In crypto world, the first and most-known cryptocurrency is, of course, Bitcoin. Created in 2008 by a mysterious person known as Satoshi Nakamoto, Bitcoin was born the first digital currency without a central node of authority behind it. Transactions are verified by nodes in the Bitcoin network using cryptography, and they're recorded in a public and distributed LEDGER called Blockchain.
Bitcoin Mining
Bitcoin uses a Proof-of-Work system to accept a new block to the Blockchain. Blocks are kept secure using a SHA-256 hash function. Miners validate transactions by solving a difficult mathematical puzzle. The primary objective of the miner is to determine the nonce value, and that nonce value is the mathematical puzzle that miners are required to solve to generate a hash that is less than the target defined by the network for a particular block. Users able to find the nonce value get rewarded with a number of bitcoin which is getting lower and lower in time with a process called Halving.
Bitcoin Halving
After every 210,000 blocks mined (which is achieved about every 4 years) the block reward given to miners for processing transactions is divided by two.
The first halving occurred on November 28th 2012, after a total of 5,250,000 BTC had been mined.
At the time of writing this article, and since May 11th 2020 (third halving), the reward is set to 6.25 BTC.
The current circulating supply is 18,655,318BTC, while the theoretical maximum supply is 21mln BTC.
There's an estimation that 98% of maximum supply (i.e. 20.58mln BTC) will be available before year 2031:
which probably means that its value will grow accordingly, since it will become more and more requested and scarce.
So, is Bitcoin a currency?
Here's the definition of Currency as stated by Investopedia:
Currency is a medium of exchange for goods and services. In short, it's money, in the form of paper or coins, usually issued by a government and generally accepted at its face value as a method of payment.
Here's, instead, the definition of Store of Value, as stated by the same source:
A store of value is essentially an asset, commodity, or currency that can be saved, retrieved, and exchanged in the future without deteriorating in value. In other words, to enter this category, the item acquired should, over time, either be worth the same or more.
Which definition do you think fits Bitcoin the most at the moment?
In my opinion, scarcity, high transaction fees, slow transaction approval time and, of course, BTC price, made Bitcoin transition out from being a currency and transformed it into one of the most requested Store of Value out there.
Should I buy Bitcoin?
As the Store of Value definition says pretty clearly, Bitcoin should, over time, be worth at least the same. But, considering the halving process and the limited supply, there's a good chance that BTC price will go higher and higher with time. In other words, the scenarios I'm considering are two:
- The whole crypto world shatters and BTC will be worth nothing
- 1 BTC will be worth more than 1mln USD by 2032
If you want to buy BTC, you can do it on Binance. If you are new to Binance, you can register using my invite link here. You'll get a discount on trading fees and 5$ as a welcome bonus.
Disclaimer: this is not an investment advice. Do your own researches before investing in cryptocurrencies.
Credits
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Thanks for reading, let me know what do you think about it in the comments and feel free to share your experiences!
