Before diving into the world of bitcoin, one must understand the concept of money. Money is essentially something that carries value in a society. As it carries values, it’s usual purpose is to get something of value in return when exchanged. Now, there is another concept to be grasped here, the commodity money. Money that gets its value from a commodity is known as commodity money. Commodities are things that carry value in the real world intrinsically, like gold, silver etc.
When it comes to cryptocurrencies, there are essentially currencies but in the digital space. Commodity-backed currencies themselves are not commodities rather they represent the value of their respective commodities in the society. Cryptocurrencies are used to carry out monetary activities in the digital space. As of now, we have seen cryptocurrencies being backed by the USD or other fiats (stablecoins), but some other asset can also be used to back them such as gold.
Bitcoin is one of the leading cryptocurrencies in the digital arena right now. It was invented by an anonymous entity Satoshi Nakamoto back in 2008. Nobody knows if there is just one person behind the pseudonym Satoshi Nakamoto or a group of people. It is essentially based on the technology of blockchain, a decentralized framework of operation. And blockchain is not just limited to bitcoin, it has use-cases in various industries.
Bitcoin started its journey in the financial world just after the global economic recession of 2008. It is considered as money by the people who accept it as something of value in the digital space. Bitcoin is not owned by a single country or a group of countries, rather it is designed to be free of the influence of governments and banks. It is not backed by gold or any other commodity. It is a real currency in the digital space as long as people consider it as something that carries value and worth.
As long as people use bitcoin to exchange valuable goods, it will carry value. It is usually used by people to carry out monetary activities in the online world. Although it is not a real thing in the physical world, it is real in the online space. It is not a hard currency that represents value in the physical world.
Bitcoin (BTC) price often fluctuates and changes owing to the traditional supply and demand phenomenon. Manipulation of bitcoin price is also done by huge whales present in the market that own a large number of bitcoins. The market is very volatile and sudden jumps and plunges are seen very often.
Although highly unlikely, there is a possibility that it might replace gold in the future as it carries value. Some people call it the new gold while some use the word ‘digital gold‘ to describe it. In some countries, bitcoin buying, selling and trading are legal while in others, they are not. Bitcoin is often used by traders to make money. Buying and selling bitcoin at just the right time can help people make money out of it. It can also be converted into cash through various means such as bitcoin ATMs. It can be exchanged for real money through cryptocurrency exchanges such as Coinbase.
While its proponents claim bitcoin’s future is bright, experts have mixed opinions regarding its success in the financial space moving into the future. Bitcoin can become a dominant currency in the future but nothing can be said for sure as huge uncertainty looms around regarding the asset.
Anybody can invest in bitcoin, depending upon the legal status of one’s country because bitcoin can be banned. Bitcoin investment can prove to be very risky as the market is very volatile. One can lose a large amount of money as it has happened in the past with many.
Regulation is largely missing in the bitcoin world but it, alongside other cryptos, is regulated as a currency and as a security under the U.S. law. Although there is a lack of official frameworks and official regulatory bodies in this space, developments are being made in this sector at a very rapid pace.