With much talk about when its bubble will burst, Bitcoin has reached a value of over $20,000.
The market size of cryptocurrency has grown to 50 trillion yen due to the increase in Bitcoin’s value. We still do not know when its value will stop growing. Why is Bitcoin’s value increasing this much? We will explain the basics of Bitcoin now.
Bitcoin is a type of digital currency that is called cryptocurrency. Although its value fluctuates greatly, it can increase in value in short periods of time, making it an attractive new form of investment.
Even with its rapid growth, Bitcoin’s market size is $200 billion, making it insignificant when compared to the New York Stock Exchange’s $20 trillion (as of 11 December 2017).
It is said that Bitcoin will start to be as widely accepted as Paypal as a mode of payment by 2025. The English firm WaveCrest has launched the debit cards Wirex, BTCC, Bitwala, Xapo, and Shakepay, and the most popular Wirex has over 30 million users (its use is only limited to residents of Europe currently).
In 2008, a person going by the pseudonym Satoshi Nakamoto sent an idea to a public cryptography mailing list. An engineer who found this idea interesting helped to develop Bitcoin. Many magazines including Wired tried to find out the identity of Satoshi Nakamoto, but it is still unclear who exactly he is.
A central party manages the books in a centralized system. In a decentralized system, all the users share the books. Without a middleman, transactions between countries will become cheaper.
Bitcoin connects all transactions, from old to new, into chains, with about 3000 transaction records making up one block. The origin of money can be tracked by looking at the transaction records.
Since transaction records are shared with all users at the same time, if someone copies or tampers with the records, it will not match up with other data and the fraud will be detected immediately. In addition to that, each and every block is linked in a unique way, making the addition of a new block in between impossible.
If Blockchain technology is applied to document management as well as currency, important documents such as contracts, certificates, and medical records, as well as personal information, can be shared safely. It can be applied to many areas, for example, speeding up the appraisal process by sharing insurance information with the insured party, insurance company, and appraiser.
Even with their advanced technology, due to their fast growth, Bitcoin is not able to process transactions fast enough and there have been many cases of payments not going through and huge fluctuations in value as well. It is still too early to consider this a stable currency.
There have been suggestions of increasing the block size from 1MB to 8MB, but there are objections to this, stating that this will not ensure connections with previous block chains and that it is going against the initial idea of Bitcoin.
There was a suggestion called the Segwit proposal that proposed to compress the volume of transactions while keeping the block size at 1MB. In the end, they were unable to come to a compromise between the big block proposal and the Segwit proposal, causing the first split in August 2017.
3 splits (hard fork) happened in August, October, and November respectively regarding Bitcoin’s design.
Due to the increase in purchases, Bitcoin has announced plans to trade their futures on the American Stock Exchange CME and the Chicago Options Exchange within the year of 2017. There is also a possibility that derivatives will be traded in the future. On the other word, people are saying that other hard forks are scheduled to happen in the future, and Bitcoin’s value will probably drop when that happens. Bitcoin will still stay as an unstable currency for the time being.
Bitcoin has been attracting a lot of attention with the soar in its value, but the application of the outstanding technology of Blockchain has the potential to speed up the growth of IoT and Fintech as well.
Also, if Bitcoin starts to trade its futures, the potential of cryptocurrency being accepted as a real financial asset in Wall Street’s various corporations will definitely increase. PricewaterhouseCoopers (PwC) has already accepted payments in Bitcoin. Bitcoin’s unprecedented bubble has made it a form of speculative investment. We can only wait and see if it is possible for Bitcoin to become an accepted form of currency, or if it will collapse before that.