Crypto-currency in a form of decentralized digital-only currency. It is not controlled or regulated by any world government or central bank, and so offers a tremendous amount of freedom to its users. All transactions take place directly between buyer and seller, without the need for third party mediation, allowing funds to be transferred instantly anywhere in the world. As a result, transaction fees for using crypto-currency are negligible, and the need for currency exchange is removed altogether.

The first crypto-currency to be released was bitcoin. The Bitcoin client was developed by Satoshi Nakamoto, and made available to the public in early 2009. Last year bitcoin surged in value by over 10,000%, and at one point was worth more than gold. This sparked a massive interest in crypto-currency, and dozens of ‘altcoins’ have were developed in an attempt to replicate, or even surpass bitcoin’s success. These include Litecoin, Namecoin and Feathercoin, to name just a few.

The majority of crypto-currencies are ‘mined’ by powerful computers which perform complex mathematical equations in order to process transactions, maintain network security, and prevent fraud. Miners are rewarded for this service with varying amounts of new currency, and a portion of transaction fees.

Crypto-currencies have also very become popular with speculative investors who trade crypto-currencies against each other. The potential rewards are very high, as a crypto-currency can increase in value by as much as 50% in single a day. However, trading is not without risks, and should only be attempted by those with a good working knowledge of the market.
(You can visit http://bitbanx.com/ to learn more about crypto trading.)

Crypto-currency is already big business, and what we’re seeing now is just the tip of the iceberg. If anyone asks me if they should be investing in crypto-currency, I tell them –‘absolutely’. You don’t even have to be mine or trade crypto to be involved, a lot of people simply buy crypto-currency and hang on to it. One thing’s for sure though; however you decide to get involved in crypto, you definitely should be involved.

Whenever anyone talks about crypto-currency, it’s hard not to mention bitcoin. Bitcoin was the world’s first crypto-currency, and is the most well-known. It was developed by an anonymous programmer called Satoshi Nakamoto, and released on January 3^rd, 2009. Initially, there was little interest in the new currency, and its value was next to nothing.

However, in April of 2013 bitcoin’s value started to increase dramatically, and by December of that year 1 BTC was worth approximately $1,250. Since then, bitcoin has gradually gained popularity, and more online and high street retailers are beginning to accept it as a payment method.

How does Bitcoin Work?

Bitcoin is a decentralized currency – it is not owned or controlled by any one entity, and instead operates on a peer-to-peer system. This means all transactions are conducted directly between payer and payee, without the need for a central banking system. Bitcoin is not backed by any physical commodities, so its value is determined by its users, in the same way as fiat currency. Unlike fiat currency however, bitcoin’s value can be artificially adjusted, so it is immune to inflation.

Bitcoins are stored in ‘bitcoin wallets’, pieces of software that records a person’s bitcoin balance and transaction history. A wallet can be kept on a computer, smart phone or tablet. Each wallet is assigned an ‘address’, which is an alphanumeric code that functions like an email address. All a person needs to send bitcoin to another wallet is that wallet’s address code. Bitcoin transactions can be made in the real world by use of QR codes, which can be scanned with a smart phone or similar device, and allows bitcoin to be transferred directly to the vendor.

A single bitcoin can be divided into sub-units, to make spending it easier. The most commonly used is the milliBitcoin (1/1000^th of 1 BTC). However, theoretically there is no limit to how many sub-units a bitcoin can be broken down into, as its value increases.

 How Did Bitcoin Become So Valuable, So Quickly?

For the first couple of years after its release, bitcoin was worth next to nothing. By the beginning of 2013, its value had slowly risen to $12-13. However, in the next few months its value grew at an unprecedented rate. Due to regional economic problems, many people started to invest heavily in bitcoin as a way to safeguard their assets. The most notable example of this was during the Cypriot banking crisis.

As a result of increased demand, the currency’s value rapidly increased to $200 per bitcoin. In response to its sudden rise in value, speculative investors started to take a strong interest. This created a ‘gold rush’ effect which drove the price even higher. The price of bitcoin finally peaked in December at around $1,250, slightly more than the cost of an ounce of gold at that time.

The currency’s value since levelled at out at an average of around $500, and still continues to fluctuate. Although some people like to point out that bitcoin has dropped in value, it’s worth noting that the value of bitcoin is over 30 times what it was in January of last year. That’s a huge increase whichever way you look at it.

Many analysts – including myself – predict that bitcoin will see another sudden rise in value, possibly within the next year or two. Some analysts are even estimating that 1 BTC could be would several thousand dollars within a couple of years

If you would like to learn more about bitcoin, or keep up to date with bitcoin news, check out my personal blog at http://bitbanx.com/, and find out how you can get involved.

Enjoyed this post? Why not take a look at Bitcoin Pros and Cons