most valuable cryptocurrency
in the world right now, but its price has dropped considerably lately. This article explains in detail what Bitcoins are,
how the cryptocurrency system works
and why the prices of this particular ‘coin’ have been falling. Keep reading to know more!
What is Bitcoin?
Bitcoin was invented by the mysterious
in 2009. This cryptocurrency uses a network of computers around the world to track every transaction. In essence, the
technology of cryptocurrency is a permanent public ledger that allows you to record both new and old transactions without the need for any third party, (such as a bank, for example). By using cryptocurrency, users can purchase goods and services, create other
and transfer funds around the world.
What is the value of cryptocurrencies?
Some are worth relatively small amounts, while others are worth thousands of dollars.
The Bitcoin system
Bitcoin is a virtual currency that runs on a decentralized system. At one extreme, there is a person or group of people (called “
“) who have computers that will assist the decryption process. This person works together with other people in the Bitcoin community to produce new Bitcoins that are released into circulation, through computerized processes. The process of creating the next Bitcoin in circulation is called
and requires large amounts of computing power. At the other end of the system, there is a “wallet” of Bitcoins, which is used to
store and transfer
these coins. This wallet is also called
wallet service provider (WSP),
and it is usually large companies using their own computers to mine Bitcoins.
Why is the price of Bitcoin dropping?
The first of the causes is that
the Chinese government
announced that it will ban all cryptocurrency trading in China. This means that China is deciding to protect its citizens from the possible loss of money from investing in cryptocurrencies, even if it means not benefiting from them. The second reason for the Bitcoin price decline is due to a possible split, called
. A split occurs when a coin is split into two coins with similar values because some people disagree with how the original coin should work or want to make some changes to it, and diverge to create their own version of a cryptocurrency.
And what does Elon Musk have to do with all this?
announced in February that his electric vehicle company, Tesla, had invested $1.5 billion in the cryptocurrency Bitcoin, causing the value of this coin to skyrocket, and new investors to enter
. Then in March, this company began accepting Bitcoin as a payment method for all transactions on its website, which contributed to another increase in price. Elon Musk also promoted the purchase of digital currencies, such as
, whose value also increased in a few days. We explain it further here: [Is Dogecoin a good investment in 2022] (https://canaltrader.com/blog/es-dogecoin-a-good-investment-in-2022)
However, Tesla changed course and announced that it would stop accepting Bitcoin due to possible
that cryptocurrency mining could cause. This announcement set the tone for the great recession in most cryptocurrencies that we are experiencing today.
How does cryptocurrency affect the environment?
Multiple studies have explained that the Bitcoin network generates an amount of
similar to a large western city or a whole country like
. But a Cambridge University study last year estimated that, on average, 39% of encrypted mining was powered by
If you have been curious and want to know more about the trendy coin, we advise you to try a simulator first. You can open a [DEMO] account (https://canaltrader.com/plataforma-de-social-trading) on a platform that trades with Bitcoins.