Published on December 29th, 2019 | by Sunit Nandi0
A Decade Later – is Bitcoin Still a Viable Investment in 2019?
Since the inception of bitcoin in 2009 by the mysterious Satoshi Nakamoto, the cryptocurrency has soared in popularity yet remained a fairly controversial investment. While there are many other cryptocurrencies in existence, bitcoin is by far the most widely recognized out of them all, partially due to all the press it has received over the last decade, both positive and negative.
Bitcoin has certainly proved itself to be more than a passing fad as more and more major retail giants like Starbucks and Whole Foods are now making an effort to accept cryptocurrency payments. While bitcoin has changed the currency landscape for the foreseeable future, does it still remain an attractive investment at the end of the decade?
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How Bitcoin Works
In the early days of bitcoin, those who were keen on investing in the cryptocurrency or doing the actual work of mining the blocks that yield bitcoin were able to amass huge amounts of the cryptocurrency. Initially, bitcoin essentially held no value as it only appealed to a select group of people interested in cryptography, hacking, and the like. The first purchase made with bitcoin was when the early adopter Laszlo Hanyecz bought two pizzas for 10,000 BTC, which would have been worth approximately $86,000,000 in today’s money.
The reason that there was so much bitcoin concentration at that time is largely due to how bitcoin is mined. Initially, the bitcoin “blocks” — a group of bitcoin transactions chosen from the list of all currently pending transactions that are then recorded and added to the growing record of blocks or “the blockchain” — yielded 50 bitcoin per block. New blocks are found roughly every 10 minutes through cryptocurrency miners using raw computational power to mine these blocks, and about every four years since bitcoins creation the number of bitcoins yielded from a single block has halved.
Bitcoin is far from the only cryptocurrency available to the public, as alternatives to bitcoin such as Ethereum, NEO, and Litecoin are all popular cryptocurrencies. In fact, essentially anyone can create their own cryptocurrency with the right technological know-how, whether starting from scratch with their own blockchain or creating a new currency using tokens that are built upon existing infrastructure.
Why It’s Popular
The reason that bitcoin is valued more highly than the cryptocurrencies that it competes with is due to a variety of reasons. First and foremost, bitcoin has the largest user base with over 30 million bitcoin wallets, it was the first cryptocurrency to come to market which gave it a huge head start, and it is more widely accepted by merchants than any other cryptocurrency. While that does explain why bitcoin itself is valuable, it doesn’t fully look at why bitcoin was originally and continues to be popular.
To answer that, one must look to the foundational elements of any cryptocurrency: the blockchain. The ultimate benefit of the blockchain is that it allows for digital information to be distributed or transferred without being copied as it exists as a shared database that is constantly checking itself for continuity. This effectively makes bitcoin a decentralized currency with no central governing body overseeing transactions, insulating users from bank failures or collapses and keeping the currency unaffected by inflation or deflation as well as currency exchange rates.
While the blockchain has evolved beyond a method of tracking digital currency, it still offers users of bitcoin a way to skirt many of the financial pitfalls that a centralized currency suffers from. Bitcoin and other cryptocurrencies are, however, an incredibly volatile market due to their relatively small market sizes compared to more traditional forms of currency as well as the fact that public opinion of bitcoin and other cryptocurrencies seems to wax and wane wildly.
Bitcoin’s Lasting Effects
While bitcoin has offered many the ability to conduct transactions pseudo-anonymously, free of many of the regulations that make transacting money difficult and costly, there are other lasting effects that the cryptocurrency has created that may impact its viability as an investment opportunity. The fact that governments around the world are unsure of how to regulate cryptocurrencies like bitcoin further adds to their volatility. For example, in 2017 China began to crack down on cryptocurrency trading, causing bitcoin valuation to plummet from $9,000 to $6,000 in less than a day.
Another long-term effect caused by bitcoin comes in the form of its impact on the climate. As blocks become harder to mine and yield less bitcoin as time goes on, the computational power needed to do the actual work of mining steadily increases. The huge networks of computers that bitcoin miners use require an immense amount of power, and in China where the bulk of the world’s mining takes place, a huge amount of that energy comes from non-renewable sources. This can negatively impact the public’s perception of cryptocurrency, adding yet another avenue for the value of bitcoin to drop unexpectedly.
None of this is to say that bitcoin is an investment that should be avoided, just that it is more volatile than many other traditional investment opportunities and should be treated as such. Perhaps instead of investing directly into cryptocurrency, investing in the various sectors of business that are using blockchain technology to improve services like the fintech industry, healthcare industry, security industry, or even the real estate industry might be more sensible and stable in the long run.