Background
Bitcoin has been getting increasing news coverage recently. Bitcoin price has breached the USD$10,000 mark. In the past month, my nephew encouraged me to buy Bitcoins and on a separate occasion, my friend’s son, declared that he is making money from Bitcoin.
Honestly, I am ignorant about Bitcoin and only know of it as an internet currency which we can use to make purchases. Recent developments prompted me to look further into the Bitcoin world. I started with the basics. This journal records my probe into the world of Bitcoin.
What is Bitcoin?
Bitcoin is a digital cash which can be only be used on the internet. There is strong security and privacy built into it in using cryptography. That is why Bitcoin is also call a cryptocurrency. Bitcoins are stored in digital wallets on your mobile device or computer. You can also store them in on-line Bitcoin exchanges.
When and how did Bitcoin start?
In November 2008, Satoshi Nakamura posted a white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System into a cryptography mailing list. This white paper details the working of Bitcoin. Till date, nobody knows who Satoshi Nakamura is. It could be a person or a group of people. In January 2009, Bitcoin started when Satoshi Nakamura releases the source code and mined the first block on the chain.
Who regulates Bitcoin?
There is no central authority to control Bitcoin. The regulation of Bitcoin can be compared to the technology behind electronic mail. Nobody can control or regulate the technology behind how electronic mail communicates between sender and receiver. Similarly, no one can regulate Bitcoin. Just like there are many email apps like Outlook, Gmail, etc., there are also many Bitcoin apps, but they follow the same protocol or rules. There are 17 million Bitcoins in circulation and release of Bitcoins are controlled by the protocol and will not exceed 21 million. The price of Bitcoins is based on demand and supply.
The price trend of Bitcoin over the last year.
How do I buy and sell Bitcoins?
The simplest way to purchase Bitcoins are through Bitcoin exchanges like www.coinbase.com. You need to register with the exchange, link your credit card or bank account to make purchases. You do not need to purchase 1 Bitcoin which is currently at about S$15,500. You can purchase a fraction of a Bitcoin. That means you can purchase 0.00614318 of a Bitcoin for S$100.
Should I invest in Bitcoin?
Warren buffet, says that Bitcoin is a bubble. According to him, we cannot value Bitcoin because it’s not a value-producing asset. Having said that, we cannot ignore the astronomical rise in Bitcoin prices. In my next article, I will share further on the opposing camps of Bitcoin – the naysayers and the supporters.
Lam Pintoh
Research Analyst, Mind Kinesis Value Investing Academy
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