How did Bitcoin become synonymous with cryptocurrency?
Crypto is this era's buzzword. It has been churning out millionaires here and there, leaving the rest of us feeling left out in a frenzy. However, there are many people who have lost money by jumping on the bandwagon without proper knowledge, cue Litecoin believers.
In this Web3.0 world, the best advice I received came from CZ, who advised us to DYOR (do your own research). For those of you who don’t know CZ, he is the founder of Binance, Changpeng Zhao. This DYOR plan does a good job of informing you about where your money is going.
To learn more about the subject, it is necessary to first understand how cryptocurrency differs from Fiat currency (government issued currency):
Fiat can be exchanged both digitally and physically, whereas crypto can only be exchanged digitally.
Fiat currency is represented by bills and coins, whereas cryptocurrency is represented by a single public and private piece of code.
Cryptocurrency is mined by computers, whereas fiat currency is minted by the government.
The value of fiat currency is determined by the market and regulations, whereas the value of cryptocurrency is determined by supply and demand.
The main distinction between the two is that Fiat is centralized, meaning it is governed by law and can be controlled by banks, whereas cryptocurrency is decentralized and is not governed by any government or banks.
Now that we understand the difference between Fiat and Crypto, let's look at how bitcoin got to where it is today.
Bitcoin is the most popular type of cryptocurrency on the market. It enables quick and anonymous transactions without government intervention and has significantly reduced the role of middlemen.
Bitcoin was intended to be used as a digital payment system, but anyone who is familiar with its price volatility understands that this is not feasible.
Bitcoin first appeared on the market in 2009, and while there had been other cryptocurrencies before it, none had proven to be useful. Bitcoin was also launched during the 2008 financial crisis, when people lost trust in the government because they believed the government printed too many notes, causing the crisis. Bitcoin gained traction as a solution to government-regulated fiat currencies.
The transactions ensure high levels of security as no payment can be reversed, all data is stored in a central ledger that cannot be altered by anyone else, and the users' data is not revealed in the process.
The economics of supply and demand are well established; only 21 million bitcoins can be mined, and mining incentives are halved every four years. There are currently 18 million bitcoins in circulation, and demand is increasing every day due to the large number of transactions that occur every day.
Because of these factors, Bitcoin was able to take the lead in the Crypto Era and become synonymous with the term itself.
However, there are a number of drawbacks, ranging from security concerns due to the rise in scams to the scalability itself. Bitcoin has yet to demonstrate its worth as a long-term investment, and its volatility makes it unsuitable for short-term investments.
As a result, we're back on the same page we started on, DYOR. This is a term you should remember whenever you dive into the world of cryptocurrency investing and trading.