Bitcoin is the crown jewel of cryptocurrency. Its success caused a boom on the market and a wave of new online coins. Even when many predicted it to fail early, it is still going in 2021. Nowadays everybody knows what Bitcoin is. It is accepted by major companies like Microsoft and AT&T. You can buy a video game, book a flight, play Bitcoin slots for free, and there’s even a restaurant in Prague that ONLY accepts Bitcoin. But what caused this cryptocurrency to be that valuable as it is nowadays. To understand it, you have to take a look at how it works.
The value of Bitcoin in the market increased because of the growing interest from users and investors. This demand made the value grow dramatically. Some early investors made millions, and others even billionaires after investing in Bitcoin. Yes, they invested in the right coin at the right time. But there are no guarantees that you will find a coin like that, and make millions out of it. So why is there such hype around cryptocurrencies?
To understand the value of Bitcoin, we have to go back to the beginning. However, it’s not necessary you know about all the technical details before you can start investing. All you need to know is how this currency works.
How Does Bitcoin Work?
Bitcoin works as a currency, but it is not printed by the government or any other institution. It’s an online currency that uses computer codes to verify transactions and track money transfers between users. To be more precise, there are no coins or bills. There are only records stored on a digital ledger called a blockchain. This ledger is distributed among thousands of users in computers around the world. It makes sure no single person owns the system, and no one can change the information stored on it without others noticing it.
The blockchain enables this currency to work in a decentralized way. No one is in control, and no one can abuse the system for their own benefit. Even when you buy Bitcoins today, they don’t get lost in some bank account somewhere. Instead, they are stored in your digital wallet. You can access them from any device linked to the internet, like your laptop or smartphone. The online wallet is a location where all your Bitcoins will be stored until you decide what to do with them next.
The code of this currency also makes it impossible to fake or copy Bitcoin. It uses cryptography to ensure each transaction is unique and cannot be copied or replicated by anyone else. This same code also prevents unauthorized or malicious users from accessing your account or changing your personal details. They can’t even change your wallet balance without your consent, because the code won’t allow it. After all, this currency relies on math rather than trust to protect its users from thieves and hackers.
What Are Bitcoins Used For?
The main “business” behind Bitcoin is trading them for dollars or other currencies at exchanges markets (like Coinbase). Once you buy them in exchange markets, most people store them in their wallets hoping for their value to rise over time so they can sell them at a higher price on exchanges markets. This is called Hodling: Hold On For Dear Life; meaning to keep the coins you own instead of selling them at a lower price right away because you believe they can rise in value in the future. In the beginning, it was a good idea would be to sell them once you double their value after you bought them (at least), and then keep the rest for some time until they break out again towards new highs, but now as they rise in value has slowed down, and more people interested, there is no simple way of investing.
So why is it so valuable?
Bitcoin is independent of the government. It is sometimes perceived as a disadvantage, but it is also an asset. It can’t be “printed” if a government needs more money, and is not affected directly by the politics and market situation of any country. It makes Bitcoin a good tool to defend against inflation. Another reason why it is so valuable is that it has always been the biggest cryptocurrency out there. The chance of the owners ending scamming you is virtually non-existent, although there have been instances of Bitcoin transaction scams. Its market share makes it the least likely cryptocurrency to lose all its value overnight, a threat that is a big problem for a lot of smaller virtual coins. A lot of people choose Bitcoin as a way to get into the world of crypto, as it is perceived as relatively safe because it has been on the market for longer than most, and even with some sudden value drops, it has always bounced back. The last reason is that it has a fixed supply. There can be only 21 million BTC on the market, so it will probably gain even more value as time passes.