Bitcoin is 10 years old
Bitcoin may have turned 10 years old but its continued drop in value is hardly cause for celebration.
On Thursday, the price of one bitcoin was down to about $6,320.
Its price has dropped dramatically since its all-time high of $20,000 in December 2017. The cryptocurrency started the year at just under $13,500 and has been down ever since.
Although bitcoin’s infamous price rise launched it into the mainstream last year, it’s hardly a new concept. Wednesday marked the 10th anniversary of a white paper written by Satoshi Nakamoto that detailed for the first time how bitcoin could work.
It was published on a cryptocurrency mailing list shortly after the start of the financial crisis in 2008. The concept, which is an alternative to fiat currencies such as the US dollar, served as a way for people to exchange money without a regulatory middle man.
Nakamoto described how new bitcoins coins could be created through a process called mining, which requires powerful computers that solve complex math problems. Months after the white paper published, Nakamoto mined the first block of bitcoin, which generated 50 bitcoins.
Little is known about the creator. Nakamoto is a pseudonym — and even a decade later, it’s still unclear who exactly that is.
But the publication of the paper was a groundbreaking moment. According to Maya Kumar, an executive who oversees the UK and Ireland operations at Luno, an app that helps users buy bitcoin, it paved the way for the next phase in the evolution of money.
“The invention of bitcoin and the underlying blockchain [that supports it] has allowed us all to reimagine money,” Kumar told CNN Business. “We are seeing a new parallel financial system being built in real time.”
Bitcoin relies on cryptography, which uses hidden codes to communicate. Users can make transactions directly under pseudonyms, taking away power from banks and governments, and it is not controlled by a central authority.
For bitcoin, each problem takes about 10 minutes to solve and creates a predetermined number of coins. The number that is awarded for solving each problem dwindles as time goes on.
Nakamoto’s system only allows a fixed number of coins to be created — there’s a limit of 21 million bitcoins that can ever be generated.
Eiland Glover, the CEO of coin company Kowala, said this fixed number will limit bitcoin’s future.
“There can only ever be so many bitcoin supplied so if demand grows and you have a limited number, there’s deflation and volatility,” Glover said.
His company and others are attempting to create more stable coins that are tied to the US dollar — a move he believes will make the value of the coins less volatile.
Glover calls Nakamoto’s white paper “the most essential foundational paper” but he notes how people have been trying to improve it.
Bitcoin’s early adopters sometimes tried to make clandestine and illegal transactions. Over time, it gained broader adoption.
In 2014, Overstock became the first major US retailer to accept bitcoin. Companies such as Expedia and Microsoft followed, and now even Starbucks wants to find a way to let customers use bitcoin to pay for their caffeine fixes.
Bitcoin is far from the only cryptocurrency available. From ether and litecoin to even cryptokitties, there are more than 1,500 options. But bitcoin is the oldest, biggest and most popular.
Although supply and demand play a role in its volatility, so does hype from news coverage. For example, the news of a cryptocurrency exchange hack can cause prices to drop, while the potential of tighter regulation leads to a boost.
But bitcoin’s growing popularity and entrance into the mainstream suggest the coin isn’t going anywhere anytime soon, according to multiple experts. Stability is needed for any digital currency to succeed.
For now, we’ll see how bitcoin evolves as a teen.