The cryptocurrency scene is teeming with opportunities, especially for those who have the financial and business prowess to use them to gain some profits. With the rise of non-fungible token (NFT) games or play-to-earn apps, more and more people are drawn toward cryptocurrencies.
One of the most popular digital currencies today is Bitcoin. I’ve been hearing the buzz surrounding this cryptocurrency for a long time, and it may definitely be a worthwhile venture.
Those who are thinking of investing in NFT games or buying cryptocurrencies should take time to learn what it is and why it is expensive. This article tackles this topic through the following points.
- Brief History Of Bitcoin
- So, What Is Bitcoin?
- Why Is Bitcoin Expensive?
- Is Bitcoin Legal Tender?
- Ways To Earn Bitcoin
Brief History Of Bitcoin
I want to start with the history of Bitcoin to show how it evolved from a mere idea to a high-value virtual currency. The idea of what is now called cryptocurrency was conceived by Wei Dai in 1998 when he suggested creating a new kind of money that utilizes cryptography to manage transactions.
Almost a decade later, in 2009, Satoshi Nakamoto came up with the proof of concept for Bitcoin. However, it is difficult to pinpoint who the inventor of Bitcoin is, and according to the BTC website, it is no longer relevant.
I want to clarify that the terms digital currencies and virtual currencies refer to different things. The term digital currencies is an umbrella term referring to units that have value, such as electronic money and virtual currency.
E-money pertains to the digital form of sovereign currencies (also called fiat money). So, if I have money on PayPal, for example, that is an example of electronic money. Virtual cash, and crypto, for that matter, are classified under digital currencies. It refers to units of value that, unlike fiat money, are decentralized or not controlled by a single administrative body.
Other Cryptocurrencies Like Bitcoin
Aside from Bitcoin, other cryptocurrencies emerged after the invention and success of BTC. Some of the options are Ethereum (ETH), Litecoin (LTC), Cardano (ADA), Polkadot (DOT), Bitcoin Cash (BCH), and many others.
These cryptocurrencies exist in different networks, but they share the same quality with Bitcoins: they are all expensive.
So, What Is Bitcoin?
Bitcoin is a type of cryptocurrency, which is a type of virtual currency. This means that it does not have a physical form, unlike fiat money such as the United States Dollar, British Pound Sterling, and the Euro, which exists in bills and coins.
I want to point out that Bitcoin is a decentralized currency, which means that it is not controlled by a regulatory entity such as a central bank or an administrative agency. Instead, every BTC transaction ever made is recorded in a technology called a blockchain.
Blockchain is a public digital ledger that maintains the anonymity of parties making transactions. It is called a blockchain because it is a string or series composed of blocks that contain records of particular transactions.
It is built to ensure that the information will be safe from tampering, hacking, and cheating.
The Price Of Bitcoin
If I want to own BTCs, I need to have a lot of money to be able to purchase even a single unit. This is because Bitcoins now cost $37,142.39 per unit, and this value can change overnight. One thing is for sure, though: the value of Bitcoin is much higher than the USD.
Now, many people might argue that the value of BTC is merely based on speculation, which means that it does not have value. Meanwhile, others believe that it should be valued at a higher price compared to its current valuation.
The thing is, this cryptocurrency is speculated to be the money of the future and is even proposed to be valued as digital gold. According to a report by Al Jazeera, JPMorgan Chase & Co experts think that it can reach a value of $150,000 within a decade.
Why Is Bitcoin Expensive?
While the current price of Bitcoin is at around $37,000, Coinbase reported that it reached a 24-hour low of $36,419.39 and a 24-hour high of $40,539.39. Regardless of whether I am talking about either end, it is easy to see that one Bitcoin remains expensive compared to one USD.
So, what determines the price of Bitcoin? Several factors can affect this, and surprisingly, it works similar to the market. First, the price is affected by supply and demand. Miners help create BTC, which is introduced into the market.
The thing is, the network is designed to slow down the rate of production over time. The network also has a cap on the maximum number of BTC that exists at any given time. Currently, the cap is at 21 million, which means that no new coins can be produced when this number is reached.
The cost of production can also increase the value of BTC. Mining these coins can be expensive, especially when there are a lot of miners. The more miners there are, the more expensive it can be to create BTCs, which further increases its value.
Other Factors That Affect Value
Competition among miners can increase its value, but so does competition with other cryptocurrencies. While BTC is the first to emerge, it now competes with hundreds of others that offer different potentials for consumers.
Competition can keep prices down. Moreover, having alternative options prevents consumers from crowding on one crypto alone and lowering its value.
BTC stands out because it is a dominant coin, which means that it is one of the most visible ones. It is only the one that most people are aware of. In fact, those who are not that knowledgeable about crypto uses the term Bitcoin to refer to all cryptocurrencies.
Is Bitcoin Legal Tender?
Given that it can be bought using fiat money, those who want to dive into the crypto scene may be wondering if they can use it to purchase products in the real world. The answer is yes. I can use Bitcoin to make transactions with various merchants, as long as they accept BTC as payment.
The good news is more and more businesses now accept BTC., even brick-and-mortar ones. I can transact with various establishments such as restaurants, law firms, apartments, and grocery stores. The key is finding merchants that accept Bitcoin payments.
Because many businesses accept it, does this mean that BTC is legal tender? The answer to this is no. In fact, only El Salvador has made Bitcoin a legal tender, and this development happened just this year. However, El Salvador continues to use the USD as its primary money.
Legality Bitcoin In The US
While the United States is yet to make Bitcoin a legal tender, I find it necessary to note that the US Treasury has acknowledged BTC as a convertible decentralized virtual currency.
It was also classified by the Commodity Futures Trading Commission as a commodity and by the IRS as taxed property, making it legal to use in the US, Canada, and Mexico.
This crypto is also legal in parts of Africa, South America, Asia, Oceania, and Europe. In fact, most countries allow the use of Bitcoin, while some allow it but with banking bans.
Ways To Get Bitcoin
There are a few ways to earn Bitcoin. While it can be expensive, the methods for getting my hands on this crypto can be easy. In fact, I do not have to purchase one BTC. I have the choice to purchase 0.1 or 0.01 BTC through a trading platform.
Trading platforms work like stock exchange platforms. I can use fiat money to buy coins, which I can monitor through the app or website. Then, when the time comes, I can sell my coins. To earn profits, I need to make sure that the value I am selling at is higher than its value when I bought it.
I can also provide services and get paid with Bitcoins. This can be a favorable compensation for supplying products or services as its value can increase over time, and as experts expect, it will skyrocket in the next years.
I can also set up a mining rig and start creating BTCs. I need a powerful computer with high-end graphics processing units (GPUs) to process the cryptography. My computing unit will need to solve cryptographic problems so I can receive coins in exchange.
Those who are planning on setting up a mining rig should know that this process consumes a lot of electricity, thus increasing the cost of production. More miners mean that cryptographic problems become harder to solve, thus taking more time before the computer finishes solving them.
While this can increase the value of BTC overall, it can also cause electric bills to skyrocket. It is essential that such risks exist to temper expectations.
The Bottom Line
Bitcoin opens a lot of opportunities for me to earn profits. It also helps enrich the market by providing a new way to transact. With its potentials for individual and economic enrichment, BTC is the money of the future.