Opinion

The Basics of Bitcoin

By Ryan Halfpenny

ryan.halfpenny@spartans.ut.edu

Creating an alternative to the current monetary system appeared to be a lost cause in 2009, but everything changed in October of 2008 when a document was published by Satoshi Nakamoto online. The document, also known as a white paper, which explains the aim of a cryptocurrency project and the technology that underpins it, suggested a way of creating a system for a decentralized currency called Bitcoin. 

This technology claims to be able to create digital money that overcomes the problem of double spending without the need for a central authority. Bitcoin is a decentralized ledger with no central authority, but what exactly does that statement mean? So, because most money is now digital, let’s compare Bitcoin to a bank. The bank maintains its own ledger of balances and transactions, but it is not transparent and is stored in the bank’s main computer; you cannot look into the bank’s ledger, and only the bank has complete authority over it. 

Bitcoin, on the other hand, is a transparent ledger that can be viewed at any time. You can see all of the transactions and balances that are occurring; the only thing you can’t figure out is who owns these balances and who was behind each transaction. This means that while Bitcoin is anonymous, and everything is open, visible, and traceable, you still have no way of knowing who is sending what to whom. 

Today, Bitcoin is also decentralized, meaning instead of a single computer holding the ledger, each computer participating in the system keeps a copy of the ledger, known as the blockchain. Bitcoin, like most modern money, is digital, which means it has no physical form and no actual coins. When you hold Bitcoin, there are simply rows of transactions and balances, which implies you control the right to access a specific Bitcoin address record in the ledger and send from it to another address. So, what does it all mean, and why is Bitcoin such a big deal? 

For the first time since the invention of digital money, we now have a viable alternative to the current system. Bitcoin is a form of money that is uncontrollable by any government or bank. Bitcoin is the Internet of Money, and it provides a decentralized money solution. Bitcoin also has various advantages over the present system. First and foremost, it provides you with complete control over your funds. With Bitcoin, you and only you have access to your funds. No government or bank has the authority to close your account or seize your assets. 

Bitcoin also eliminates a lot of the middlemen in the money transfer process, making it cheaper to use than regular wire transfers in many circumstances. Bitcoin was created to be digital by nature, which means it can be enhanced with extra layers of programming to become smart money. Also, Bitcoin allows two and a half billion people around the world who do not have access to the current financial system to engage in digital trade. Because of where they live and the reality they were born into, these people are unbanked. However, today with a mobile phone and a click of a button they can start trading using Bitcoin, no permission needed. 

There are also several merchants online and offline that accept Bitcoin, you can order a flight or book a hotel with Bitcoin if you’d like, there are even Bitcoin debit cards that allow you to pay with your Bitcoin balance. However, the road to widespread adoption by the general population remains long, and we are witnessing it revolutionize money as we know it these days.

According to statistics from Trading View, Bitcoin is up over 300% in the past year, up over 7,000% in the past 5 years, and is up over over 40,000% all time.

My end of the year prediction for Bitcoin is over 100k per coin, granted, I am not a financial advisor and this should not be taken as financial advice. Below I have provided the lowest price on the chain for Bitcoin according to the stock to flow model (S2F), keep in mind this is my lowest price on the chain prediction each month.

  • October over 63K
  • November over 98k
  • December over 135k 
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