Bitcoin is not the first cryptocurrency to make its debut in the modern world. It has been over eight years since the bitcoin was mysteriously created by someone under the name Satoshi Nakamoto.
However, it was not until later that the bitcoin gain favor among the many digital currencies.
Here are five things you need to know to better understand the bitcoin:
1. It’s not actually a coin
Bitcoin is an international digital currency. It is not a physical currency; it uses a complex digital code that is digitally signed for transactions.
According to the Federal Reserve, “Bitcoin is a scheme designed to facilitate the transfer of value between parties.” Bitcoin can be used wherever it is accepted, which does away with the need to transfer currencies between different countries.
2. Cuts out the middle man
The digital currency is transferred directly from one computer to another, this eliminates the need for third parties like banks or credit card companies. Avoiding these extra charges is attractive to many bitcoin users because they can avoid additional fees.
“Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously,” according to ABC News.
Untraceable spending has seemed troublesome to some while others are relieved to not have to divulge personal information for every purchase.
3. It’s gaining popularity
Bitcoin has been around since 2009 but its popularity has soared within the past two years. According to NPR, bitcoin’s price has already spiked more than 1,000 percent in the past 12 months.
Because bitcoin’s value is rising, a majority of the public is holding on to it instead of spending it.
“These overall statistics constitute an estimate of the proportion of bitcoins in circulation which are held for ‘investment’ purposes,” Federal Reserve informed.
People are starting to accept it and it only has value if it’s widely respected.
4. Feared to be an economic “bubble”
“Usually the bubble happens when people that are buying it and demanding it and overestimate what the actual true value is,” said David Barrus, the chair of the Economics Department.
Barrus explained there is no way to actually prove something is a “bubble” until it has already popped and is on its economic decline.
“The continued rise in the value of bitcoin looks unsustainable in both economic and environmental terms,” according to BBC.
5. How and where it can be used
As the price of bitcoin has increased, so have the opportunities to spend it. According to ABC News, places such as Microsoft and overstock.com have announced they will accept bitcoin.
Not every place accepts bitcoin as a valid currency, but as popularity has risen more stores have decided to accept it.
“It’s the acceptance of that currency that makes it valid,” Barrus said.