The Rise of Bitcoin

Eleven thousand dollars. This is how much one Bitcoin, a new virtual currency, is valued at after taking off in 2017. Bitcoin has risen 1,600 percent this past year, and those who were smart enough to invest are reaping the rewards. With prices so high, many wonder what exactly is Bitcoin and what makes it so valuable?

Simply put, Bitcoin gets its value the same way as anything else does: people want them. This form of currency is used to make trade easier, enabling people to convert goods into tradable commodities. Despite office banking, the online currency is seen as more valuable than other currencies, particularly for digital transfers and money transfer across borders. As the network grew many people started looking to invest including senior Matthew Zinn.

“My dad works a lot with stock and equity investments at his job, which also includes bitcoin.”

“He got me thinking about new ways to invest my money as soon as I started earning it.”

The Bitcoin network is the most powerful computer network in world. In 2015, it was 11,000 times faster than the top 500 supercomputers combined. The program runs on a computer loop. The network pays “miners” to use their computing powers towards securing the network. Miners receive higher fees as the price of Bitcoin increases, incentivizing miners to devote more computer, making the network more powerful and creating a positive feedback loop.

With Bitcoin based on such a powerful network, it is nearly impossible to corrupt. Corrupting the Bitcoin ledger would take building a supercomputer that would cost roughly $3.2 billion in hardware and $5.6 million in electricity every day.

Bitcoin benefits from a property called censorship resistance. This means that anyone trying to steal your Bitcoin would need such a large amount of computing power, that it would cost far more to steal the Bitcoin than to buy it for themselves.

Bitcoin is an online currency used mostly for transactions from person to person. This process eliminates the need to go through a middle man, such as a bank, and can be used to purchase things anonymously. It is hard for the government to trace and tax. Unfortunately, it is also sometimes used for illegal transactions because the money cannot be traced.

It is estimated that around two to four million people worldwide use Bitcoin. In early 2010, investors paid just six cents for Bitcoin. A $100 investment seven years ago would be worth a whopping $28,341,266 today.

Senior Matthew Zinn has invested in Bitcoin. “I first heard about Bitcoin a year or two ago,” Zinn said. “Back then it was worth over twenty times] less but I never thought it would become this valuable.” Zinn also said he predicted a drop in value in all cryptocurrencies. “The amount of investment from people looking to earn a quick dollar, but who don’t entirely understand cryptocurrencies has created a bubble. The amount of investments and value placed on Bitcoin by investors exceeds the intrinsic value of the asset.”

Bitcoin is also treated like a stock with millions of people around the globe investing in this currency. It was created in 2009 by an unknown person using the alias Satoshi Nakamoto. There is a cap of 21 million coins and once this mark is reached, no more coins can be generated.

Chief analysts refer to Bitcoin as a large bubble because it has no backing. Bitcoin relies solely on investors to back its values meaning that its rise is limited and its fall will be inevitable, though many are staying optimistic. People can earn Bitcoins online by mining them, although this is getting harder by the day as the amount of Bitcoins become scarce.

Bitcoin transfers are irreversible so once spent, there is no way to get your money back. Unfortunately, this means it is easy to be ripped off.

The value of Bitcoin lies in its versatility. Bitcoin can be easily valued based on what it is you are buying or selling. The issue with Bitcoin is that its price is rising too high to be a useful form of currency. At $10,000 per Bitcoin, people have to use very small amounts to purchase everyday things. It is inconvenient and confusing to use .002 of a Bitcoin. Although the value seems destined to fall, many are kicking themselves for not taking a chance and investing in Bitcoin a year or two ago.

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