BLAST FROM THE PAST: BITCOIN (Part 1)
To quote American Entrepreneur Charlie Shrem, “Bitcoin is cash with wings……”. And guess what? This statement of his seems to be one of the most precise and apt description of the bitcoin. It is cash with wings, wings that allow it to reach great heights while in other fraction it is down to the earth. It is cash with wings, wings that allow it to flow freely without any administrational flaws. And finally, it is cash with wings, wings that are expanding their span by the minute. Some financial planners, analysts claim that by 2050 the value of a bitcoin can go up to a million dollars for 1. So, let’s take a deep dive into its history and understand how these things go about…
Why was the bitcoin formed?
Currency in general was formed to give a physical representation of value. For instance, your domestic electrician comes home and repairs your slow-moving fan and in return you pay him for the service (basically for his time, for his work, for his value). Over the decades this representation has changed from copper coins, to gold bars, to dollar bills and to notes as well. But in recent times, people have come to terms with the fact that physical money cannot be liquidated whenever required. You definitely cannot hoard up 2 crore rupees in large bags and buy a home in a big city, or would you? So, for representing value in digital form “Satoshi Nakamoto” came up with “BITCOIN”. This was a revolution…
What is the difference between general digital money and Bitcoin?
So, the basic difference is that digital money that we handle via “PAYPAL”, “PAYTM” is centralized whereas Bitcoins are decentralized. The transaction records in case of digital money are kept by the bank, which are in turn given to the government. But in case of bitcoins the transactions are transparent (available to every associated individual) and are compiled by the community itself. This compilation has a long-haul process which eventually boils down to bitcoin mining.
Here’s a look at the major developments in this field in the past years: —
2009: — “Satoshi Nakamoto” as he addresses himself is the architect of this perplexing concept. The white papers for attaining the patent to this amazing idea are published.
2010–2013: — With a limited people having in-depth knowledge about this subject and with the investor community being tentatively smaller the system witnessed steady growth and it was not as sensitive as it is now. Miners used GPU’S and FPGA’S which made the mining game not very interesting. A report says that in the year 2011 around 20K bitcoins were spent to buy DOMINO’s pizza. Which in today’s valuation boils down to “80 CRORE” USD.
2013: — A major development in the field of bitcoin mining takes place and a hardware called as the “ASIC miner” (Application Specific Integrated Circuit) is introduced. ASIC miner is on the grass root level an additional hardware attached to the server/ PC to optimize its process of hashing. This basically opened up the mining/earning game not only for an investor but also for engineers associated. The formation of engineering groups providing blockchain/ mining related services started increasing by the hour. All in all, the community became super expansive.
2014–2017: — This was a period where the investors had become prone to comparatively large crests and troughs. The community had realized that a quick drop or drastic growth of tentatively 5–7% is not a big one but just a part and parcel of the investment itself. The growth however was decent.
2017–2018: — This was a year which turned the ball game all together. “Collectibles” were in trend. To give a textbook example of a collectible, it would be the “crypto kitties”. This was something similar to the game of Pokémon. The creators initially introduced 50K kitties, a digital collectible item. Every kitty had its own characteristics, its own peculiar features. Be it bright eyes, great turquoise color, a larger paw, distinct patches, or any other feature, people were in love with these collectibles. The more distinct the appearance, the more value that collectible had. (So, we had to pay more to buy it). Further these kitties could also be bred, and the off spring could be sold to earn coins. So, basically all in all it was becoming equivalent to a videogame, isn’t it? Though these were bought in terms of ETH (a currency same as bitcoin) they bought a huge rather unrealistically large audience for “Bitcoin”, which was by then a veteran in digital currency. This surge in investors led to a drastic growth in the value of a bitcoin. To say the least even drastic is an understatement!!! From Jan 2017 where a bitcoin was hovering around at 975 USD it raised to 20K USD in December 2017. A rise of as high as 2051% in just a span of 1 year.
But as you say that “Every coin has two sides”, the law of averages came into play and investors lost interest in collectibles. The sentiment was that mature, educated investors were playing a videogame. Once this thought got into the mind of investors it was all downhill. Most of the new investors pulled out their funds and began liquidating it. By 2019 Dec, it had again come down to 3855 USD.
To conclude this blog, I would love to throw light on the fact that even though there was a big fall, the drop stopped at 3855 USD, which basically means that the community made up to 400% profit in two years, which is itself a large surge. Lastly, I would love to quote Warren Buffet, “For any stock the holding period which I would have is infinity”. All in all, this compiles the bitcoin game for newbie investors, “Hang in there guys…its gonna get bettter”. Stay tuned for more exciting stories about the crypto giant in our forthcoming blogs…..Cheers and have a good one!!!!
Credit : Nikhil Patil — Team E-Cell ABV-IIITM Gwalior
