All about bitcoin

Bitcoin is a payment network working on blockchain, which is spread across millions of computers around the world. No one controls or regulates it centrally. In 2012, the Bitcoin Foundation was formed to provide Bitcoin’s basic infrastructure. It is trying to improve it because the network is becoming more and more overwhelmed by its own traffic.

The final amount of bitcoins will be 21,000,000. At present, there are about 17,000,000 bitcoins which were created by so-called mining. This means that special computers (typically modified graphics cards) perform operations to transfer bitcoins from one wallet to another. For these calculations, miners are rewarded by bitcoins. It is expected that the last bitcoin will be mined around the year 2140.

Bitcoin can be divided to 8 decimal places. I.e. its smallest value is 0.00000001, which is called one satoshi.

Little is known that one of the world’s centers of bitcoin and other cryptocurrencies is Prague, the capital od the Czech Republic. However, this is a closed group of people who do not like public attention. From publicly known activities we have the following primaries:

– The first bitcoin pool of miners in the world – SlushPool, which mined up to 5% of the total  amount of bitcoins, is from Prague. Since 2010 it has earned over 1 million bitcoins.

– The first hardware cryptowallet (and today one of the world’s three most widespread) – TREZOR – was developed and is produced by a Czech company.

– The Czech Natinal Bank is the first Central bank in the world to place a bitcoinmat (Bitcoin ATM) in its headquarters.

– The first university in the world that lectured about  cryptocurrenciess is the Prague University of Economics – the first seminar was started here by Mr. Jedlinský in September 2014 (the famous US MIT followed up a month later).

– The first café in the world where bitcoins were used to purchase refreshments was opened in Prague, it is stil working and is called Parallelni Polis.

Bitcoins are stored in wallets. There are many types of them. They are all visible in the blockchain network, but they are anonymous. Bitcoins can be handled by the person who owns the private key to the wallet. The wallet also has a public key, which is the address to which bitcoins are sent.

If the owner loses the private key, bitcoins in the wallet will be irrecoverably lost. If a hacker discovers the private key and steals the bitcoins, there is no way to get them back. Paradoxically, everybody can see the wallet in the blockchain where the stolen money were transfered, including all the other moves in this wallet, but its owner is anonymous and there is no way to get the stolen bitcoins back.

In the first half of 2017, bitcoin miners discussed further development of the protocol. Because there was no agreement, one group of miners split, made a so-called fork, and created a new cryptocurrency – Bitcoin Cash (BCH). Another fork of BCH was made on 15 November 2018 creating Bitcoin Cash ABC and Bitcoin Cash SV.

Bitcoin Gold (BTG) was created in the same way.

 

Why should bitcoin’s value continue to grow?

The bitcoin price is set only by supply and demand. From the very beginning of bitcoin, some people say that its price is already too high. In fact, this value, unlike shares or commodities, has no logical or fundamental ceiling. Basically, it does not matter if the bitcoin price is one thousand or one million dollars. Bitcoin is divisible into 8 decimal places, so it is possible to pay even the smallest price.

Since its inception, bitcoin has been used for payments. It is a well-known case that someone bought pizza in May 2010 for 10,000 bitcoins. However, until 2013 the payments were made almost exclusively by IT specialists. Until then, investors noticed its existence and cryptocurrency exchanges began to emerge and gradually and slowly real trading began.

At the very beginning, bitcoin price was $ 0.001. In February 2011, bitcoin was priced at $1, on June 8, 2011, stood at $31 and began to decline for the first time. It dropped to $2, and on April 11, 2013, it reached another all-time-high of $266. It dropped to $70 by June, then grew, reaching $1,000 in November. By January 2015 it fell to $152. It got over $1,000 at the beginning of 2017 flow and has followed to rise to $20,000 …

 

Bitcoin mining

In order for transactions to happen, one has to verify them. Verifiers are called miners because they are rewarded for their work, in a way that a certain number of new bitcoins are assigned (“mined out”) to them. Bitcoins are often mined at large “farms“ where there are thousands of “mining machines ” – these are usually customized and very powerful graphics cards.

 

State regulation

Cryptocurrencies are largely in a legal vacuum, as they are very new and the legislators have not been able to react to them yet. The Czech National Bank has repeatedly declared its policy of “not helping and not protecting”, that is to say, as if cryptocurrencies did not exist and leave things as they are. In some countries, legislators began to perceive cryptocurrencies, as Germany, for example, recognized bitcoin as an official virtual currency. China forbid the use of cryptocurrencies by financial institutions, but allowed other natural and legal persons to do so. In the United States, bitcoin was labeled as a commodity (similar to oil or coal) and therefore trading with it must be governed by commodity rules.

  • 2009

    Bitcoin was created

    Satoshi Nakamoto invented and programmed the blockchain and bitcoin based on it. He mined the first 50 bitcoin coins.

  • 2012

    The price of bitcoin reached USD 100

    In April 2012, the bitcoin price reached astronomical USD 100 and continued to grow.

  • 2013

    USD 1,000 for one bitcoin

    Bitcoin rose to USD 1,000, doubling its price during a week. The first crypto exchanges are set up, bitcoin is spreading throughout the world, discovered by the Chinese. The price culminates at USD 1,216. During the next three years the price will not exceed USD 1,000.

  • 2017

    USD 10,000 for bitcoin

    There are plenty of crypto exchanges, new cryptocurrencies are created, bitcoin is becoming popular worldwide. At the end of the year, the price goes up to USD 20,000.

  • 2018

    Cryptos are widespreading, prices going down, gaining strength

    Crypto exchanges improve their services, first governments issue cryptocurrencies, more cryptos are created, sometimes through hard-forks, Prices go slowly down preparing soil for the next growth. Blockchain spreads into corporations.

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