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What is Bitcoin and where is it going next?

bitcoin
Lily Bridgwood
Written by Lily Bridgwood

What is Bitcoin and how has it evolved?

Cryptocurrencies, also known as virtual currencies, have made headlines from the North to South Pole. There is much speculation that cryptocurrency, the hot topic of the modern world, will become the ‘money of the future’. Just like how Columbus intended to find India and discovered America, the story of Bitcoin, the first and foremost cryptocurrency, is not that different.

The unknown founder Satoshi Nakamoto announced the first release of Bitcoin, a new electronic cash system that uses a peer-to-peer network to prevent double-spending in 2009. “It is completely decentralised with no server or central authority.  – Satoshi Nakamoto, 09 January 2009, announcing Bitcoin on Source Forge.” If only Nakamoto knew what his non-regulated digital peer-to-peer cash system would amount to.

This was not the first time someone tried to create a deregulated virtual currency, there were many trials in the nineties, such as Digicash. However, Satoshi found the missing piece when he created Bitcoin – involving the trust element by including miners who timestamp the transaction in hash nodes (A distributed hash table (DHT) is a class of a decentralized distributed system that provides a lookup service similar to a hash table: (key, value) pairs are stored in a DHT, and any participating node can efficiently retrieve the value associated with a given key.) unlike having a centralised system doing it, it’s the network of peers doing it using Blockchain technology as the support system.

Where have Cryptocurrencies come – and where are they going?

Cryptocurrencies have come a long way in the last decade. Though Bitcoin is still the most popular with roughly 52% of the market share, there are other cryptocurrencies obtaining the limelight and share in the market such as;

  •   Ethereum – currency name: ether has the additional feature of smart contracts (Blockchain stored applications for contract negotiation and facilitation using ether for peer to peer contracts).
  •   Iota – unlike Bitcoin, Iota uses a web structure called Tangle which asks anyone submitting transactions to verify it by identifying two random transactions
  •   Ripple – with the initial purpose to be a payment system, remittance network and currency exchange, unlike bitcoin’s peer-to-peer cryptocurrency protocol.
  •   Dash– Following the same concept as Bitcoin but overcoming its weaknesses such as instant send, immediate transfer (i.e. within seconds) of currency as compared to minimum of 10 minutes in Bitcoin, Dash also has new concept of Masternodes, which benefits the users with payments and other transactional features and secures the network. Masternode operator invests 1,000 Dash for hosting a Masternode, receives 45% rewards for mining a Dash Block and gets 7 Dash every month as a reward.
  •   Litecoin: Charlie Lee the creator wanted Litecoin to be the silver of the crypto market, with Bitcoin being the gold. In layman’s language Litecoin mining can be done with normal computers, rather than the high spec, performing computers required for Bitcoin mining. Other features include less transaction time, simpler cryptographic algorithm and 84 million Litecoin as compared to 21 million Bitcoin.

Whilst, these coins have the most significant market cap, there are approximately 1,400 cryptocurrencies in total, each with their own pros and cons. It is important to do your research on Bitcoin prior to making a decision to invest. Whilst it may appear to be an exciting opportunity, there are many other investment products in the market that may be more suited to your investment needs. You head to OFF3R to view some of your options,  and to compare some of the best robo-advisors or some of the best stocks and shares ISAs in the market. 

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About the author

Lily Bridgwood

Lily Bridgwood

Lily is the Partnerships Associate at OFF3R. She has previous work experience in both the corporate and start-up environments. She joined the OFF3R team in October having recently graduated with First-Class Honours in International Business from the University of Edinburgh.