The Future of Bitcoin. Is the Toss of a Coin a Bit Too Risky? Laetitia Petersen*
By now, everyone who isn’t living under a rock in a cave has heard of Bitcoin – one of many virtual banking currencies. I have fielded many questions from clients over the last year about Bitcoin. Where does it come from? It is safe? Should I include it in my portfolio? What does the future hold for cryptocurrencies? Given all the confusion, I thought it was time to invest some energy into unpacking this new currency phenomenon for you and leave you with some sage advice.
based on a mathematical algorithm without any human intervention.
What is a cryptocurrency?
People can also buy Bitcoins with traditional currencies. Once you own Bitcoins, they behave like physical commodity coins; they possess value and trade just as if they were gold that you had freshly mined. You can use your Bitcoins to purchase goods and services online, or you can pop them away and hope that their value increases over time like an investment.
A cryptocurrency is a digital currency generated by a mathematical formula or algorithm. The coins are generated by so-called ‘miners’ who use high performance computers and vast amounts of electricity to solve complex mathematical problems. They are rewarded for their efforts with Bitcoins which are stored on a public ledger called Blockchain. You could think of Blockchain as like a self-regulating central bank issuing money
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The first cryptocurrency, named Bitcoin, appeared in 2009 from a developer supposedly named Satoshi Nakamoto. There is a finite supply of 21 million Bitcoins, of which more than 16 million are already in circulation. This limit is expected to be reached around the year 2140. Bitcoin is not unlike gold. Gold must be mined out of the ground, and Bitcoin must be mined via digital means. The limit is set by the founders of Bitcoin through protocols. Once miners have unlocked the potential supply, there won’t be any more Bitcoins to be mined.
For most of the last decade, cryptocurrencies had a niche appeal, predominantly to early
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