Bitcoin candle graph sourced from cryptowat.ch

You don’t need to be a trader to know that in the past couple of months Bitcoin has been shooting to the moon. Due to the bullish crypto market, every business is being affected, from online companies to Lamborghini dealerships. It’s being covered by every and any media company, including Cosmopolitan, an online magazine aimed towards fashion and sex advice thought it was necessary to publish an article. So why is it that a virtually non-tangible currency is being valued at such a high price and gaining so much traction? Well, first we need to answer the fundamental question that even people who own bitcoin don’t know.

What is Bitcoin?

The most straightforward answer is it’s a digital currency, but there’s more to bitcoin than online money. Specifically, Bitcoin is a decentralized and digital currency with a controlled supply.

Though it isn’t entirely apparent at first, having a decentralized currency is a relatively new school of thought with the only comparable form of barter being gold. Bitcoin might not be monetarily related, but the connection to gold is critical because it describes a similar relationship with its users, including the ability for anyone to collect the currency themselves.

You can put that shovel and pan away — it isn’t that easy to acquire Bitcoin. Bitcoins creator Satoshi Nakamoto (he’s vanished like the last air-bender) programmed the blockchain to created a limited supply of bitcoins, 21 million, and with every bitcoin being mined it becomes slightly more challenging to mine more.

What is the blockchain though? It is a solution to the double- spending problem that was fairly common with digital currencies. An excellent example of this was a glitch in the iconic Club Penguin. The glitch allowed users logged into the same account on two computers to purchase an item with in-game currency. If the orders were executed at the same time on both machines, the money would remain on the users’ account, and they would also receive the item they ordered.

Issues like this held back digital currencies until Bitcoin came along.

Bitcoin implements a ledger system which records all the transactions by making each transaction publicly available. The deal is then verified by nodes on the bitcoin network, known as miners. Anyone with the mining client can join and start mathematical computations to mine bitcoin and check transactions.

Mining becomes increasingly tricky due to the idea that each block on the blockchain should take approximately 10 minutes to mine, while the overall computational power to mine Bitcoin is continuously increasing.

The mining issues means an ~10 minute wait time for a transaction to be complete is one of the main reasons merchants don’t adopt Bitcoin. Comparatively, a credit card transaction takes seconds.

High Traction High Value

When Bitcoin started out, Satoshi Nakamoto wrote in his Bitcoin white paper

What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.

These parameters then created an ecosystem where anyone could buy anything anonymously. Anonymity is a very compelling concept because it made the primary use of Bitcoin to be for illegal purchases. In 2011, a .onion site named silk-road was launched and when it was seized, Ross Ulbricht (The founder), had an estimated 144,000 bitcoins. Those were just based on transactions made on a reasonably public site. Since then, many copycat black-market sites are up, and private sales are even higher with an increasing amount of illegal money being funnelled into Bitcoin and other anonymous cryptocurrencies.

Dirty money isn’t the only thing being dumped into bitcoin, investors in the far east have gone all in on crypto, in particular, China. In 2016, China had a volume market share of ~50% and is notoriously known for setting up mining farms where mining GPUs are taken off the assembly to be put to be used for mining.

Bitcoin is King

With anonymity, pioneering the blockchain, and investments flooding in from all directions, Bitcoin is the undeniable king of the crypto world.

Single-handedly Bitcoin has encouraged innovation as new crypto coins enter the space with their take on improvements to the blockchain, so much so that there seems to be an ICO (Initial Coin Offering)every other day. When putting all these things into perspective, it becomes a no-brainer why Bitcoin is where it is right now, and why it’s going to continue to climb.