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Cryptocurrency soars: Bitcoin broke the $ 30,000 threshold earlier this year. Some analysts believe that further price increases are possible, but betting on digital currencies remains risky. But what is Bitcoin and what drives it?
Bitcoin was first described in a document published on October 31, 2008 under the pseudonym Satoshi Nakamoto, only shortly after the collapse of the US investment bank Lehman Brothers, which at the time massively exacerbated uncertainty in the financial system and, therefore, it fueled the global financial and economic crisis. Who is behind the pseudonym remains a mystery.
Behind Bitcoin is the idea of a currency that exists independently of states, central banks, and monetary policy. Unlike traditional currencies, digital payment means are not controlled from a central point and reservations do not have to be confirmed by a central point.
To make it clear who has transferred a bitcoin to whom, simply put, the entire community of users of the digital money system maintains a gigantic ledger containing all the transactions ever made, and that anyone can see at any time. In this decentralized database, the so-called blockchain, the data is cryptographically encrypted, so the term cryptocurrency is also common.
This process, in turn, requires an increasing computing effort. This is where private computer users also come into play. Because whoever participates in complex computing processes that consume a lot of energy is rewarded for it, in shares of the digital currency. In this way, new “coins” are created. Therefore, the process is called “mining” (prospecting). A total of almost 21 million bitcoins can be created at most based on Satoshi Nakamoto’s specifications, most of which already exist.
How do users get digital money?
All Bitcoin payments and transactions are made over the internet. Bitcoins can be produced, bought and sold through “mining”, that is, exchanged for real currencies. Bitcoin mining is now largely dominated by professional players who use special hardware for this, if possible in countries with low electricity costs. Bitcoin “mining” is not worth it for private users.
The first block of 50 Bitcoins, the so-called “Genesis Block”, will be created in January 2009. Ten months later, on October 5, 2009, the value will be derived for the first time based on production costs: at that time , one Bitcoin was worth $ 0.00076. The story is also legendary that on May 22, 2010, a developer in Florida convinced a pizza delivery man to give him two pizzas for 10,000 Bitcoins. In 2013, the cryptocurrency broke the $ 1,000 mark for the first time.
Above all, things are looking up when the US payment provider PayPal announced on October 21, 2020 that it will also allow users to pay with digital money in the future. Furthermore, while central banks around the world are flooding the financial system with fresh money as part of their ultra-flexible monetary policy, the amount of new Bitcoins is becoming scarce: in a so-called “halving” in May 2020, the reward for “miners” will be cut in half, and thus the number of newly created bitcoins will also be reduced.
The US investment giant JPMorgan Chase is now even comparing crypto currency to gold: in the future, Bitcoin with the precious metal, which is considered a safe haven in times of crisis, could fight more intensely for paper as an alternative currency, analysts concluded in December.
Critics warn of a bubble bursting and continue to view Bitcoin primarily as an object of speculation that can be risky, especially for private investors. For example, Bitcoin futures contracts give professional investors the opportunity to bet on falling prices. At the moment, however, many investors are betting that prices will continue to rise. In fact, Bitcoin has had a real roller coaster ride in recent years, in March 2020 it was trading at just $ 5,000. Courses initially fell slightly on Monday.
Von: APA / AFP
