Bitcoin is a mystery to many people, and a lot of cryptocurrency enthusiasts don’t do a very good job of explaining what bitcoin is, how it works, or whether it’s a good investment. Here’s everything you need to know about bitcoin and how it’s performing today.
Bitcoin is a digital currency independent of any financial institution, whether state or government, and can be transferred from individual to individual without the need for an intermediary. In addition, its monetary policy cannot be altered.
The complexity of bitcoin can be baffling, but understanding cryptocurrency and how it works is fascinating. The rest of this article will discuss what bitcoin is, how it works, and what you need to know about it in the news today.
What Is Bitcoin?
At its core, bitcoin is a digital currency that is independent of recognized legal tender. It is used to make payments internationally without the need for an intermediary and typically at a much lower cost. It is ‘digital gold,’ if you will, offering a form of digital collateral untethered to a central organization and not subject to some of the pitfalls of modern currencies.
Features of Bitcoin
One of the most important features of bitcoin is that it is decentralized. Nobody actually owns bitcoin, and there is no head of the company. Bitcoin is traded through an open-source software client by participants who are in agreement with the rules of the protocol.
Any changes to this protocol must be agreed upon by the users.
This decentralization implies the need for pristine recordkeeping, which ties into the second major feature of bitcoin: how it’s distributed.
The system works on the basis of people choosing to record their transactions through nodes of the protocol software, a public ledger called the blockchain. Because of how decentralized the network is (with over 80,000 nodes), it never loses information or suffers downtime like other institutions.
Transparency and Personal Autonomy
The rules of the protocol dictate the rules governing transactions that happen on the blockchain, and payments are directly transferred from person to person without the need of a third party. You don’t need permission to use bitcoin; any transactions following the rules of the protocol and within the defined consensus agreements will be confirmed.
Bitcoin is also entirely autonomous and largely anonymous. Identity isn’t tied to transactions; instead, they are coupled with a randomly generated string of alphanumeric numbers. Similarly, bitcoin cannot be tied to an individual, making it difficult for authorities to seize assets.
What’s Happening with Bitcoin Today?
Recently, bitcoin has stagnated to $20,000 and has been struggling due to the risk-aversion tendencies of investors in the current market.
Bitcoin is not defined by other investments, but it does tend to follow the risk-sensitive assets like stocks and reducing investors’ interests in bitcoin as an investment opportunity.
Analysts suggest that bitcoin is headed for a rough patch as inflation continues to rise, consolidating bitcoin around the $20,000 mark and stagnating its growth.