What is a Bitcoin?
A Bitcoin is an online currency that can be exchanged for goods and services across a number of platforms. The Bitcoin is said to be a crypto currency because the entire Bitcoin network is digitally encrypted using an algorithm.
This algorithm allows pockets of transactions, called ‘blocks’ to be completed over regular amounts of time. These ‘blocks’ contain the ledger information necessary for Bitcoin to act as a decentralised bank. The details included in a block consist of the transaction history, and the time and date that the block is completed.
How are new Bitcoins issued?
Bitcoins are created through a process called ‘mining’. Computers on the bitcoin network are constantly attempting to solve an algorithm, in order to obtain a reward. This reward is given in the form of a variable bitcoin reward, that is adjusted over time. It started at 50 in 2008, and halving every 4 years since- it’s currently at 12.5 Bitcoins per block reward.
What decides the value of a Bitcoin?
The value of a Bitcoin is decided by the amount of value placed on it by the holders of the currency, as well as by the amount of miners on the network that mine Bitcoin. People value a decentralised, electronic, private and anonymous method of storing and sending money for obvious reasons.
As Bitcoin and other cryptocurrencies gain further attention for their uniquely useful their features value increases, and they become more scarce. This makes it more desirable in the markets eyes, much in the same way gold is coveted the less there is.
For this reason, the Crypto space is often unfairly called a speculation driven bubble- the reality is that there is far more nuance involved. Such a view is disingenuous, as well as completely dismissive of the future potential of the technology.