Bitcoin is all the rage right now (just like blockchain), but how many entrepreneurs really know what it is? Simply put, bitcoin is a decentralized digital currency that isn’t regulated or owned by any one country or bank. It comes from people called miners, who process transactions and keep the network running smoothly, earning bitcoins in return. We’ve gathered the top facts you should know to get a deeper understanding of this cryptocurrency.
How Did It All Start?
In 2008, a developer by the name of Satoshi Nakamoto introduced the concept of Bitcoin and mined the first 50 units on January 3, 2009. Nakamoto abruptly quit the project in 2010, but other innovators continued on. Nakamoto’s identity has never been officially confirmed. Newsweek claimed to have found him in Temple City, CA, but the man they interviewed insisted he was not the right person. Others have come forward over the years claiming to be Nakamoto, but no one has ever been able to provide proof. The very first Bitcoin transaction took place in 2010 when 10,000 bitcoins were traded for Papa John’s pizza by a Florida programmer. Those same 10,000 bitcoins would be worth approximately $99 million today.
What Can I Do with Bitcoin?
Believe it or not, you can use bitcoins to buy actual products and services. Companies large and small now accept Bitcoin as a payment method, most notably Overstock.com, Expedia, Microsoft, and eGifter. The government has even dabbled in Bitcoin, albeit mostly accidentally. In 2013, the FBI scored a big win by closing down the Silk Road black market site. In the process it seized the bitcoin wallets held by the site, and investors have been cashing in big.
Setbacks and Struggles
Bitcoin was touted as a highly secure alternative to traditional currencies, but a high-profile hack in 2014 called this into serious question. Mt. Gox, a large and valuable Japanese Bitcoin exchange, was breached and approximately $460 million went missing. This raised concerns that the currency wasn’t as secure as it claimed to be. Several famous investors and billionaires have spoken out strongly against Bitcoin, including Warren Buffett, who called it “a mirage” and warned people to “stay away from it.” Jamie Dimon of JPMorgan Chase warned against “invent[ing] a currency out of thin air,” saying “someone is going to get killed and then the government is going to come down on it.” Mark Cuban has proven to be cautious as well, warning that the value of Bitcoin is inflated even as he invests in funds that support its rise.
Bitcoin has attracted some high-profile backers as well. Cameron and Tyler Winklevoss (the twin brothers who sued Mark Zuckerberg, claiming he stole the Facebook idea from them) bought $11 million of Bitcoin in 2013 and were named the first Bitcoin billionaires a few years later. Erik Finman, who bought $1,000 worth of Bitcoin at age 14 is now worth millions. Celebrities like Ashton Kutcher, Nas, Drew Carey, and Snoop Dogg have all invested in Bitcoin in one way or another as well. Banks and financial institutions have so far shied away from supporting Bitcoin, with the exception of Fidelity Investments. In mid-2017, the company began allowing customers to manage their Bitcoin holdings through the Fidelity website, an important step forward toward Bitcoin gaining legitimacy in the financial space.
In August 2017, Bitcoin split into two separate technologies as a result of a dispute over the relative importance of a decentralized network vs. transaction speeds. There is a limit to the number of Bitcoin transactions that can be processed every second across the network, which led to the formation of Bitcoin Cash. Bitcoin Cash can process more transactions more quickly, but is more centralized. Despite this and other growing pains, Bitcoin is slowing no signs of slowing down. By the end of November 2017, Bitcoin’s 16.7 million units were valued at over $167 billion, higher than many major corporations. It remains to be seen how Bitcoin will continue to grow and evolve in the future.
Stay on the Cutting Edge
While you may not be ready to dive right in the Bitcoin market today, it pays (see what we did there?) to keep updated on what is going on in the world of cryptocurrency. Part of that process is working with a payments processor who prioritizes education and ensuring you’re ready to adapt to changes in the credit card industry when they come. 360 Payments is the perfect choice. Give us a call at 408-295-8360 or drop us a line on our website. We’d love to show you why we’re different.
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PPS – New entrepreneurs in all industries can benefit from these tech tips.