Bitcoin, which became the official currency in El Salvador on Tuesday, has been on a roller-coaster journey since emerging the first cryptocurrency 13 years ago.
Following dramatic price fluctuations, bitcoin has gained increased backing from small and major investors, including Wall Street and Tesla CEO Elon Musk, during the last year.
What is bitcoin?
Bitcoin, which was created in the aftermath of the 2008 global financial crisis, originally advocated a libertarian ideal and sought to destroy existing macroeconomic and fiscal organizations like central banks.
Satoshi Nakamoto, a pseudonym whose name remains unknown, wrote the foundation white paper, which was released on October 31, 2008.
The main objective of the eight-page paper was to conduct internet payments between two parties without going through a banking institution.
The first block of 50 bitcoins was produced in January 2009, and there are now 18.8 million units in circulation.
Because only 21 million may be generated, bitcoin’s price trades well above that of its competitors.
Since then, thousands of additional cryptocurrencies have been launched, headed by the likes of ethereum, ripple, and tether.
How to obtain bitcoin?
There are two methods to obtain bitcoin. Individuals have traditionally “mined” for it by utilizing computers to solve hard mathematical riddles.
However, as the price of bitcoin increased, so did the number of miners, lowering the chances of obtaining units in this manner.
Mining also consumes a significant amount of energy, which means that the cost of obtaining a bitcoin may outweigh the reward, notwithstanding the environmental effect in the context of global efforts to combat climate change.
Another option is to use the traditional currency to purchase a whole or portion of a bitcoin on an exchange site.
Purchased money is stored in secure virtual wallets, but with hacking still a possibility, some investors have opted to keep their portfolios offline.
How much is it worth?
Bitcoin, which was once valued at practically nothing, surpassed $1,000 in 2013, attracting the interest of financial institutions.
Since then, it has exhibited extraordinary volatility, peaking at over $20,000 in 2017 before plummeting.
It rebounded to $15,000 in late 2020 but soared to a record $64,870 in April on the back of a speculative surge.
However, it was selling at less than half that price two months later, until rising back beyond $50,000 in September.
Such volatility, along with lengthy transaction delays, continues to stymie bitcoin’s growth as a payment method.
With bitcoin transactions lasting anywhere from a few minutes to several hours, some proponents envision the world’s first cryptocurrency as a future digital store of wealth rather than a means of payment.
This would place it in competition with gold, a classic safe-haven investment that is kept in large quantities by bitcoin’s adversary central banks.
What can bitcoin buy?
Initially, bitcoin was mostly used to purchase illicit goods on the “darknet,” or the portion of the Internet that is not accessible via conventional search engines.
As it gained popularity, certain restaurants and stores, mostly in major cities, began to accept it as payment.
And, over a year ago, as the epidemic fueled online purchasing, payments company Paypal began enabling its US users to do bitcoin transactions.
In nations where high inflation devalues existing currencies, particularly in Africa and Latin America, bitcoin is gaining appeal, particularly among the younger generation.