Since the cryptocurrency market has developed, Bitcoin has become a buzzword in the realm of finance as it has been continuously growing throughout the years. In fact, Bitcoin ranks number one as the most popular cryptocurrency of all time – however, other cryptocurrencies were also born in the years since.
If you have done your research about the different cryptocurrency trading platforms, and you’re curious about Bitcoin and how the cryptocurrency market works, prepare to discover interesting facts about the crypto world that you probably didn’t know.
Bitcoin and the cryptocurrency market have largely experienced significant growth and increased value in recent years. Bitcoin undoubtedly has become the most widely recognized and valuable cryptocurrency ever.
What’s the Purpose of Bitcoin?
During the early years, people who wanted to sell their goods or purchase specific crops or products didn’t always use money. Sometimes, a product can be attained by offering another product considering the approximate value – this process is called the barter approach, or bartering. However, as monetary relationships continued to develop and change, the barter approach became more inconvenient. Eventually, society switched to a cash nexus – a real revolution in economics.
As the monetary approach continued to develop, it became the reason why people nowadays use coins and paper money (or bank cards representing them) to purchase goods and services.
The method of payment didn’t stop at paper money and coins – the introduction of cryptocurrencies such as Bitcoin brought about a new class of financial assets that can solve some long-existing problems.
While debit and credit cards have been a popular way to make payments and make people’s lives easier, there are still plenty of challenges and obstacles regarding using credit cards for specific instances, such as using cards for international transactions.
Fortunately, cryptocurrencies can smoothly handle international transactions – not to mention you can transfer Bitcoins abroad in just a few clicks at extremely low charges.
Cryptocurrency was not commonly used for payment transactions in the past, but nowadays, there’s no denying that it’s gaining popularity. In turn, this attracts traders, investors, and businesses to trade cryptocurrency for various assets on the stock exchange.
But the cryptocurrency market fluctuates a lot, and the values of crypto change over time – this is something that new investors must consider and take note of before putting a huge amount of money into one cryptocurrency.
Cryptocurrency vs. Fiat Money
The release of fiat money (a.k.a. traditional currency) is in the hands of the government and central bank as they have full control of this type of currency. In addition, the worth of fiat money depends on the specific country’s authority and its economic and political situation.
During the 21st century, digital forms of money are already used to make electronic payments. The history of each online transaction contains the details about payments made on the web using the corresponding digital method and is recorded on bank servers since that money comes from a user’s bank account or card.
On the other hand, cryptocurrency is also digital money. The major difference is crypto is not controlled by banks or a specific government, which makes it easier to use in transactions. Instead of being recorded on the bank servers, each transaction is recorded on a blockchain. Possessing an extreme level of security, the transactions recorded on the blockchain cannot be changed, canceled, or transformed.
How Are Bitcoins Produced?
If you’re interested in the most popular cryptocurrency, you need to understand how it is produced and how to have Bitcoins. The first thing that you have to do is to join the Bitcoin blockchain network, which functions to decentralize as it consists of computers from various parts of the world.
So how do you gain bitcoin after joining the network?
The answer to that question is simple. Your computer has to work on a mathematical problem of high complexity, which might consist of several electrical and computational resources. This work is actually what keeps the network and all transactions safe — it ensures that all nodes have the same information, which prevents any one person from cheating the network.
After your computer finishes solving the complex mathematical task of validation, it first sends it to the system on the blockchain – then the other nodes of the blockchain system solve the problem using the same computations to check if the solution that your computer made is correct. If the task is solved correctly, the computer that shows the correct answer gains a bitcoin. And that is how Bitcoin is mined.
The feeling of solving difficult and complex tasks and earning profit from doing that may seem tempting and exciting. However, it’s not as easy as you think! Satoshi Nakamoto, the founder of Bitcoin, set a limit of 21 million bitcoins to be generated, with the rate of reward constantly going down. Due to this, generating bitcoin becomes difficult, which increases the crypto’s value.
As a result, Bitcoin — and other cryptocurrencies — have made their way to specialized exchanges where people can invest in them without engaging in crypto mining at all.
The Cryptocurrency Exchange
In the first years after it was developed, the cryptocurrency market was exclusive to its dedicated space, making it impossible to trade it for fiat money. Even though the crypto market gained popularity, there are still certain governments that do not acknowledge this form of currency. This is the reason why traditional exchanges cannot properly cater to the needs of crypto traders and investors.
Fortunately, the cryptocurrency market has given birth to its own set of exchange businesses. The market brings crypto enthusiasts who want to purchase, sell or trade cryptocurrency together by allowing trading and exchanging one cryptocurrency for another (or for fiat money such as dollars).
In addition, cryptocurrency brokers also appeared over time. Similar to stock and Forex brokerages, these companies allow trading crypto and crypto derivatives such as CFDs. Some options here include Robinhood and Immediate Edge which are already popular in the crypto community.
It’s important to remember that to perform any transaction in the crypto market you should know the current trends. Since the crypto market constantly changes as the values increase or decrease over time, it’s important to monitor the real-time cryptocurrency value. Keeping track of crypto exchange values can help provide information to crypto enthusiasts and inspire various strategies to take advantage of the token’s value and convert it into profit.
Why Do Cryptocurrencies’ Values Change?
For instance, in the cryptocurrency market, Bitcoin is a highly volatile asset, which means that its price can change quickly as it depends on several factors.
Let’s take a look at Bitcoins price history – In the year 2010, 1 Bitcoin was only worth $0.08, and five years later, it soared up to around $360 and continued to show stable, increasing growth. Nowadays, the value of Bitcoin is constantly increasing as the highest possible number of issued items were inclined years ago.
Even though Bitcoin may seem like an isolated system, the value of cryptocurrency relies on political and economic events worldwide. For example, when crypto enthusiasts around the world invest in cryptocurrency and not in traditional stocks or securities, the value of cryptocurrency increases.
The world of cryptocurrency is full of complicated but manageable processes that need to be studied and reviewed before putting a huge amount of money as an investment. Learning about Bitcoin and how the cryptocurrency market works are just some of the important things that every newbie must know before directly choosing crypto and investing a huge amount of money in cryptocurrency trading platforms.