In 12 January, 2009, the pseudonymous Satoshi Nakamoto made the first-ever Bitcoin transaction, sending 10 BTCs to developer Hal Finney and just like that a new asset, or rather a new asset class was born.
Going back a bit further, triggered by the 2008 financial crisis, Nakamoto mined the first-ever Bitcoin block, named the genesis block, on 3 January, 2009, awarding Satoshi the first 50 Bitcoins of the 21 million that will ever be created.
With a cost of around $25 dollars, these pizzas set the first “real-life” value for Bitcoin at $0.0025 dollars.
On 2June, it reached $10; by 8 June, it climbed to its highest price yet of $31.91, only to plummet again to $10 four days later, on 12 June.
That’s when governments began to notice Bitcoin and tried to figure out how to categorise, regulate, or even control, this new digital currency.
Gox, both in a span of a couple of months, drove the price down again, and Bitcoin didn’t reach that psychological barrier again until January 2017.
And, of course, the bull run brought a lot of buzz around “the new digital currency”; the cryptocurrency rallied from around the $1,000 mark to almost $19,000 by December 2017.
For example, Japan passed a law to accept Bitcoin as a legal payment method, and Russia had announced that it will legalise the use of cryptocurrencies such as Bitcoin.
Come March 2020, Bitcoin was no exception to the “dash for cash”, considering it tanked more than 50 per cent at the height of the Covid crisis to $4,800.
Meanwhile, acceptance of this novel cryptocurrency kept accelerating.
Now let’s look closely at what happened: I put my pearl in your hand, we both know it was real, we experienced it.
You can give it to a friend and they can give it to someone else and so on or you could just leave it on the sidewalk.
The problem? How would you know that I didn’t duplicate the digital pearl before sending it to you? How would you know I didn’t send the same pearl to my friend on Instagram? You wouldn’t know.
Just like a physical ledger, where you record all transactions, we need a digital ledger for the above online transfer or transaction and have someone in charge of it.
Imagine that the person in charge has to verify the ledger every time there is an exchange.
What if we gave this ledger to everybody? Instead of a single ledger living on a third party’s computer, everyone involved would have a copy of all the transactions that have ever happened.
Plus, it’s decentralised, so no one can decide to give themselves more digital pearls.
You could participate in this network, update the ledger and make sure it all checks out .
When I make an exchange, I can certify that the Bitcoin left my possession and is now entirely yours because it’s a public ledger; I didn’t need a third party to make sure I didn’t cheat.
However, gold itself survived the end of gold coinage, the rise of paper money, the end of the gold standard and so on.
So, it is only natural to expect that we will witness volatility in this novel asset class/payment system.
On a comparison with gold, this is what Vineet Arora, Managing Director, BTA Wealth Management has to say: “Bitcoin is to millennials what gold was to a generation ago.
Meanwhile, the maximum drawdown of Bitcoin is a whopping 83 per cent, compared to 20 per cent and 14 per cent for gold and USD respectively.
The primary goal of any form of currency is to be a reliable and convenient source of payment.
Furthermore, because only so many transactions can fit in a block when the network is congested, fees skyrocket in a bidding war between users to get their transaction in the next block.
“While CBDCs may replace currency, in the near term I still find it hard to accept Bitcoin or any altcoins as a store of value and a medium of exchange.
On the other hand, Devvrat Moondhra, Director, Duro Steel AG and Blockchain Investor, says, “Bitcoin is like religion.