When it first appeared in 2009, Bitcoin was an enigma unknown to almost, except to its developer, the pseudonymous developer Satoshi. However, with time Bitcoin grew in stature and on January 2017, touched $20000. Though in the subsequent quarter, the cryptocurrency market crashed, Bitcoin still remained the undisputed leader of the market. As of today, Bitcoin is being traded at a shade below $6000 and owns almost 50% of the entire cryptocurrency market cap.
However, the role Bitcoin has played in spawning an entire universe of cryptocurrencies goes beyond simply its traded values and volumes. Every cryptocurrency that has appeared thereafter has based itself on Bitcoin. Litecoin, Ethereum, zCash have all modelled itself on its more illustrious predecessor and improved further.
The rise of Bitcoin though has not been without intense scrutiny. The SEC and the Department of Justice had launched enquiries into the handling of Bitcoin by its exchange Bitfinex.
How does Bitcoin work?
The first cryptocurrency to use the blockchain technology, which is a peer to peer, decentralised enterprise, Bitcoin ensured that transactions were lightning fast with no transaction fee and third party oversight. Such a premise gave unbridled freedom to investors and participants alike. The independent individuals and companies who own the computing power and contribute to the Bitcoin network, are known as “miners, “. They are motivated by rewards (by releasing new bitcoins) and the transaction fees are paid in bitcoin. These individuals or miners can be accepted as the decentralized authority given the responsibility to enforce the credibility of the Bitcoin network. New bitcoin is being released to the miners at a fixed, the rate which periodically declines, such that the total supply of bitcoins approaches 21 million. Currently, there are roughly 3 million bitcoins which are yet to be mined. In this way, Bitcoin (and any cryptocurrency generated through a similar process) operates differently from fiat currency or government-approved currency or the national currency.; in centralized banking systems, currency is released at a pre-approved rate which matches the growth in goods in an attempt to maintain price stability, while a decentralized system like Bitcoin sets the release rate ahead of time and according to an algorithm.
This makes Bitcoin immune to dollar fluctuations. For the future of cryptocurrency, this bodes well, since more investors would be able to hedge their investments against currency shocks.