The Rise of Crypto Currency

Matthew Mirzai
By Matthew MirzaiDeveloper
5 minutes to read

In October, the price of a single bitcoin rose to more than $5,000. That’s a huge increase of 750% since the start of 2017. As a result, major banks are considering how this new currency can be integrated.

So, what is the future of bitcoin and Cryptocurrency as a whole? Here’s rundown of all you need to know.

What is bitcoin?

Bitcoin’s origins are a little mysterious. It was founded as a virtual currency in 2008 by a person (or group) called Satoshi Nakamoto.

It’s still a contentious topic as to whether it’s a real currency. Unlike most currencies, bitcoin has no central authority but it does follow other rules. There is a finite supply and it’s difficult to earn. However, it’s very easy and quick to transfer around the world and is incredibly secure as it’s protected by the latest complex algorithms.

How does bitcoin work?

Bitcoin is earned through a process called ‘mining’. This is when a user links to a central server and uses their computer’s processing power to solve complex algorithms. When one is solved, the user receives bitcoin as a reward. The longer this goes on, the more difficult the algorithms become and, because there’s a finite number of coins, the smaller the reward. Eventually, the reward tails off to zero, all 21 million bitcoins are in existence and no new ones will be created. If you want to find out more about bitcoin mining, check out this useful infographic.

Because of the way bitcoin is mined, a powerful computer means you can mine faster. There have been a few stories of employees transforming their work systems into a mining farm.  So far though it’s mainly hobbyists who hold the majority and sell it on. The creator, Satoshi Nakamoto, is rumoured to hold around $4 billion worth of coin.

What’s the benefit of bitcoin?

At its core, bitcoin is highly secure. This is because of what’s called the ‘blockchain’. Blockchain technology allows information to be distributed but not copied. This is because records are kept in millions of different places so every owner of a bitcoin can check against the records to see if a transaction is legitimate. So if anything strange or untoward occurs on one account, it can be checked against the other records to see if it’s correct.

Are there any downsides?

This means that bitcoin is almost incorruptible and immune to fraud. However, that could also lead to its downfall. Unlike traditional banks, bitcoin transactions can’t be frozen, vetted or interfered with. As a transaction is guaranteed to be processed if it’s legitimate, it’s a haven for dark web drug deals and cybercrimes.

Transactions are also verified once every 10 minutes so, in theory, it’s possible to spend a bitcoin in two (or more) different places before the payment registers.

Crypto-copycats

Due to bitcoin’s huge success, more virtual currencies have popped up. From the low-value Dogecoin to the Kanye West version of bitcoin, Coinye, everyone is jostling to be the next big thing.

One quickly gaining steam is the highly secure Ethereum project which is essentially a crypto currency for creating crypto currencies. Users can create ‘smart contracts’ which are automatically carried out once conditions are met. It’s already been picked up by Microsoft, JP Morgan, Cisco and Intel. It’s expected to be a big player in the future.

But what does this mean?

As crypto currencies become more popular, it’s inevitable that more and more retailers will accept it as a currency. In fact, Microsoft already accepts bitcoin payments on its online store and PayPal offer merchants the ability to accept crypto currency as a payment option. It may well be the next banking innovation after contactless cards and the likes of Apple Pay.

Banks are starting to recognise the significance of bitcoin and are almost treating it as a legitimate currency. So those who got in on the ground floor may become millionaires overnight.

While it’s almost inevitable that the bitcoin bubble will burst, it’s not stopping other crypto currencies from attempting to mimic its success. Given bitcoin’s current financial status, it may be worth keeping a close eye on other start-ups to see if the success can be replicated.

 

If you want to learn more about bitcoin, Netflix has an excellent documentary charting the rise of this new breed of currency.

Have you tried mining for bitcoin? Let us know in the comments below.

 

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Articles by Matthew Mirzai

Two time Enjoy Digital Mario Kart 8 Champion, I'm also a back end developer specialising in Umbraco.