Have you ever paid 60 million dollars fora pizza? Well, one programmer in Florida has. In this video, you will learn the basics of cryptocurrency, its history, and how a cryptocurrency price is determined. What’s going on, guys? Welcome to a new series about cryptocurrency. The first episode will be about the basics of cryptocurrencies. The basics of cryptocurrency, the history of Bitcoin, How the price is determined, and a summary. Let’s get started! Bitcoin was the first decentralized cryptocurrency, and Satoshi Nakamoto created it. It is online money that you can buy, sell, and exchange for different stuff all around the world.
There are over 1600 other cryptocurrencies besides Bitcoin, like Litecoin, Ethereum, Ripple, and so on. Comment down below what’s your favorite cryptocurrency! The part “crypto” comes from how the cryptocurrency is protected, and the part currency comes from... Well, the fact that it is a currency. Cryptocurrencies are a digital asset; there is no physical form. Unlike physical money, cryptocurrencies aren’t issued by the government. This means that there is no inflation with cryptocurrencies because governments can’t print more money as they wish. If you don’t know what inflation means - simply put, it means that you lose your purchasing power.
The Early Bird Gets The Bitcoin
For example, if you have 10 dollars, you could buy one pizza for 10 dollars. But because of inflation, the pizza will cost 11 dollars next year. This means that you can’t buy it anymore, so you lose your purchasing power. One reason for inflation is the fact that the government can print dollar bills. More and more bills are printed all the time, which makes the value of the dollar weaker. The maximum amount of bitcoin that will ever be created is 21 million, and according to the book “The early bird gets the bitcoin,” that amount is estimated to be mined by 2024. So Bitcoin can’t be just “printed” more and more until it’s worth noting. But how are cryptocurrencies created? Cryptocurrencies are created with mining. No, it is not mining gold with pickaxes, itis the system that processes creating the currency and verifying the transactions.
To put it short, blockchain is a document that tracks all the transactions ever in the history of the cryptocurrency. Group of transactions that have happened in the past ten minutes are called a block, that the bitcoin miners “mine” using not their pickaxes but their computing power. The mining verifies the block, which prevents fake transactions. But why would anyone waste their computing power to verify these blocks? Well, verifying these blocks can give you currency, like bitcoins as a reward. I’ll talk more about the blockchain in a future video, so that is all about it for now. But do you know how much 12.5 bitcoins are worth? While it doesn’t sound much, at the moment, one bitcoin is worth $11,800, so 12.5 would be worth $147,500. Did that make you sharpen your digital pickaxe already?
They are also kept in wallets like every other currency, but instead of a normal wallet, you store it on your computer. So your computer is your wallet. This means that your cryptocurrencies won't pickpocket while you walk in the street, only if you lose your computer. Even though cryptocurrencies are very safe, this doesn’t mean that they are stable; the price changes all the time, as you can see in this chart. In a couple of hours, the price of Bitcoin went from $11,000 to 12,000 dollars. This means that Bitcoin and other cryptocurrencies are very volatile, but more about the price later in this video; let’s first move onto the history of bitcoin, so you’ll get a better idea of how cryptocurrencies became so popular.
Bitcoin Like a Pizza
As I mentioned earlier, Bitcoin was the first decentralized cryptocurrency created by Satoshi Nakamoto. No one really knows who the creator Satoshi Nakamoto is. It is not sure if it his real name or if itis just a made-up name. Bitcoin’s Co-founder was Hal Finney, he is not anonymous, but he also doesn’t know who Satoshi Nakamoto really is. At least that’s what he claims. In 2007, Satoshi Nakamoto started to develop Bitcoin, and in 2009 the first block, also known as the Genesis block, was mined. After 11 days, the first transaction was made from Satoshi Nakamoto to the co-founder Hal Finney. On February 22, 2010, Bitcoin was first traded in the real world. A programmer paid 10,000 bitcoins for two pizzas. This day is known as Bitcoin Pizza Day. I wonder if there were any pineapple on those pizzas. Comment down below what’s your opinion about pineapples on pizza! Well, anyway, let's move on with the history of Bitcoin.
In July 2010, bitcoin’s price raised from$0.008 to $0.08. Five days later, Bitcoin joined an exchange called. Gox, and was slowly starting to become the Bitcoin we know today. Less than a month after joining Mt. Gox, Bitcoin was hacked, and 184,000,000,000 Bitcoins were created. This problem is now fixed, and the cap on Bitcoins is back to 21,000,000. Coinbase made exchanging bitcoins easy. In 2012 a Bitcoin bank also got listed as an official European bank. In early 2013 the first Bitcoin ATM was created. Now the price of one bitcoin was already over $130. The price went down for a while because the FBI shut down a criminal black market that used Bitcoin. After all, Bitcoin hides your identity. In late 2013 the price was already up to $503. The day after the Senate meeting about Bitcoin, the price rocketed to over $1,200.
Cryptocurrencies Also Aren’t Linked To Goldor.
On February 23, 2017, Bitcoin reached its all-time high value. One bitcoin was worth $19,891.00. So imagine if you had bought bitcoin with 1 dollar back when it was $0,008. You could have bought 125 Bitcoins. And if you would have sold those with the all-time high value, your one dollar would now be almost 2,5 million dollars. Nice! I still couldn’t afford that 60 million dollar pizza tho. So how is the price of cryptocurrencies determined? Because Bitcoin is a decentralized currency, it isn’t issued by a central bank or backed by the government. Cryptocurrencies also aren’t linked to gold or any other currency. Yes, you can buy bitcoin with dollars, but you can’t change bitcoin to a fixed quantity of gold or dollars.
This doesn’t really matter since you can’t do that with dollars or any other currency either anymore. But things like inflation rates, economic growth, and so on don’t apply to bitcoin like they affect physical currencies. The price of the cryptocurrencies come from the supply and demand on the market. The supply changes all the time since more currencies are generated all the time. Like Bitcoin is mined at a fixed rate until it reaches the maximum of 21,000,000 Bitcoins generated when supply is at a lower rate than demand, the price rises.
The market sets the price. The currency price reflects expectations; when everyone has high expectations for the currency, more and more people want to buy the currency. Because demand is higher than supply, the price will rise. This makes demand lower than supply is, so the price of the currency crashes. Because cryptocurrencies aren’t linked to any money or banks, and you don’t receive part of the companies like in stocks, the price of cryptocurrency is very volatile.
Bitcoin Was The First Decentralized Cryptocurrency
Other factors affect the price, like the number of competitors and regulation, for example. Let’s imagine a worst-case scenario: the government one day decides that cryptocurrency is illegal; well, the price just crashed because no one wants the currency anymore. Competition in the crowded field keeps the prices down, but Bitcoin’s high visibility gives it an edge over its competitors. Let’s now summarise the video. Bitcoin was the first decentralized cryptocurrency, developed in 2007. Cryptocurrencies are safe online money that can be used to buy, sell, and exchanged for different stuff globally.
There are over 1,600 different cryptocurrencies, like bitcoin, bitcoin, and ripple, for example. Cryptocurrencies are created with mining. Not with pickaxes, but with computing power. Blockchain documents all the transactions, mining these blocks verifies the transactions and rewards miners with currencies. This process makes cryptocurrencies safe. Even though cryptocurrencies are safe, they are not stable but very volatile. The market sets the price. When demand rises, the price rises, and when supply rises, the price falls. And the most important thing: You can buy 2 pizzas for $118,000,000.
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