Bitcoin: How it is made and everything you need to know about it

How is Bitcoin Made?

Bitcoin is governed by a computer protocol created in 2009 by an unknown group under the pseudonym, Satoshi Nakamoto, and the currency is created through a process called mining.

Mining operations are carried out through computers equipped with high computing capabilities, and these devices constitute a decentralized network that ensures transactions and verification of sales and purchases, through what is known as blockchain technology.

Each divisible Bitcoin unit is divided into parts, and no more than 21 million coins are expected to be created in the long term to reduce the risk of inflation.

Read more: How Do I Get Bitcoin.

Can it Be Used as a Means of Payment?

Originally, Bitcoin was designed to transfer money electronically from one person to another, without the need for a central authority to verify the validity of this transaction, and this cryptocurrency is traded on specialized platforms at a price determined by the law of supply and demand.

Until now, Bitcoin has not technologically transformed into a bargaining chip on a global scale, but many companies and brands accept the transaction to facilitate payments.

Bitcoin is not widely used as a means of payment in developed countries that have an efficient infrastructure for traditional payment systems, unlike countries where bank accounts are difficult to access, or that suffer high inflation rates such as Venezuela or Argentina.

Why Has Its Value Increased?

It is clear that Bitcoin greatly benefited from the Corona crisis, as it doubled in value 6 times in one year, during the pandemic, and became the currency of choice for traditional investment institutions such as banks, insurance companies and pension funds. , as they see it. as a refuge from the devaluation of official currencies.

Another factor that contributed to its high value is that it has been in high demand by thousands of companies looking to invest their money and bet on the uptrend of their prices, and many observers believe that Bitcoin has not yet reached its maximum value.

Tesla's investment of $ 1.5 billion in bitcoin last month sent prices up 20% in 48 hours.

Is it a Safe Haven Like Gold?

The cryptocurrency boom coincided with the worst economic recession since the 1930s, and proponents of bitcoin believe that it is a safe haven and that it will take the place of gold as a store of value, especially since yellow. metal is expensive in terms of storage, can be confiscated and cannot be easily divided, while bitcoin is easy to store and can be stored. The division is almost infinite, it is accessible everywhere, and it is completely independent of government authorities.

On the other hand, critics believe that the value of cryptocurrency is unrealistic and unstable, since it is not recognized globally, cannot be traded in banks, and is rejected by most companies in the world, unlike the Gold, which is recognized worldwide, represents a true refuge against inflation.

Is Bitcoin a Bubble?

The price of Bitcoin rose in 3 months from $ 13,000 to more than $ 58,000 at the end of February. "Unlike real estate or stocks, bitcoin has no intrinsic value and does not generate financial flows such as income, so it is difficult to determine the price of this currency," says Mathieu Bouvard, a researcher at the Toulouse School of Economics.

The value of Bitcoin depends on the confidence that investors place in them, and to a lesser extent on its dominance as a means of payment, and Bouvar again explains that if this confidence declines for one reason or another, the value of Bitcoin could theoretically fall steel.

Despite all the pessimistic expectations about Bitcoin, since its appearance this cryptocurrency has been able to withstand all the confidence crises that have hit it, and for Citibank analysts, Bitcoin is now witnessing a turning point, either by becoming a currency. preferred for international trade. or it will face an internal collapse.

Threat to Other Currencies?

"You can't buy coffee with Bitcoin," says US Treasury Secretary Janet Yellen of the rising price of Bitcoin. Popular crypto investor Tika Tiwari commented: "You are right, the trucks were not built to carry a single pineapple."

Tewari, in turn, does not regard Bitcoin as a currency, but sees it as an efficient payment method, as billions can be moved from Tokyo to New York in minutes for $ 20.

Central banks of major countries seek to compete with cryptocurrencies by launching electronic versions of major currencies (dollar, euro, yuan) in the coming months or years.

As for developing countries with fragile financial resources, this virtual currency can cause imbalances and effects that are difficult to control, which is why the Financial Stability Board, the International Monetary Fund and the Bank for International Settlements called for a regulatory framework to deal with to cryptocurrencies.