At Coinpursuit, we take pride in being able to research and bring you the current trends and news in the world of alternative currencies. That includes taking a closer look at some of the bigger players in the cryptocurrency industry, and today we're gonna focus on the biggest Bitcoin.
To not mention Bitcoin in a discussion of digital currency would be like not mentioning Warner Brothers in the history of movie making; you just can't do it. Since its introduction by Satoshi Nakamoto in the first half of 2009—making it the oldest existing digital currency in the world—Bitcoin has become the gold standard against which all other alternative currencies are compared. For better or for worse, it has also fallen under the most scrutiny, for its features and methods are often used as the template for other cryptocurrencies.
Bitcoin is the first major currency system in the modern age that isn't directly connected to any bank or government; in fact, that's one of the major selling points for it and other digital currencies. Since it's not tied to interest rates or inflation, the argument goes, its value is destined to be more stable. A lot of press has been devoted to the meteoric rise in value Bitcoins have experienced, such as this article in The Guardian that discusses a $27 investment in 2009 that's worth over $800,000 today. Such stories make for good ink, of course, but Bitcoin's FAQ page itself points out that any investment—Bitcoins included—can lose value or ultimately become worthless. Not that it will happen, mind you, but realistically the risk is always there.
Another aspect of Bitcoins that investors find attractive is the potential to actually earn them, as opposed to simply purchasing more of them from a cryptocurrency exchange. The main way to do this is through a process called “mining,” in which blocks of data that contain transaction information are processed by Bitcoin network members. The reward for this process is a set number of Bitcoins awarded to the miner who meets a certain set of criteria. Mining tends to take up a lot of computer time and resources, and it's now to the point where special hardware and dedicated devices are needed in order to make it pay off. For this reason, many miners are forming mining pools, with the Bitcoins earned being divided among the pool's members. You can read more about the Bitcoin mining process here —and it's a system that's used by all other cryptocurrencies, as well.
Network members can also earn Bitcoins during mining through transaction fees; these vary depending on the size of the transaction, number of transactions per vendor and other factors. Now, mining also creates new Bitcoins, but there's a limit; they will be capped off when the number of coins issued reaches 21 million. When that happens, transaction fees will be the sole source of income that can be made from mining. And—you guessed it—most other forms of digital currency also follow this model, though with varying mintage caps.
Starting off, however, you need to buy Bitcoins from an exchange—and there's a factor of risk involved there, too. It's best to use an exchange with a strong history and performance numbers, for if an exchange fails, they take down their client's Bitcoins with them, as well. Again, this risk should be considered with any form of digital currency.
Spending Bitcoins is easy to do; the growing popularity and value of the currency is making it increasingly attractive to many merchants. It's easy to do, too, whether you use your Bitcoin “wallet” to make a transaction online or scan a QR code in a brick-and-mortar store. Since they were the first in the game, Bitcoins have more vendors who accept them—but their competitors are doing their best to catch up.
You've seen, no doubt, that we've mentioned how Bitcoin has set the standard in many ways for other cryptocurrencies. That's not to say all digital currencies are exactly alike—that will become apparent as you browse our site. But when you're the first with a new concept—and successful at it—others are bound to follow in the wake of that success.
Discuss this topic and others on SliceFeeds, Coin Pursuit's Cryptocurrency network for miners, traders and enthusiasts. Register today and begin Slicing!
Not a member? Get started today! You can post comments here and join in the discussion over at out forums.
Login or Register