It seems everyone is talking about bitcoin. While the future of this digital currency is still uncertain, the blockchain technology supporting it seems more promising. So, we think some more attention should be paid to this new technology as it may change the way businesses around the world operate.
When it comes to bitcoin, it seems the jury is still out on whether it will have any value in the future. Some people believe it will be the currency of the future while others think bitcoin’s value is pure hype and that it will soon implode in the same way as the tulip mania of the 17th century.
While the future of bitcoin and other cryptocurrencies remains uncertain, the blockchain technology supporting it shows a lot of promise. This technology records bitcoin transactions so that people can exchange this digital currency. The allure of blockchain technology is that it’s decentralized and not controlled by any single entity which makes it transparent and accessible to anyone, anytime.
Many experts believe blockchain technology will be the next creative disruptor that will transform how businesses around the world store and share information.
But before we get into the technology, we should talk about bitcoin since it’s the reason blockchain technology was created. Here are the top 3 questions people ask about bitcoin.
What is a bitcoin?
Bitcoin is a form of digital currency that is accepted only by certain businesses around the world such as Expedia, Overstock, eGifter. And the list seems to be growing steadily.
Currently, the Canadian government does not recognize bitcoin as actual money, so it is not accepted at our banks.
How is a bitcoin priced?
As of January 9th, 2018, one bitcoin was priced at approximately $14,500 US. But, by the time you read this, the price could be completely different. Since it was created, bitcoin prices have been very volatile. For example, in January 16, 2012, the price of a bitcoin was approximately $6.02 USD and then on January 13, 2014 its price was about $854.65 USD.
Unlike, paper money such as the loonie and the dollar, in which the prices of the currencies are affected by government policies, economics and trade, the price of bitcoin are determined by buyers and sellers (i.e. traders). When thinking of the price, the traders will consider bitcoin’s future value and utility (i.e. how widely it will be accepted as a form of payment). The higher the perceived value, the higher the price.
In some ways, bitcoin is like gold in that its supply is fixed. The supply of bitcoin is limited to 21 million units. So, like gold, supply scarcity can make it seem more valuable.
How to buy and sell bitcoins
New bitcoins are issued to miners when they verify bitcoin transactions. Miners are the people who maintain bitcoin transactions records. As a form of payment, they get bitcoins and transactions fees (the transaction fees are paid by the bitcoin owners who initiated the transaction). In short, miners release new bitcoins into the world.
To buy or sell bitcoins, you can open an account at a bitcoin exchange.
Once you open an account you can buy and sell bitcoins by linking your bank account, credit/debit cards to the bitcoin account.
Is blockchain here to stay?
Blockchain technology is the backbone of bitcoin. It’s the technology that records and tracks all bitcoin transactions. This technology acts as a virtual ledger much like the ledger used in accounting where debits and credits recorded. This way the amount of bitcoins people own is updated in real time and reduces any risk of double spending.
The reason it’s called blockchain is because transactions are verified in blocks and the information in each block depends on the information in the proceeding blocks. Chaining blocks together makes it hard to forge transactions as a change in one block affects the data in the proceeding blocks.
The attraction of blockchain technology is that it removes the need for a third party (i.e.the middleman) to maintain and store information. Since the information is decentralized and maintained by a number of different people and groups it helps to achieve data accuracy, transparency and accessibility.
Although blockchain technology is only in its infancy,the financial, legal, and accounting businesses are already seeing the benefits of this technology. In the same way the internet changed the way we get information and the way robo-advisors changed how people invest, we may soon experience another big shift specifically in the way we work and access information.