In this edition of Blockchain Briefs, we go back to basics with Bitcoin (BTC).
What is BTC?
• Bitcoin is digital money that people can exchange peer-to-peer without needing a trusted third-party, or « middle man. »
• Bitcoin has a hard cap on its maximum supply at 21 million, making it provably scarce.
• The Bitcoin network runs on computers distributed around the world. The decentralized nature of the network makes it extremely secure and resistant to attacks.
Use cases of BTC
Bitcoin can be used as:
• Digital cash. Its original authors subtitled it a « peer-to-peer electronic cash system. »
• A store of value. Many consider bitcoin to be a better version of gold given that it’s portable, easily storable, and impossible to counterfeit.
• A way to « bank the unbanked. » Bitcoin lets anyone with access to the internet create a wallet and use the network, including the estimated 1.4 billion globally who lack access to the traditional financial system.
Why is BTC getting attention?
Bitcoin is getting outsized attention due to:
•Its size. Bitcoin has the largest market capitalization of any crypto.
•Inflation. With many countries facing rising inflation, many view bitcoin as a hedge, or « safe haven » against the falling value of national currencies.
•Volatility. Bitcoin is synonymous with volatility, reaching an all-time high around $69K in November of 2021 and trending around $40K since the beginning of 2022, a 35% swing.
Big moments for BTC
• Whitepaper. Satoshi Nakamoto, the pseudonym of still unknown Bitcoin inventor, published the Bitcoin white paper in October 2008.
• Pizza purchase. On May 22nd, 2010, the first retail transaction of two pizzas for 10,000 BTC (over $400 million today) occurred.
• Legal tender. On September 7, 2021, El Salvador became the first country to accept bitcoin as legal tender.
3 myths about crypto
Cryptocurrency has reimagined digital money. Although it’s been around for over a decade now, it’s not always been in mainstream consciousness and is still considered a fairly ‘new’ currency.
With that, we often hear certain misconceptions about crypto. So, we’ve separated the facts from the fiction and debunked three of the most common myths about crypto.
Myth #1 Bitcoin doesn’t have any value
Although Bitcoin isn’t backed by a physical asset such as gold (neither is the US dollar, for example) there is a finite supply of Bitcoin, 21 million to be exact. So, when there is more demand for Bitcoin, the price goes up, and when there is less demand, it goes down. Like any other market, sentiment, and features of the macroeconomic environment, including inflation, also drive Bitcoin’s value.
Myth #2 Cryptocurrency is used for illicit activity only
According to Chainanalysis, in 2019 an estimated 2.1% of crypto transactions were used to facilitate illegal activity, in 2020, this fell to just 0.34%. While there’s still work to be done, statistics show that a sweeping majority of crypto transactions are used for genuine purposes. Our recent podcast episode with crypto-journalist Laura Shin explores how the media’s portrayal of criminal activity in crypto has shifted over the years.
Myth #3 Bitcoin is a Ponzi scheme
By definition, a Ponzi scheme is a fraudulent investment operation that pays returns to early contributors using the money from later contributors rather than overall profits. While early adopters of Bitcoin have seen great returns, there are no paid dividends to these investors. And, as Bitcoin is decentralized, and operates peer-to-peer, there’s no central body to operate a Ponzi scheme. Now that we’ve got the myths out of the way, are you ready to get started? Join the digital transformation and buy Bitcoin today.