What I Know About Bitcoin

This time I want to discuss a frequently requested topic about the popular cryptocurrency, namely bitcoin. Maybe some of you have heard that the price of bitcoin has gone up like crazy for the past few days. In fact, at first the price of one bitcoin was less than one rupiah. It was very cheap. As if it had no value. But as time went by, the price of bitcoin continued to soar from tens of rupiah to hundreds of rupiah. It went up again to thousands of rupiah, until the price reached millions of rupiah. At its peak, on December 16, 2016, one bitcoin reached a price of 260 million Rupiah. Just imagine, one bitcoin that was previously valued at less than one hundred Rupiah, rose to 260 million Rupiah in 7 years. That's why many people regret it. Just try buying bitcoin when the price was still cheap. Those who bought and kept bitcoin would have become billionaires, or even trillionaires. But on the other hand, there are also many people who went bankrupt because of bitcoin. Most of those who went bankrupt were those who followed those who tweeted about bitcoin when the price was already very high. Because they are tempted by the fantastic increase in the price of bitcoin. They only speculate that the price will increase, but they don't understand what bitcoin is. Well, they panic when they see the price fluctuations that go up and down drastically, and are finally forced to sell their bitcoins at a price that is much cheaper than the purchase price, and experience severe losses. Until now, there are still many people who talk about bitcoin. But only about the very high increase and decrease in its price. It is very rare for anyone to really understand what cryptocurrency is in general, and what bitcoin is. Well, that's why in this post I will not discuss the fluctuation of the bitcoin price. Instead, I want to discuss the history of bitcoin. Actually, what is the purpose of creating bitcoin, what is its function, and what are its advantages and disadvantages?

Okay, let's start the story from the history of cryptocurrency and bitcoin.

What is cryptocurrency?

As the name implies, cryptocurrency is a form of digital savings whose transfer process uses cryptography techniques, or secret codes. The circulation of cryptocurrency is not controlled by one institution such as the Central Bank, or a particular company. But rather by scattered servers that are decentralized in nature. Actually, why create cryptocurrency, is there something wrong with the traditional digital money system?

Well, the early initiators of cryptocurrency had the idea that the circulation of money in the economy should be able to be done by everyone independently, without having to go through a third party as an intermediary, such as a bank or a company providing a digital wallet. And the issuance process is not monopolized by one institution such as the Central Bank. Because if there is a third party as an intermediary, the economic transaction process that occurs is strictly monitored. The distribution and circulation of money is also controlled using interest rates, and the money issuance process is monopolized by the Central Bank. Not only that, the storage service or transfer process is also subject to a fairly expensive fee by the Bank.

Well, Cryptocurrency is here and provides a solution, so that everyone can carry out transaction processes independently using a system that is not controlled by anyone. But has a network that can document every transaction automatically without having to have an institution to manage it.

Wow, the idea is very interesting, right?

Actually, the initial idea of ​​cryptocurrency has been around since 1998, but at that time, technically this system could not be implemented, because if there was no party to record every transaction. Every person can duplicate digital money as much as possible.

Well, the problem was finally solved in 2008, by a very mysterious person who used a pseudonym, Satoshi Nakamoto, using blockchain technology.

In January 2009, the concept of cryptocurrency with blockchain technology was launched for the first time and named bitcoin. It can be said that bitcoin is the first cryptocurrency to be successfully created.

So, how come bitcoin can be distributed to so many people? And can everyone transact with each other using bitcoin?

First, bitcoin must have a network, but the network is not centralized on one server. It can't be managed by one company, and no one can control it.

So why can't bitcoin be controlled by anyone?

Because if bitcoin can be controlled by one party, in the end it will be the same as the current digital currency which is controlled by the Central Bank, or by a particular company's server.

So how do you do it?

The way is to make many home computers around the world into servers that are scattered and function to store, record, and confirm all bitcoin transaction data. The early founders of bitcoin such as Satoshi, Hal Finney, and Gavin Andresen, and their friends began to popularize this concept by persuading their friends to become bitcoin servers.

How can a computer become a bitcoin server?

