The birth of bitcoin and its rise popularity

Category:  News
Wednesday, March 21st, 2018 at 5:17 PM

On Oct. 31, 2008 a paper credited to Satoshi Nakamoto, titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” was posted on a cryptography mailing list. The paper was designed to educate potential users on a new currency after the crash of the stock market. On Jan. 3, 2009 a decentralized digital currency was born. To this day, Nakamoto’s exact whereabouts and identity remain unknown. 

So what is bitcoin and what makes it different? Since it’s a decentralized cryptocurrency it can be transferred via the internet, therefore it can be directly sent from person to person without going through a bank, which means lower transaction fees. Sending bitcoin is similar to sending an email. It requires two people to have an account, and between those accounts, money can be sent between those individuals. Additional features to bitcoin include the flexibility to be used in any country, not having to worry about your account freezing and zero prerequisites.

“Unlike a stock whose value is highly correlated with the company's performance, Bitcoin's value only depends on the demand and supply of Bitcoin,” said Dr. Jingze Jiang, a business and economics professor at Edinboro University. “It satisfies the basic characteristics for currency. You can store the value and it can be used as a medium of exchange,” she continued.

Cryptocurrency also operates on a similar level to the stock market. For example, there are many different stocks to invest in, so you choose to invest with what stock you think will make you the most money. It’s similar to investing in Coca-Cola or Disney. Aside from bitcoin and Ethereum, some other cryptocurrencies in circulation are: Litecoin, Zcash, Dash, Ripple and Monero. However, the cryptocurrency that started it all was bitcoin.

According to the Pew Research Center: “24 percent of Americans indicate that they make no purchases using cash during a typical week. At the same time, an identical share of Americans (24 percent) indicate that they use cash for all or almost all of their typical purchases, and about half of Americans (51 percent) fall somewhere in the middle.”

In that spirit of convenience, some people would rather rely on the digital aspect of making a transaction, which is why companies like Microsoft and Overstock.com are bitcoin friendly.

When asked if Zachary Owens – a local certified bitcoin professional could buy a pizza at John’s Wildwood Pizzeria with bitcoin, he said: “There are services online that allow you connect a bitcoin wallet to what is essentially a prepaid Visa or Mastercard and when you swipe that at a location, it will deduct and basically sell off your bitcoin for whatever dollar amount you transacted. Therefore, if you buy a $12 pizza at John’s, you would swipe your bitcoin Visa card that you got through a third party service and then all of a sudden [the third party] would sell $12 worth of your bitcoin and John’s would authorize the transaction on your card.”

Owens became a certified bitcoin professional by the cryptocurrency certification consortium.

Even though one of the pulls to bitcoin is to avoid third parties, there still lies the option for involvement with a middleman. But it’s the ability to choose for yourself as an investor that makes the currency independent. An example of a third party buyer would be Coinbase, a mobile app that allows you to integrate your bitcoin wallet with their network, in which they sell your bitcoin and convert and transfer your money to a bank account.

Therefore, since the technology is so young, there is still a need for some type of third party assistance to convert your earnings, however none of the money can be tracked or controlled by the government. And as bitcoin continues to grow, there may be more businesses that accept bitcoin directly.

“Businesses would benefit from bitcoin by not having to pay transaction fees. A lot of small businesses use Square to accept credit cards. 

Square takes 2.75 percent of your transaction from the merchant, so a lot of people end up having to pay more at a store because those sort of costs are built into the price of doing business,” said Owens.

When asked what differentiated bitcoin from other currencies, Edinboro business and economics professor Dr. Shuang Feng said: “It functions through the internet. That’s what’s special about bitcoin. It’s also anonymous.”

According to The Wall Street Journal: “Cryptocurrency fans typically fall into two groups. One sees the currencies as ways to buy and sell things; the other views them as investments.”

A junior at Edinboro, Neve Laughery, used cryptocurrency as an investment. “My girlfriend and I mined for Ethereum for a short amount of time, using her graphics processing unit,” he said. “I wanted to learn more about what mining actually meant, especially in terms of Ethereum, which is known as an alternative to the quintessential cryptocurrency bitcoin. When people refer to cryptocurrency mining, they are usually referring to proof of work. [This allows] the cryptocurrency’s network to use your system resources to perform complex algorithms in order to validate and secure transactions.”

He continued: “With every block of bitcoin transactions that are processed, the user spends an amount to send the transaction and new bitcoin is distributed around the network to miners based on how much work their system has done. This means that more powerful machines can earn cryptocurrency.”

When asked if Laughery benefited from mining, he said, “Yeah, if we had sold at its peak, we would’ve made about $100 per month.”

He continued: “I haven’t sold, I’m still holding in hope that the value will increase, but I will eventually use it to pay for one of the two. If not, [I’ll use it] to fund a new laptop for school use.”

Mining cryptocurrency was explained by Investopedia.com as: “the only way to release new cryptocurrency into circulation. In other words, miners are basically ‘minting’ currency.” Bitcoin mining is the order in which transactions are certified and joined to a public ledger, otherwise known as the block chain. This process is comprised of complex algorithms which essentially functions as a puzzle.

In contrast to the stock market aspect, the currency feature of bitcoin allows users to access bitcoin ATMs, which operate like any conventional ATM in the sense that you are.

Rick Chernicky can be reached at eupnews.spectator@gmail.com.

 

Tags: bitcoin

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