BITCOIN DEMYSTIFIED: The Rise of Cryptocurrency

Bitcoin, bitcoin, am pretty sure we have all come across this word somewhere (especially online and on the news especially during 2017 until now). The first time I came across Bitcoin was around 2011/2012 (barely three years after its invention) while installing some computer software and the software owner put an option of donating via bitcoin. At the time a bitcoin was worth $50 to $60 (not an exact estimation) but today a single bitcoin is worth thousands of dollars. So what exactly is this mysterious “Bitcoin”?

Bitcoin is simply a cryptocurrency and worldwide payment system. By cryptocurrency, it implies an electronic or digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions. Bitcoin is a form of digital currency that can be transferred peer-to-peer with no middleman. It is the first decentralized digital currency, as it works without a central bank or single administrator.
 

They (bitcoin) are mined by using computer chips to solve a mathematics problem. When bitcoin was first created, you could mine them on an ordinary laptop. But now they're mined in giant server farms because pooling processing power increases the odds of finding new bitcoins. These farms are called mines. The mining process consumes huge amounts of electrical power, this implies that the cost of mining bitcoin is very high. It is unknown how many bitcoin mines exist in the world but China is the home to most of them. Mines in China consume about half of the power that the whole world uses for bitcoin mining.

Bitcoin runs on the block chain technology. A blockchain is a continuously growing list of records called blocks using cryptography. Bitcoin is one of the most phenomenal application that uses the blockchain. Other crypto currencies that run on blockchain consists of Ripple, Litecoin, Dash, and Monero just to mention a few.

The cost of sending and exchanging bitcoin has considerably increased over the past few months, this has resulted in decrease in the use of the crypto. The high transaction costs are attributed to high mining fees which is a form of payment to the miners as a proof of work. This is a big threat to the popularity and usefulness of bitcoin.

The Lightning Network is an in-development project that aims to fix the bitcoin scalability. Lightning Network will require putting a funding transaction on the blockchain to open a channel. It was first put to test in January 2018. This is a scalability that may solve the bitcoin problem that is making the processing of its transactions expensive.

Here’s a breakdown of Bitcoin prices from December, 2017:

                  

19th Dec	$17 608
26th Dec	$15 745
3rd Jan	$15 130
10th Jan	$14 890
17th Jan	$11 141
24th Jan	$11 399
31st Jan	$10 297
5th Feb	$6, 801

       Source: The Spectator Index @spectatorindex

       As of February 6, 2018 BBC reported that the Bitcoin had fallen below $6,000. 

 

Official Bitcoin Logo

The future of transactions may perhaps be in crypto currencies, bitcoin is one of them. Whether a skeptic or an investor, let us embrace it and perhaps the traditional banking system may just have to compete with this new wave of money transactions, the forth industrial revolution after discovery of the internet (It just could be).

Article submitted by: Malcolm Buluku (@malcolmbuluku)

Edited by: Kapila Kavenuke (@coolkapsdeone)