Bitcoin and Crypto: What you need to know?
You all have heard of bitcoin since it has been the most searched word on Google for many years. But few of us know what it is and how it works. The recent catastrophe and the online demonstrations of the people have made it very clear that people need knowledge. Here I will use simple words to explain “What is this hidden giant?” Stay with me.
Table of Contents
Background
In Oct 2008 a document was published by an author named Satoshi Nakamoto. This document suggested how we can replace our current banking system through Bitcoin currency. There are many cryptocurrencies but I would focus on bitcoin. When you’re using Daraz and Careem you get some reward points these reward points usually can only be used inside that platform. If those points can be accepted outside then their value would increase. Same as the case with bitcoin, the success of the bitcoin depends on how people accept it. When you buy some bitcoin you’re simply buying the specific address of the bitcoin through which you make the transaction at other bitcoin. Complications coming but bear with me I will make it simple.
Bitcoin Mechanism
Bitcoin is an automated structure you do not need coding for it. Its algorithm is also on autorun. But to run an algorithm you need computers. And at this big level you need thousands of computers and to make these computers working you need a third party. But again if we have to include a third party the whole point will return to that banking system. To avoid third-party ‘bitcoin mining’ concept came into existence. In this people used computers to run their algorithms and when the transaction is completed successfully they get the bitcoins as a reward. Because this whole system is in distributed and blockchain form so the problem of power and hacking can easily be resolved. But if miners continue to generate bitcoin then inflation shall increase. Thus, to avoid this it’s confirmed that miners cannot generate more than 21 million bitcoin. How much miners will get as a reward depends on how many miners are doing mining using computers. In 2009 you could generate 200-300 bitcoins in 3 days but today you need far more time to generate even 1 bitcoin.
Downside
The downside is that it is not universally accepted. Also since the government is not a party in it, there is a possibility of illegal activities. It is also volatile, hence its value changes every few seconds. Consider that you buy something and then want to return it, but since the price has changed, the shopkeeper may be wondering how much he should pay because there is no mechanism for it. But as it’s open-source some mechanism may come in the future.
Bitcoin and success
Bitcoin is now legal in Pakistan but has not been recognized by the government for many years. This means that whatever you are doing is for you and the government is not responsible for any loss. But now the government is trying to make its regulations. Let’s see what results we get. Since it has a high return that’s why it carries a lot of risks. Be prepared to lose everything if you want to get rich overnight but if you invest wisely you can become a millionaire in long run, too. Who knows, time will tell!
