The hikes and plunges of Bitcoin are accompanied by stories of overnight wealth and sudden bankruptcies. Bitcoin has also attracted much skepticism among its naysayers. So what is this Bitcoin that everyone’s talking about? Here are the basic facts about Bitcoin you should know.
Bitcoin is created in 2009 by Satoshi Nakamoto to enable seamless fund transfers over peer-to-peer networks. Unlike fiat money or gold that take on physical form, Bitcoin exists virtually and can be transferred to any part of the world without relying on centralized intermediary institutions. The issuance, transfer, and verification of Bitcoin are autonomous and independent from the traditional fiat system. Bitcoin is free from intervention by any third parties or individuals due to its decentralized and universal design. Nicknamed the father of all cryptocurrencies, Bitcoin has become the most widely-known cryptocurrency with the largest market dominance.
Bitcoin is built for everyone in mind. The maximum number of Bitcoin that can be issued is capped at 21 million. Private keys are used as digital signatures in Bitcoin transactions, which allows direct transfers among users without going through third-party institutions like banks, clearance centers, or exchanges. As users are able to avoid intermediary fees and bureaucratic red tape, Bitcoin has been increasingly adopted in cross-border trading, payment, transfers, and other purposes. Thanks to its finite quantity and decentralized architecture, Bitcoin functions as a tool for value exchange and circulation without the hindrance of borders and centralized authorities.
After learning about the basic facts and the prominence of Bitcoin in the crypto world, it is important to know that the value of Bitcoin is still subject to considerable fluctuations, which is not so ideal as a medium of exchange. To address this issue, stablecoins are created. Pegged to a fiat currency or a commodity with a stable value, such as US dollars and gold respectively, stablecoins inherit their price stability. As an exchange medium, stablecoins function as the bridge between the crypto world and the fiat world. This feature means that stablecoins are primarily used in commercial transactions, not as a target of investment.
Stablecoin has only existed for less than a decade since USDT was issued by Tether Limited in 2014. USDT soon emerged to be the most popular stablecoin with the largest market value. Pegged to US dollars, USDT and USD are exchangeable at a 1:1 conversion ratio. Not just a digital currency, stablecoins are programmable currencies empowered by blockchain technology. In all, stablecoins function as a universal equivalent in the crypto world, while aiming to be a medium of payment in broader areas.
