What is Bitcoin, and why is it so popular?

By WILLIAM XIE | February 1, 2018

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PUBLIC DOMAIN The value of Bitcoin had surged from $5,716 to $19,499 in a single month.

Cryptocurrency is a popular term that has recently received much publicity. As its name suggests, cryptocurrency is related to cryptography, the art of solving codes.

In the case of cryptocurrency, cryptography is used to authenticate transactions that are securely and anonymously recorded in a complex ledger called a blockchain. Equipped with special hardware, computers are used to “mine” or contribute to the blockchain while simultaneously generating cryptocurrency.

A blockchain is a decentralized, public ledger consisting of all cryptocurrency transactions. “Blocks” or new transactions are chronologically appended to the blockchain with the use of computers.

A copy of the blockchain is shared and updated by computers that are connected to the blockchain.

Blockchain technology thus eliminates the need for central regulation, because every transaction can be viewed by anyone who is connected to the blockchain. There exists no intermediary, such as banks, and thus no transaction fee. Blockchain technology has possible applications in various fields beyond cryptocurrency.

“Blockchain and derivatives of blockchain technology like Tangle and Nebulas will be integrated into many of the products we already use ranging from cloud storage to legal contracts, to background checks, and insurance, etc.,” Travis Chan, a sophomore majoring in computer engineering, said in an interview with The News-Letter.

There are a few defining characteristics of cryptocurrency trading. First, transactions are made securely, backed by the blockchain.

Second, the identities of parties are kept anonymous. Third, the value of a cryptocurrency has no fixed value but is determined by supply and demand. Fourth, cryptocurrencies can be exchanged for traditional currencies. Lastly, cryptocurrencies cannot be fabricated due to the fact that the blockchain keeps track of all currency.

Bitcoin is the most popular cryptocurrency, or digital currency, that can be used anywhere in the world. It was introduced in 2009 as the first decentralized cryptocurrency.

Recently, the value of Bitcoin has surged from $5,716 in mid-November 2017 to as high as $19,843 in mid-December 2017.

Bitcoin is currently priced at $10,132.83, making it by far the most expensive cryptocurrency. The blockchain estimates the current Bitcoin market capitalization, or total Bitcoin supply in circulation, to be about $200 billion. Bitcoin has the largest market capitalization and the longest blockchain network.

Like other cryptocurrency, Bitcoin is traded securely and anonymously, recorded by a blockchain. Similar to any medium of exchange, Bitcoin can be traded for virtually anything, including illegal items.

The trade of Bitcoin and other cryptocurrency is a contentious issue because the identities of the parties are unknown, making it impossible to control.

There is a limited quantity of Bitcoin established at 21 million coins. How can one obtain the coveted Bitcoin? There exists only two ways. A Bitcoin can be traded for or mined.

As the most expensive cryptocurrency, the time, processing power and cost required to earn one Bitcoin by mining is unfeasible for a single person to achieve. There are large scale mining operations called Bitcoin farms, establishments located around the world that pool resources from investors to mine Bitcoin.

Consumer level hardware can be used to mine at a smaller scale. Miners must account for the cost of electricity and hardware before determining if a profit can be made mining.

“Because of the cost of buying the components needed to mine ethereum [a popular cryptocurrency] effectively, buying ethereum is generally more profitable than mining it,” Razi Rais, a sophomore majoring in electrical engineering, said in an interview with The News-Letter. “Once you set everything up, mining is a good way to make some extra money.”

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