Many people have asked themselves about the usefulness of cryptocurrencies, as their advantages are often encountered in the media – whether you’re reading the news or you’re just browsing the internet, it is more than likely to come across articles on Bitcoin that will stir your curiosity and leave you wondering. Some avoid trying it because they don’t understand the mechanisms behind Bitcoin – luckily enough, this is going to be your how-to guide.
The process of Bitcoin creation is called “mining”. Mining basically involves adding records of new transactions to the Blockchain, which is the public ledger where all of them are inscribed. Actually, this is a process that also helps with the transactions in the network through the use of specialized hardware.
The competitive aspect of the business is determined by the fact that Bitcoins are created at a fixed rate, making it rather difficult for every miner to make profit, as more of them join the network. This forces them to become more efficient, if they want to gain rewards for validating transactions. Since the number of Bitcoins available worldwide is that of 21 million, it is safe to say that there will be less and less Bitcoins created until they reach the maximum.
Now, why is BTC valuable? Well, once it started being traded for real world assets, everything became possible, as people could link it to a common value. Bitcoin’s price is generated by supply and demand – given the limited number of existent Bitcoins mentioned earlier, the demand should make up for the decreasing rate of Bitcoin creation in order to keep the price stable. However, since large amounts of money aren’t necessary in order to influence it, price fluctuations are rather common. This means that there’s a great chance of your Bitcoins’ value rising after you bought them, so you could make profit if you’re informed enough.