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Bitcoin is described as the first decentralized digital currency.
The cryptocurrency was described in a paper released at the end of 2008 under the pseudonym Satoshi Nakamoto.
The true identity of the creator of Bitcoin remains a mystery to this day, although there have been many attempts over the years to discover who it is.
Bitcoin has had its ups and downs in terms of popularity and value over the years, but today it is estimated that there are between 2.9- and 5.8-million users of a cryptocurrency wallet, most of them Bitcoin users.
The progress of Bitcoin
In January 2009, Bitcoin 0.1 was released, and the first bitcoins were mined by Nakamoto.
The concept of bitcoins was popular with those who believed in the idea of a decentralized currency and an open source economy; however, they did not hold much value then.
2010 was the first time that bitcoins were used to make a purchase, with Laszlo Hanyecz making a 10 000 btc payment (worth around US$25 at the time) for some pizzas.
2011 saw a significant step forward for Bitcoin with the launch of the Silk Road, an online drug marketplace that accepted payments via bitcoins.
Regardless of one’s personal views of the Silk Road, there is no denying that it provided a new infrastructure for bitcoin spending that did not exist before. The price of bitcoins reached US$1 in February 2011, but it was not until 2013 that bitcoins boomed.
Early that year, the price rose to $200. It then crashed again before jumping up to a high of US$1242 by November of that year. The price didn’t stay this high for long and by 2014, the price was below US$900.
A major blow came to the industry in February 2014 when the largest Bitcoin exchange, Mt. Gox declared bankruptcy when it discovered its system had been hacked losing 750 000 customer coins and 100 000 of its own coins for a total loss of US$500-million.
By 2015, the price fell to less than US$300, making Bitcoin the worst performing currency that year.
However, the past year has seen major growth for the cryptocurrency.
By 2017, Bitcoin had begun to seriously recover and, in January, for the first time in years it climbed past the US$1000 mark.
By June, it had reached the unprecedented height of US$3000, but by mid-July it took a 36% hit and dropped back down to US$1869.
At the beginning of September, it jumped up to close to US$5000, but then feel 37% by the middle of the month, climbing above US$4000 again 3 days later. By the end of October 2017, the price had hit another all-time high of US$6300.
Factors Impacting the Price of Bitcoin
The price of Bitcoin has been very volatile with several factors that impact it.
- Forks – A fork happens as part of the mining process when two miners find a block at a similar point in time. The network will then fork briefly until it is resolved by the software.
- Regulation Issues – A number of governments around the world have expressed concern over cryptocurrencies because it is decentralized and is risky to regulate. Many law enforcement agencies deem bitcoin and other cryptocurrencies to be the currency of criminals, used particularly for money laundering purposes. However, governments are starting to take bitcoin seriously and in April 2017, Japan recognized Bitcoin as legal tender, becoming the first country to do so.
- Theft – Theft and the resultant shutdown of bitcoin exchanges has had serious impacts on the price of Bitcoin. An example of this is the hacking of Mt. Gox and its subsequent bankruptcy and shutdown.
- Merchants – As more merchants begin to accept bitcoins as a payment method for goods and services, they become more popular and their perceived value increases, leading to an increase in price. More than 100 000 merchants accept bitcoins, making it a legitimate alternative to traditional currencies.
The future of Bitcoin
While Bitcoin has had many ups and downs over the past eight years since it was launched, the general trend now seems to be positive. However, its past volatility should give a hint of what may come moving forward.
Cryptocurrencies have not been fully accepted by governments around the world with laws and regulations still to come. This uncertainty leads to much speculation about the future of Bitcoin.
In addition, the issues of fraud that are unique to cryptocurrencies will not fully go away and this leads to the risk of major thefts and hacking that could drop the price of the cryptocurrency.
While many people are looking for a universal currency, perhaps Bitcoin will continue to become more popular and will fill that role, securing it a solid place with a more stable price going forward.