Updated: Feb 17
History & Background for the Creation of Bitcoin
The hype around Bitcoin over the last year has been mind-boggling. Anyone interested in Bitcoin investment should have a sound knowledge of the history of cryptocurrency and its future potential. The rich and the famous are already investing in cryptocurrencies and you should too.
In layman’s terms, cryptography is the mathematics of codes and codebreaking. In 1992,
three individuals started researching cryptographic issues, mathematics, politics, and philosophy. They came up with a term named Cypherpunks. The original cypherpunks were a diverse group who shared a core conviction: “that the Internet would soon become an important battleground for human freedom”.
The encryption and decryption of Cypherpunks resulted in free-flowing discussions on a wide range of topics. It gave the members to create an open forum to discuss things without fearing any authority. The platform eventually helped people to understand the importance of decentralization.
The Early Attempt of Independent Digital Transactions
Since the topic of decentralization has become a thing of discussion, many people started finding the way of decentralized money transactions. In 1997, Adam Back created Hashcash. Using this Hashcash, the first-ever decentralized transaction was attempted.
The first method is having a separate database with every participant. They will keep a record of the transactions to maintain transparency.
The second method is keeping the transactional data with a group of users. The members in this group will be chosen by other users.
The double-spend problem
But all of the early ideas for a truly independent and decentralized monetary system failed due to the double-spend problem
Imagine I have a digital $100 bill.
If that $100 bill is entirely digital, then it’s just a bunch of bits (codes) on my hard drive. What’s to stop me from copy and pasting those bits so I now have two $100 bills, thus creating infinite copies? And if I pay two people with copies of that $100 bill, they would not know which one is the “real” one?
Blockchain, Solution for the double-spend problem
Eventually, in 2008, Satoshi Nakamoto came with the proposal of Bitcoin. According to his proposal, Bitcoin was defined as the peer-to-peer electronic cash system based on blockchain. In his proposal, he also mentioned that Bitcoin draws inspiration from Hascash and B-Money.
In 2009, Nakamoto generated the first genesis block of Bitcoin. Since its inception, Bitcoin has come under a lot of criticism. At the same time, many people praised Bitcoin for its decentralized nature. While many people feel that Bitcoin is the future of the currencies of the world, critics think that Bitcoin will not last for a long time. The debate goes on, but the truth is every year the number of people investing in Bitcoin and other Cryptocurrencies is increasing exponentially and so is the price.
Reasons to Consider Bitcoin Investment
Even though people like the idea of decentralized currency, they are skeptical about investing money in Bitcoin and other cryptocurrencies. Is there any future of Bitcoin? Will Bitcoin survive for a long time? A lot of questions are often asked by the investors. You can follow the reasons below to consider Bitcoin an investment-worthy asset.
1. Change Is Inevitable
Change is the only constant. After a certain period of time, people start looking for new ways to deal with new challenges. Digital transactions have now become a daily part of our life, and it was not a part of our lifestyle even a few years ago.
We all know the benefits of digital transactions. Now, people have started thinking about decentralized digital transactions. In the world of conventional currency, Bitcoin is a disruption, as it is finite and inflation can be curbed from the equation. It has pushed many countries to come with some measures to regulate Bitcoin or store Bitcoin as a currency reserve. Since countries have been implementing policies to regulate Bitcoin, it's safe to say that they have accepted the reality of Bitcoin.
2. Value of Centralized Currency going down
Centralized currency is controlled by the governments and reserve banks. Depending on the policies, the reserve bank increases money production. After the Coronavirus pandemic, the situation around the world has changed. People have lost their jobs, and thus states need to support people through various roles and other welfare programs. To support this the US Govt. printed 20% of the total USD in Circulation in 2020.
The value of the centralized currency will fall sharply due to an increase in currency printing. Demand is not growing, but money is getting published. As a result, the value of the money will drop swiftly. Bitcoin has no top, simply because the centralized currency has no bottom.
3. Bitcoin Is Digital Gold — The Gold Standard of Cryptocurrency
Today, one can invest in gold reserves through digital platforms. Now, the value of the gold keeps fluctuating. Over a longer time period, the value always goes up, but in a shorter time frame, the value of the gold declines too. The supply of gold is not predictable. Moreover, the value of gold depends on the market demand. Similarly, Bitcoin is rarer than gold, with only 21 million BTC to be mined, of which 90% is already mined and the rest will be mined till 2140. Due to its finite quantity Bitcoin has emerged as one of the best investment options in the last decade and is rightly called Digital Gold.
4. Alternative Asset Class : Cryptocurrencies
Since we are heading towards a new era of technology, we will notice a lot of disruptive changes around us. Many conventional ideas will fade out, and new ideas will emerge. As a result, people should start accepting the fact that Bitcoin is an Alternative Asset class and not a payment mechanism. In fact, along with your conventional investments, you should also consider investing in an alternative asset like Bitcoin and other cryptocurrencies to diversify your portfolio.
5. Bitcoin Has the Momentum & Support
In the monetary investment field, momentum and trend have been noted as crucial factors. When something has momentum, it will last for quite some time. Investing in that asset is a good idea to make money in the short term. Nowadays, Bitcoin is a topic of discussion among every group of people. As a result, Bitcoin comes with the momentum that investors seek. Investing in Bitcoin with the present momentum will fetch you a good return but if you invest do so with at least 4–5 years horizon in mind, simply because the price of BTC goes up 3X-20X after every halving event. The next halving is due in 2024.
Taking calculated risks is a common practice for investors. Bitcoin is the future of alternative finance. Thus, an investment in Bitcoin today can prove to be an exceptional investment for tomorrow.