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Know your Bitcoin, it's 13 years old

Know your Bitcoin, it's 13 years old
Photo Credit: Pixabay
1 Nov, 2021

On this day 13 years ago, the world’s most popular cryptocurrency Bitcoin was born with the publication of the Bitcoin whitepaper on metzdowd.com’s Cryptography Mailing List by Satoshi Nakamoto. The paper laid the foundation for triple-entry accounting with the Bitcoin network, which went on to inspire future blockchains and cryptocurrencies.

Bitcoin inventor

Even after 13 years of its inception, the identity of the cryptocurrency’s creator remains a mystery. Some believe it to be a person named Satoshi Nakomoto, while many suspect it's only a pseudonym presumed by a group of individuals that authored the Bitcoin whitepaper. According to industry estimates, Nakamoto owns 5% of the total Bitcoin, making him the 20th richest person on the planet. Interestingly, digital trading platform Coinbase believes if Nakamoto’s true identity is revealed, it will negatively impact the value of the crypto, according to a its IPO filing with the US Securities and Exchange Commission (SEC) earlier this year.

Technology that powers it

Bitcoin runs on a protocol called blockchain. It is a decentralised peer-to-peer network wherein every node in the network provides and consumes services at the same time, ensuring security and transparency. What sets blockchains like this apart from others, is that they run on the core principle of decentralisation of control. 

No single authority controls or is superior to another. Every node in the peer-to-peer network provides and consumes services at the same time, depending on their role creating a triple entry accounting system. This reduces the scope of discrepancy or manipulation that is common in double or single-entry accounting systems. 

Bitcoin count

The creators of Bitcoins have set a maximum cap of 21 million on its total supply. As per industry estimates, 18.78 million Bitcoins have been mined so far, which is 83% of total Bitcoins. 

Bitcoin value

Last month, Bitcoin’s value soared to an all-time high of $66,974. The surge in Bitcoin’s value is a fairly recent development. In April 2020, it was valued at $6,641 and by March 2021, its value rose to $60,000. The value fell to under $40,000 in May. 

The appreciation in Bitcoin's prices can be attributed to the growing acceptance of crypto by mainstream companies such as PayPal, Starbucks, Square, Rakuten, Etsy — and even Tesla for a brief period. The appreciation also started when the traditional stock markets saw a downturn to the pandemic last year, turning investors towards non-traditional assets.

Mining Bitcoins

Bitcoin is generated through a decentralized process called mining. A fraction of a Bitcoin is generated as a reward when certain nodes called miners solve complex mathematical problems to validate transactions or exchange of Bitcoins. 

Does Bitcoin devour electricity?

Mining requires a lot of computing power, which consumes a lot of electricity much of which is generated from fossil fuel. According to the University of Cambridge, Bitcoin mining consumes more Terawatt Hours (Twh) per year than the annual electricity consumption of some countries.

One of the reasons Tesla reversed its decision to accept payments in Bitcoin was the environmental impact of mining Bitcoins.

Regulating Bitcoins

Bitcoin runs on a decentralized public ledger. Its decentralized nature means it is not controlled or regulated by any single authority. New Bitcoins are generated through mining and owners can trade in them through Bitcoin exchanges.

Do most governments fear Bitcoins?

Since most governments can’t regulate the supply of a cryptocurrency, they have chosen to not accept it as legal tender fearing it might impact the value of fiat currency. 

Why are Bitcoin prices so volatile?

Unlike fiat currency, which is kept stable by governments and central banks, Bitcoin enjoys no such protection and that makes it extremely volatile. Its value can soar and dip with the same frequency. Most people invest in it to sell it when its value goes up. When its value begins to slide many companies will also stop accepting it as a form of payment, which can plunge the prices even further. 

India’s stance on Bitcoins 

India doesn't have regulations for exchange of Bitcoins or other cryptocurrencies. This doesn’t mean that buying or selling it is illegal in India. It's just that owners will not be protected by regulators in case of price fluctuations or fraud. The country has the largest number of crypto owners in the world, at 10.7 crore, according to an October report by BrokerChooser.com.