Bitcoin, the entirely-digital currency, has hit a record high in value, but could the bubble burst at any moment? Bitcoin has just hit a record high value of $11,000 per Bitcoin.
According to market watchers, in January, a Bitcoin cost about $700 and in less than a year has soared past $10,000, and many people are seeing this as a sign that Bitcoin is here to stay.
You may have heard of Bitcoins, but perhaps you are new to the idea of “cryptocurrency.” So, how do they work?
Cryptocurrencies are digitally created currency. Instead of cash being regulated by a central or federal bank, cryptocurrencies are administered by thousands of computers networked all over the world.
This decentralization is what makes cryptocurrencies like Bitcoin so revolutionary. But Bitcoin is not the only one. Cryptocurrencies like Ripple, Litecoin, and Ethereum use similar technology and have also gone up in value.
As Bitcoin has recently surged in value, Ethereum has also seen a record high. Bitcoin, however, is still the market leader. The same computers that process Bitcoin transactions are also creating new Bitcoins in a process called “mining.”
The computers “mine” bitcoins by solving increasingly difficult puzzles with a special piece of software. The transactions form a block of information called a “blcokchain.” Miners that donate their CPU power to allow Bitcoin to process transactions are reward Bitcoins.
However, the reward would but cut in half after a certain number of transactions. Around the year 2140, the currency would reach its predetermined limit of 21 million bitcoins.
So, what’s Bitcoin good for? Obviously, you can buy stuff with it. In tech-friendly San Fransisco, there are many merchants who accept Bitcoins as well as cash, credit, and debit. And like regular money, you keep cryptocurrencies in a wallet. Apps like Coinbase allows users to buy, save, and spend cryptocurrencies. Since Bitcoins are thought to be untraceable, you can also buy a lot of illegal stuff.
Bitcoin was preferred method of payment for the now defunct dark-web marketplace The Silk Road. Shoppers could buy anything from marijuana and oxycontin to automatic weapons. However, many people are using Bitcoins and other cryptocurrencies for investing. In May 2017, the Guardian profiled many young people in China who earn thousands trading Bitcoin and speculating on the currency market.
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