Initially,the price of bitcoin was $0.01 which was set in 2010.But, now it crossed $16,000.Once was used by nerds, libertarians and drug dealers, But now bitcoin is drawing millions of dollars from hedge funds.
What a drastic change?
Now the digital form of money is going main stream.It is the time nail down the reason why the bitcoin price altered heavily.
From basic questions are answered as below.
Before reading Everyone should know what actually a bitcoin is?
It is a form of money for which it is not.The currency which cannot hold in your hands.It is not backed or issued by any government. It is not recognize by many main stores.At the core,bitcoin are set of software protocols for generating digital tokens and storing the transactions in a way that makes hard to counterfeit. Bitcoin has value only to extent that user agree that it does
How did the bitcoin system start?
The original software source code was written on a white paper by a person or a group of people pen named as Satoshi Nakamoto whose identity is still a mystery.Many efforts were made by many people to claim the credit of bitcoin.Virtual currency was mainly used by the online fantasy gamers.The main idea behind the bitcoin is blockchain which is publicly visible but largely anonymous bitcoin transaction recording ledger.
How does it work?
Imagine a online money transfer.Basically what happens is the bank acts a the man in the middle for the transfer of money online.They add,subtract,verify the amount from one account to another account.You can see the log if tranfer and the transaction is controlled by the bank.You are trusting the bank to make the amount changes and for its verification. Similarly, the blockchain is a database that keeps the transactions and verification But this is done without the banks or any central authority.
Ever Wonder who performs the bank function for bitcoin?
It is done by a general agreement on a decentralized network.These transaction of bitcoins are done with the help of electronic wallets that helps to upload data to the network.All the new transaction are bundled together into a batch and broadcast to the network for verification so called “bitcoin miner”.
But How will be the Miner?
Anyone can be a miner especially if you have super fast computers,lot of electricity and desire to solve puzzles.The transaction data in each batch is encrypted by a formula that can be solved only through trial-and-error guessing on a huge scale. Large-scale computing power is put to work by the miners a they compete to be the first to solve it.If miners answer is verified by others,the data is added to the link chain of data blocks.Then the miner is rewarded with a new bitcoin.
How cheating can be prevented by the system?
Every block contains data linking to earlier blocks.It’s like a chain and if you try to spend the same bitcoin means revising many links in the chain.Moreover,as miner compete they verify each others work.
Blockchain working for bitcoin : EXPLAINED PICTORIALLY
What explains the upward movement in Bitcoin price?
New Investors and expectations from many more increased the price of bitcoin into 11 folds this year alone.Other exchange groups especially the CME group plans to offer bitcoin future contracts,potentially this expands the bitcoin’s appeal.In fact, the bitcoin software provides the guarantee that there is a finite limit to the supply of bitcoin which added the fear of missing out for some investors. Coinbase, one of the biggest bitcoin exchange platform was overwhelmed by two to three times its normal traffic on Nov 29, when bitcoin price soared past $11,000 making its service temporarily available to some users.Always a new crypto focused hedge fund opening up weekly and already crossed 100.
Bitcoin Biggest Year
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