I wrote this article back in the summer of 2018 when bitcoin was only $8,256! It is to introduce my Web 3 series with how it all began. Bitcoin is currently over $43,000 and will rise! I have not changed much of the article, so please treat it as a historical journey. We're in 2022 and exciting things around Web 3 and the Metaverse.
In the technology writing series, I will aim to break down what is happening around the new technologies and how they impact our lives. I also hope to provide in-depth support for the writing world.
Welcome to the first of my maiden Blockchain Technology series and inside Satoshi Nakamoto’s world. You can read through this article related my way (absolutely interesting. A story in itself!) or scroll down to the bottom and read the summary. So here goes……
The Creator of Bitcoin
Once upon a time, on 3 January 2009 to be precise, a ‘man’ called Satoshi Nakamoto – rumour has it that Satoshi is not even a person but a group of people! But the long and short of it is we do not know who he is – decided to create an electronic form of currency called Bitcoin.
According to Satoshi, our money, also known as Fiat – “legal tender whose value is backed by the government that issued it” – www.fool.com – goes through various kinds of financial institutions and third parties and on its journey incurs many charges due to regulations.
He felt that if people could transact their currencies through a peer-to-peer or person-to-person electronic cash system, it would be cheaper and more straightforward for all. His examples of institutions are banks, credit card companies, payment platforms, etc
Satoshi wrote that exchanging physical cash, like taking coins and paper money to a shop, might be fine, but when it comes to electronic money, the 3rd parties have to trust you and require a lot of your personal data to do this.
Due to the prevalence of fraud, the 3rd party demands even more in-depth knowledge of you, like your mother’s maiden name, your Grandmother’s first name, etc. Come on! You will be shocked at how much of your info is held out there.
Satoshi calls this a Trust issue. Merchants need to trust you to act on your behalf. We also know how long some of these transactions take. If it is an international payment, it could take over a week with serious charges. Transactions are also vulnerable to fraud, and many people have been ‘burned’!
Satoshi felt Fiat is controlled CENTRALLY by banks and Governments and does not give citizens enough say. He firmly believed that there should be a way for citizens of any country to carry out transactions directly, without boundaries and with minimal need for middlemen such as banks, governments and other kinds of financial institutions.
Imagine how controversial this thought was, but many geeky computer people got excited about it and avidly followed his plans. To them, it was not about anarchy or bringing down governments. It was about people controlling their own money. And about them carrying out financial transactions worldwide without the need for bank accounts.
The Unbanked and Unknown
One of the best cases for decentralization is to help the billions around the earth who are known as unbanked. There are about 2.5 billion of these in Africa and other developing nations who are unbanked and unknown – a lot exist without a record of their identity. Without identity most do not have a bank account although Mobile banking in many parts has done a lot to rectify this. Blockchain technology and cryptocurrency will make a bit impact when it is integrated into this space. There are significant developments currently going on in Africa that I will cover in-depth.
So what is Bitcoin?
It is a digital kind of money that can be transferred instantly and securely from one person to the other. You can use it to pay family, friends or transact businesses. It is almost impossible to steal because of how the underlying technology it was built operates.
This technology is called Blockchain and it is simply an electronic spreadsheet that resides identically on many computers round the world.
All transactions on this ledger can be viewed by anyone as long as they have what is known as private and public keys (more on this later) to view the transactions.
Bitcoin can also be divided into 8 decimal places! It means that you can buy a fraction of a bitcoin. Therefore, 0.00000001 BTC is the smallest amount that can be handled in a transaction. The last bitcoin is likely to be generated in the year 2140. The market value of bitcoin fluctuates; at the time of writing this, a bitcoin is; $8,256. When it began in 2009, it was about $0! In 2010 it was worth $0.39. A lot of people who bought it then are now wealthy. Bitcoin is also popularly known as digital gold.
What are the uses of Bitcoin?
- It can be used as payment for goods or services.
- You can buy bitcoins from Exchanges (Like the online bureau de change).
- You can trade bitcoin on trading platforms and exchanges.
- You can also buy bitcoins from Bitcoin ATMs, although the high transaction fee.
- You can invest in bitcoin, but the cryptocurrency market is very volatile and not for the faint-hearted. If you want to invest, it has to be money that you can afford to lose.
- A few’ evangelists’ have predicted that bitcoin could get to 1 million dollars per coin in years to come. It fell from its all-time high of close to $20,000 around December 2017.
So, let us recap the above;
- Bitcoin was created in 2009 by a man or a group called Satoshi Nakamoto.
- Electronic money can be processed and viewed simultaneously on many computers worldwide by specialists called Miners with powerful computers that can solve mathematical problems required to find a bitcoin.
- It is an electronic payment that allows transactions between people as long as they have a private key and public key (more explanation of this later)
- It is being used worldwide, but it might take many years before broader adoption around the globe happens.
Good things about Bitcoin
- In the future, the need for banks or financial institutions might become minimal due to the disruption of this technology. Think of how email disrupted the postal system.
- Many startups in developing countries use it to pay local people who do not have banks or easy access to banks.
- The birth of bitcoin allowed us to discover the value of its underlying technology – The Blockchain. It has also allowed the creation of hundreds of other digital currencies.
- Bitcoin is also called digital gold and, in time, might become a store of value, just like paintings by the old Masters.
- Due to the birth of bitcoin, we now have the Internet Of Money( A book title by Andreas Antonopoulos). It means the internet will become a means of banking our own money. How exciting that is!
- Bitcoin is not a’ FAD’. It is here to stay.
The Not so good Things
- It requires considerable computation power to mine, so a bitcoin transaction takes a long, and charges could be expensive.
- Its value fluctuates, and it is still very volatile.
- Cybercriminals have used it for fraud, but it is rising above this.
- The market is currently unregulated and subject to market manipulation.
Finally..do you know….
There is a traditional currency system in places like the middle east and Afghanistan known as the Hawala, where people exchange currency based on trust. The only difference between it and bitcoin is the mode of transfer. There are no computers. It is too long to explain in this article but do google it. It makes an exciting read.
Note that I am not a financial adviser. If you want to make a financial decision please seek advise from a professional.