Cryptocurrencies have established themselves as a useful market for moving money, trading and saving funds: only the cost of bitcoin has increased from $ 10 to $ 40 thousand over the past 10 years.And sales of tokenized art in 2021 amounted to almost $ 300 million: for example, a gif with falling oranges to Russian blogger Varlamov managed to sell for $ 14,007. But, despite the monetary successes, cryptocurrencies have little official status: if in Japan and the USA you can pay for goods with crypto, then in Egypt or Qatar it is generally prohibited. In Russia, the state has yet to decide. High-tech, together with Currency.com, tells how cryptocurrencies have evolved, why governments are afraid to recognize them, and whether digital money will win over fiat money – classic paper currencies controlled by governments.
From buying pizza to crypto millionaires
Bitcoin saw the world almost 13 years ago: it was then that a person or a group of persons, still not reliably known, under the pseudonym Satoshi Nakamoto published an article called “Bitcoin. Peer-to-peer electronic money system “. It described in detail how bitcoin works and what operations can be carried out with the first digital coin. What the future crypto enthusiasts liked was complete freedom from banks and governments, as well as inflation. But today, bitcoin, along with other cryptocurrencies, is at the center of public and government discourse.
Bitcoin is based on blockchain technology – a continuous chain of blocks with information about all transactions performed. The advantage of this method of storing data is that it can be restored only if all participants in the chain are present.
Another feature of bitcoin is the limited number of digital characters. As conceived by the authors, the maximum possible “create” 21 million bitcoins.
Issue, or emission of digital signs occurs through mining. Unlike the relatively simple printing of fiat money, mining is a solution to very complex mathematical problems, as a result of which a new block appears in the blockchain chain.
Mankind, having created bitcoin, literally outsmarted itself – having got rid of the gold equivalent of new generation money, miners doomed themselves to huge costs associated with finding new blocks. The mining reward, in turn, decreases. In 2009, miners received 50 bitcoins per block, three years later – only 25, and in 2017 – about 12. Experts assume that the last bitcoin will be mined in 2140, today 18.5 million cryptocoins have been “mined”. The cost of the first bitcoins was calculated in thousands – a thousand coins for $ 1.
The first purchase with Bitcoin dates back to 2010. A programmer from the United States (bitcoins have long been considered fun for geeks – “High-tech”) Laszlo Hanich bought two pizzas, paying about 10 thousand bitcoins for them. Today it is $ 65 million.
The rise in the bitcoin rate began in 2011, when it first reached the $ 10 mark. Interest in cryptocurrency began to grow, especially among those who saw the potential in the new technology. At the same time, numerous hacker attacks and cases of theft began, which significantly undermined the credibility of the crypto – cyber thieves stole 25 thousand bitcoins from the founder of the Bitcoin Forum. In 2013, the digital currency rate reached the level of $ 100, and after the American online games publisher Zynga became interested in bitcoins, the coin began to cost from $ 600 to $ 1,000. Interest in bitcoin (and blockchain) fueled the financial crisis of 2008-2012. when distrust of traditional financial institutions grew, including due to the injection of huge amounts of fiat money into the market. Decentralized currency has become a possible salvation for many from future economic collapses.
2017 was a landmark year for bitcoin – first, the digital currency exceeded the cost of a troy ounce of gold (a unit of mass equal to approximately 31.1 g – “Hi-tech”) – $ 1,235, and then in Japan it was declared a means of payment. It was impossible to keep up with the digital currency further: investors reacted violently to the first official recognition of the currency and raised its value to almost $ 5 thousand.
Each block of the blockchain network contains 1 MB of transaction information. This limitation made it possible to encrypt records more securely, but at the same time made scaling much more difficult. With such a block size, it is possible to correctly process from three to seven operations per second, and the formation of a new block takes up to ten minutes on average. The system simply could not keep up with how quickly the cryptocurrency developed – the number of transactions over the years has grown from 100 thousand to 300 thousand transactions per day.
Despite the fact that in 2017 China officially banned the ICO of cryptocurrencies, bitcoin continued its rapid growth, exceeding $ 10 thousand.According to experts, the limited emission of bitcoin and the absence of any regulation on the crypto market played a role in this. In the same year, its capitalization amounted to $ 270 billion, which allowed the digital currency to enter the five largest currencies in the world, and the Chicago Commodity Exchange even launched trading in long-term Bitcoin contracts. News about the first bitcoin millionaires launched a real excitement in the market – December 2017, bitcoin costs $ 20 thousand.
The first cryptocurrency exchanges began to appear where it was possible to trade cryptocurrencies. The authorities of the states began to advocate strict regulation, up to a complete ban. Many analysts predicted the fate of a bubble for bitcoin, which was about to burst.
“Black Tuesday” really happened when cryptocurrencies (by that time alternatives to bitcoin had already appeared on the market) literally overnight lost half of their value: bitcoin dropped to $ 9.6 thousand, ethereum from $ 1.4 thousand, which was then for him a record, up to $ 805, ripple began to cost less than a dollar, having lost almost $ 4 in value, and Bitcoin Cash – from $ 3.9 thousand to $ 1.4 thousand. Investors ran to sell cryptocurrencies for fiat money to save their savings. For many in those years, crypt became an analogue of offshore companies. Therefore, the amounts that flowed into the crypto market were truly colossal.
Two more years remained extremely pessimistic for Bitcoin. Social networks took up arms against the crypto – in 2018, advertising of digital currency was banned by Facebook, Twitter and Google, and then the miners made a real flight, starting the sale of their businesses. The result is minus 80% of the maximum values in 2017.
You can still buy Ethereum and other types of cryptocurrency, with a lot of people making money from these. It’s important that you understand what you are getting into before you even go near the world of cryptocurrency though, which is what we have been explaining to you. Cryptocurrency, as you can see, is not the most stable investment which is something that you should always keep in mind if you are thinking of getting involved.
