Cryptocurrencies PART 1

How long can Bitcoin be "crazy"?

Background: 

On November 1st 2008, a person with the pseudonym Satoshi Nakamoto published a paper entitled "White Paper" on the Internet, proposing the idea of a new type of digital currency. Soon he wrote the program, and it started running on January 3rd 2009. He dug up the first Bitcoin block containing 50 Bitcoins. Since then, Bitcoin has been continuously mined by "miners" until the upper limit of 21 million is reached in 2140.

At this time, Bitcoin is still a toy for every few programmers to do with the real world.


Until May 2010, Laszlo Hanyecz, a programmer in Florida, USA, used 10,000 bitcoins to buy pizza coupons worth $25, setting a price for bitcoin for the first time. Today these bitcoins are worth 40 million U.S. dollars. you can imagine Laszlo's expression of regret. Haha!!!!!

In February 2011, the price of Bitcoin only reached $1, and it began to attract people's attention. Since then, prices have started to rise rapidly, especially in China, and they have reached RMB 8000 in November 2013, exceeding the price of one ounce of gold for the first time. 


Soon, on December 5th 2013, the People's Bank of China and the five ministries and commissions issued the "Notice on preventing Bitcoin Risks", stating that Bitcoin is not a currency and it not legally compensated. Bitcoin plummeted rapidly and market. By January 2015, the lowest point fell below ¥1000. However, starting from the end of 2015, Bitcoin has started a big bull market until today, and the price is now close to ¥30000. 


Now we can understand the characteristics of cryptocurrency(Tyler, M et al, 2015):

  • Bitcoin is the first cryptocurrency, so it is unique;
  • Bitcoin is an online communication protocol that promotes the use of virtual currencies including electronic payments;
  • the design of Bitcoin allows irreversible account for free, without any centralised review procedures, or even providing real names.
  • For economists, Bitcoin is a virtual currency, it may destroy the existing payment system, and may even destroy the currency system. 

The following video will let us understand how cryptocurrency works.


In next week's blog:
I will explain cryptocurrencies part 2- the differences between the cryptocurrencies and the fiat currencies. 




Reference:
Tyler, M et al (2015) Bitcoin: Economics, Technology, and Governance. Journal of Economic Perspectives, 29 (2): 213-38.





 










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