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Bitcoin growing in value and importance

Bitcoin growing in value and importance

Posted on: 12/5/2017 | Author: ATB Financial's Economics + Research Team

Bitcoin, the world’s most popular digital currency recently reached the $US 10,000 mark—the currency has been on the rise ever since and now values are close to $US 12,000. But what is Bitcoin, how has it grown so much and what does it mean for the future of currency?

Created in 2009, Bitcoin was the world's first decentralized payment network. That means, there’s no central bank controlling the currency. Rather, Bitcoin is a peer-to-peer (P2P) network that maintains a permanently shared transaction ledger called blockchain. Since there's no Bitcoin company overseeing the currency’s operations, there's no one to guarantee that Bitcoin balances will have a set value. In other words, they could go $US 10,000 to $US 0.01 overnight. Instead, bitcoins float against global currencies and like commodities, supply and demand determine their value.

When Bitcoin was first created, their value was virtually worthless ($US 0.05). But, as the community of bitcoin holders grew, the digital currency’s value followed suit. The currency has now increased from a low of $US 200 in early-2015 to well above $US 10,000.

So, how is a currency like Bitcoin expected to change our lives? Consumers at large pay fees for money transfers. Sometimes these fees are significant, like when you buy a house. But, by using digital labelling (blockchain), the permanent record of a bitcoin transaction has the potential to eliminate such third parties (and their costs). It’s for this reason that business has been somewhat reluctant to embrace the digital currency. With the kind of money floating around in the bitcoin world, it’s clear that currency is now being taken more seriously by everyone.

Bitcoin prices, graph

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