5 questions to understand the bitcoin craze

The cryptocurrency Bitcoin has crossed the threshold of $ 57,000 per unit, breaking records, and it is expected to continue its upward trend in the future, despite what it witnessed after that.

In the report published by the French magazine L’Obs, the French writer Boris Manente and Claude Sulla explained that the value of the Bitcoin market is theoretically more than the value of 1015 billion dollars today.

Bitcoin set a new historical record this month, bypassing the level of $ 57,000, before collapsing to less than $ 46,000, but it is still at very high levels.

What is Bitcoin?

Mystery still surrounds the way Bitcoin appeared, and this electronic payment system is said to be established in 2008 by “Satoshi Nakamoto”, a pseudonym used by the person or people who developed Bitcoin.

The software platform, which was released for free in 2009, created a global market for pure digital transactions, and besides, this decentralized system works without being subject to any central authority or official.

Transactions are based on encryption of blocks, which are added to each other, are verified by a unit in a computer network, and are irreversibly recorded in a public registry called a “blockchain”.

This “blockchain” is tamper-resistant; It requires modifying information and changing all users’ information at the same time, and this ensures the stability of the system.

There is still difficulty in the system, such as maintaining the private password, due to the absence of the “forgot password” option, in addition to the fact that the number of attempts to log in to the private account remains limited. Moreover, the encrypted data company, Chainalysis, estimates – according to data from The New York Times – that about 20% of all 18.6 million bitcoins are in suspended accounts.

It should be noted that although Bitcoin is the most popular, it heads a wide range of cryptocurrencies, such as Ethereum (ethereum(And tether)tether(And Binance)binance).

There are many cryptocurrencies currently in circulation, including Bitcoin, Ethereum, and Tether (Shutterstock).

What interest?

Bitcoin is a decentralized currency convertible into a traditional currency such as the euro, dollar and other currencies, allowing financial transactions to take place between individuals or between companies.

In contrast, the decentralized and unregulated aspect of Bitcoin has made Bitcoin a preferred tool for the mafia and other criminals in the internet world, and today it demands a ransom in the form of bitcoins during hacking operations.

Despite the success of cryptocurrencies, illegal transactions have so far ranged between 0.4 and 1.1 percent of total trade between 2017 and 2019, according to a report by Chinalysis.

Despite the doubts surrounding the Bitcoin currency, its use is more than one day. For example, Bitcoin can be used to pay with PayPal (PayPal(Or on amazon)Amazon(Or even at Starbucks)Starbucks).

In the same context, the British company, néobanque Revolut, allows you to fund your account using Bitcoins, thus making room for payments in physical stores using cryptocurrencies.

In this regard, Carl Toussaint de Est, co-founder of wealth management consultancy Netinvestissement, says, “Cryptocurrencies led by Bitcoin will prevail in transactions, and individuals will resort to using them because transactions will become transparent and decentralized, undermining the ability of all traditional intermediaries to impose commissions.”

On the other hand, some players intend to impose the use of Bitcoin as a primary means of payment, which is sought by the co-founder of Twitter, Jack Dorsey and rapper Jay-Z, who have collaborated to create a fund whose mission is to “make Bitcoin the Internet currency”, while spreading the idea of ​​use in African countries and India.

Bitcoin mining consumes about 121.36 kilowatt hours annually (Reuters)

Is this just speculation?

The two authors mentioned that Bitcoin recorded a new high in the spring of 2020, after its value decreased by 50% in March of the same year. Along with most other financial assets, the echo of the massive economic collapse resulting from the Corona virus crisis has reached the stock market, but the cryptocurrency has gradually managed to rebound again and restore its value.

In May 2020, as happens every 4 years, Bitcoin reached a limit, called “halving”, according to which the rewards were reduced from 12.5 to 6.25 in configurations. Within 4 years the rewards will be reduced to 3.1 in configurations.

In past cycles, the increase has continued for 18 months in a row, followed by 3 months of bubble economy and a general warning.

The authors say that the way major central banks managed the Coronavirus crisis, by issuing massive amounts of liquidity to support economic activity; It raised the fear of some savers, who expected the value of these currencies to decline, which made them resort to assets such as Bitcoin.

The betting by institutional investors and companies on Bitcoin is another major innovation this year.

For example, on February 8, Tesla Motors announced an investment of $ 1.5 billion in virtual currency. Conservative funds and other insurance companies have also spun off Tesla’s footsteps.

“During the period of the pandemic and concerns about the global economy, many people saw Bitcoin as an attractive alternative. Consequently, the tendency to use Bitcoin overtook all speculation after recording great interest in all cryptocurrencies,” Du West adds.

Is Bitcoin a currency?

Some traditional currency experts argue that Bitcoin does not meet any of the definitions that define a real currency.

For his part, the Governor of the French Central Bank, Francois Villeroy de Gallo, stated in June 2019 that “throughout history, the end of private currencies has been tragic. He is the reason why coins in our modern democracy have become a public monopoly. “

The same applies to Bitcoin as it is a private commodity that is not controlled by a central bank, and its manufacture depends on an unknown algorithm, as its designers declared that it has a beginning and an end and the algorithm will stop making it at some point.

In this regard, European Central Bank President Christine Lagarde emphasized in early February that Bitcoin “is not a currency but a very speculative asset”.

The two writers believe that Bitcoin lacks an essential feature, which is stability, which makes it not classified in the category of currencies. However, advocates of Bitcoin and cryptocurrencies generally take advantage of these tools to help citizens whose countries are spreading hyperinflation, such as Venezuela, Zimbabwe, Argentina and Brazil, to defend and promote these currencies.

What is its environmental impact?

In order to manufacture this cryptocurrency, it is imperative to devote media capabilities to dealing with software puzzles that, once solved, generate new assets.

These practices were common at first, but they decreased due to the difficulty of creating new units in light of the increase in the number of Bitcoins in circulation. On the other hand, mining requires rows of expensive servers that pump huge amounts of electricity, in addition to the fact that investment in the currency does not always return profits, especially in the face of global players.

According to the BBC, citing researchers at the University of Cambridge, Bitcoin mining consumes about 121.36 kilowatt hours annually, surpassing the Netherlands and Argentina in the amount of energy consumed.

A recent study published in the Journal of Energy and Social Sciences Research stated that the Bitcoin network consumes 87.1 kilowatt hours per year, equivalent to the amount of energy consumed in Belgium, while other countries claim that each transaction is equivalent to the emission of 307.26 kilograms of carbon dioxide.

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