Bitcoin: the rapid rise of a cryptocurrency
Right in the middle of the greatest crisis of confidence in the financial markets in recent decades, a revolutionary technological system was born: bitcoin. The digital currency presented – once again – the question as to which was more trustworthy – humans or mathematics? In bitcoin, its anonymous developers have created a possible alternative to conventional currency systems, which are susceptible to crises and inflation. Admittedly, bitcoin is not the only cryptocurrency: the number of these digital currencies is currently mushrooming. According to information from the sectoral service CoinMarketCap, there are currently over 1,000 cryptocurrencies, such as “Ethereum” or “Ripple”, collectively accounting for market capitalisation of over USD 170 billion in total. Around half of this is, however, attributable to bitcoin, making it by some way the most important cryptocurrency at this moment in time.
Bitcoins are created in a computer network, in a distributed manner (an operation referred to as “mining”). Mining is a process whereby computing power is made available for processing transactions in bitcoins. For the computing power provided, users receive newly generated bitcoins as well as the fee included in bitcoin transactions. However, bitcoin mining is not unlimited, since at the very outset the number of bitcoins was specified as a maximum of 21 million. But the cryptocurrency is not backed by any government or any central bank: bitcoins are controlled purely by users. In the final analysis, anyone can create bitcoins, although the technological requirements for this (and the power consumption required) are enormous. At the end of August 2017, a total of 16.5 million bitcoins were in circulation. Here you can find investment possiblities surrounding the theme «Bitcoin: the rapid rise of a cryptocurrency».
The technology associated with bitcoins is still at an early stage of development, and standards are still being determined and introduced. In future, there will be considerable changes to the bitcoin technology. Technological advances in cryptography, in code decryption or in quantum computing could present a risk to the security of bitcoins. Furthermore, alternative technologies to bitcoins could be introduced, with the result that bitcoins become less relevant or are rendered redundant.
A further risk is that bitcoin possesses disarming similarities to cash. Anyone whose digital wallet is stolen loses the bitcoins stored in it. There have already been numerous such thefts. One of the most spectacular hacker attacks took place on the Japanese bitcoin market Mt. Gox, where bitcoins with a value of several hundred million dollars were stolen and the company was driven to insolvency (2014) as a result.
Acceptance is increasing
Overall, however, bitcoins have become increasingly popular. With bitcoin operating practically fault-free for nine years, the exponential growth in interest is a good indicator that it is a practicable solution. Whereas “only” just under 11 million people held bitcoins at the start of the year, by the end of August that figure had already risen to over 16 million people. But it is not only the digital community that is increasingly making use of it – acceptance of bitcoins by business and, more recently, by individual nations, too, has grown. In the spring of 2017, Japan became the first country to recognise the digital currency as a legal means of payment, with Australia following in July.
Bitcoin users / bitcoin transactions
The number of bitcoin users (measured by the number of wallets) and transactions is increasing steadily.