(ORDO NEWS) — Bitcoin continues to trade near its all-time high reached this month. Its price at the time of writing was about $ 34,000, up 77 percent from last month and 305 percent from last year.
First launched in 2009 as a digital currency, Bitcoin has been used for a time as digital money in the periphery of the economy.
Since then, it has gone mainstream. Today it is used almost exclusively as a kind of “digital gold”. That is, a scarce digital asset.
In response to the risk of an economic collapse due to COVID, governments around the world have flooded global markets with money created by central banks to boost spending and help save the economy.
But the increase in the money supply lowers their value and forces people to look for inflation-resistant assets to hold them. In this environment, Bitcoin has become a hedge against impending inflation and low returns on other asset types.
What is Bitcoin?
Bitcoin, the world’s largest cryptocurrency by market capitalization, currently has 18,590,300 bitcoins in circulation, with a maximum supply of 21,000,000.
This limitation is hardcoded in the Bitcoin protocol and cannot be changed. This creates artificial scarcity that keeps the value of digital money growing over time.
While the number of government-issued currencies such as the Australian dollar can be increased at the request of central banks, bitcoin has a fixed supply that cannot be increased by political decisions.
Bitcoin is predominantly traded on online cryptocurrency exchanges, but it can also be sent, received, and stored in “digital wallets” on certain hardware or smartphone apps.
But perhaps the most innovative aspect of the Bitcoin network is that it relies on the work of cryptographers and scientists to exist as a blockchain-based digital currency.
The public blockchain is a “immutable” database, which means that the transaction history record cannot be changed.
A functional and decentralized digital currency.
Bitcoin is “decentralized”. In other words, it operates through a disparate peer-to-peer network, rather than through a central body like a central bank.
And it does so through the participation of bitcoin miners. It is anyone who decides to run software to verify Bitcoin transactions on the blockchain. Usually these people are actively involved in cryptocurrency.
They are rewarded with bitcoins, which increase every ten minutes. But the remuneration paid to miners is halved every four years.
This fade was coded online by the creator Satoshi Nakamoto, who designed it to mimic the process of mining real gold – simple at first, but more difficult over time.
Why is the value of Bitcoin rising?
The recent boom in Bitcoin is attributed to a combination of three factors: ideology, social sentiment, and hope.
But while these are variable factors, it does not discredit the significance of the digital economy, the interest in technology as it develops, and the impact of institutional investors on cryptocurrencies, including Bitcoin.
Bitcoin is in an upward market trend, also known as bull market territory.
It was designed to grow in value over time, thanks to the rules that Nakamoto put into his code.
Jason Potts, Professor of Economics, RMIT University, and Kelsey Nabben, Researcher / PhD, RMIT Blockchain Innovation Center / Digital Ethnography Research Center, RMIT University.
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