Bitcoin is a completely online currency without regulation from a centralized bank or government. Since its creation in 2008, it has completed a slow climb in value from being virtually worthless to currently having an approximate value of almost $80,000 CAD. That’s no small feat, and it has made some of its investors very wealthy in the process. So, what in the world is a Bitcoin?
To understand Bitcoin it is important to know just how misleading the name is. In reality, there are no coins, when someone buys a Bitcoin they have access to virtual money online through a key called a private and public address. For example, having Bitcoin is less like having a wallet and more like having a keychain. The currency is never really held by the owner; nor does it ever exist tangibly. Each key is used to open a different virtual safe on the Bitcoin network, and when a transaction takes place the ownership of the money is moved from one address to another, like moving money from one safe to another. How is it that without a physical representation this virtual currency has any real value?
The value of a Bitcoin is based on two key ideas, it’s very secure (it’s harder to forge a Bitcoin than real currencies) and the aforementioned blockchain technology. How does this make it valuable? It is prevented from ever being in full control of an individual and protected from fraud. The blockchain is secured by millions of different people who all donated their computers to both store and run transactions. This stops people from attempting to commit fraud by keeping a copy of all the transactions and comparing them to one another. If one person made a change then all the others would see it and prevent that change from being made. Furthermore, it is secured through the use of public and private addresses. These are the aforementioned keys used to facilitate all transactions on the blockchain and prove ownership of Bitcoin.
Given all this, people see the value in Bitcoin and have been trading it for massive profits. However, this still leaves the question, could it replace traditional currencies? Unfortunately, the answer isn’t so clear given the current volatility. Having something worth a house one day and a can of Coke another is not feasible. However, if more and more retailers follow Tesla (the new electric car company) and MasterCard’s example, and begin accepting it as payment it should begin to stabilize and we could see full global adoption of the currency.