Well, the computer is tasked with solving mathematical codes on the blockchain network. If the computer can solve the mathematical code, the computer will get a prize in the form of bitcoin. In addition, the computer also functions as a server among many other server networks that are tasked with recording and confirming the bitcoin transfer process throughout the world. That's why the network is called blockchain, and the people who operate the computer are called bitcoin mainers, or bitcoin miners. With the existence of a scattered server network or blockchain, bitcoin transactions can be carried out independently without having to go through a bank or certain company. Well, this is the functional selling point of bitcoin itself. For example, you want to transfer money from Indonesia to another country. You can transfer money through a bank or certain financial institution, and pay a service fee. The transfer process takes several hours, or even several working days. Not to mention, the presence of a financial institution is required from the sender, as well as the recipient in their respective geographic locations. With cryptocurrency, everyone can make transfers from all over the world, in just a few minutes. Without the need for any intermediaries at all. Because the one who verifies the transfer is the blockchain network that is scattered throughout the world. Unfortunately, the use of cryptocurrency often conflicts with the law. So there are many negative perceptions related to cryptocurrency, especially bitcoin.

In the early stages, bitcoin was popular and used as a currency for illegal goods transactions, and also as a donation instrument to WikiLeaks, a media that disseminates secret government information. That's why Satoshi Nakamoto once said something like this "It would have been nice to get this attetion in any other context. WikiLeaks has kicked the hornet's nest. And the swarm is headed towards the US." in a cryptography forum, before he finally disappeared and no one knows his identity until now.

Regardless, the use of bitcoin has continued to increase fantastically since March 2010, when bitcoin market.com began operating as the world's first bitcoin exchange.

In May 2010, Laszlo Hanyecz, a cryptography activist, made his first consumption transaction using bitcoin. He asked a member of a forum to buy two boxes of pizza, and he paid the person 10 thousand bitcoins.

At that time, one bitcoin was only around 50 thousand rupiah. And the price of the two boxes of pizza was equivalent to 500 thousand rupiah.

But at the time I wrote this, the value of 10 thousand bitcoins was equivalent to 1.3 trillion Rupiah. Imagine the increase in the price of bitcoin since it was first circulated, it has been millions of percent.

Maybe you are curious, what makes the price of bitcoin rise so high?

According to the law of economics, an increase in a price is always caused by

Maybe you are curious, what makes the price of bitcoin rise so high?

According to the law of economics, an increase in a price is always caused by two things.

First, the high demand for the item.

Second, the limited or scarcity of the item.

In terms of scarcity, Satoshi Nakamoto, and the early bitcoin programmers, limited the number of bitcoins. The maximum is 21 million bitcoin units, and that number will only be reached in 2140. So, it can be said that the number of bitcoins is limited, and no one can produce more than that number.

From the demand side, the use of bitcoin is starting to become popular as a currency and commodity traded on cryptocurrency exchanges, with transaction volumes continuing to rise from year to year. You also need to know this, one of the weaknesses of bitcoin is its very aggressive value fluctuations. Imagine, after the bitcoin price touched its highest number in June 2011, at 30 dollars, the price dropped 93%, to 2 dollars, in December 2011. Likewise when bitcoin touched a price of 1200 dollars in November 2013. The price dropped 83% to 200 dollars in March 2015. And when the bitcoin price touched a record high of 19 thousand dollars, at the end of 2017, the price dropped 44%, to 30 dollars in December 2018. Therefore, apart from the many sweet stories that we hear from investors as bitcoin miners, it is not uncommon for us to hear bad news from many people who have experienced severe losses, even bankruptcy, because of speculating when making transactions to buy cryptocurrency. Because of the high price fluctuations, it is not uncommon for capital market players and forex traders around the world to participate in cryptocurrency trading to make a profit. In Indonesia itself, bitcoin has the status of a digital asset commodity that can be traded. But it has not been recognized as a legal means of payment.

Until now, there have been many platforms that can be used to buy and sell bitcoin in Indonesia, using the Rupiah currency.

The question is, what is the future of bitcoin or other cryptocurrencies, such as Etutharium, bitcoin cash, dogecoin, and others?

We will never know what will happen in the future. To what extent can this cryptocurrency be accepted by the public, and its use can be more active. Or is cryptocurrency just a limit on digital commodities that are traded and the price will continue to fluctuate based on speculation alone. Satoshi Nakamoto himself once said "I'm sure that in 20 years there will either be very large transaction volume or no volume." -Satoshi Nakamoto

That's all the information about bitcoin, hopefully it's useful.

Greetings always compact.

By @midiagam