The big difference between Bitcoin and conventional currency is that it is not controlled by any central bank or government. There is also a big difference between investing in stocks or bonds. Because it is not a business organization that will check the annual income-expenditure account and understand which way it is going.
Bitcoin is a type of cryptocurrency or digital currency. In 2009, Satoshi Nakamoto, a pseudonym, invented the virtual currency. Bitcoin transactions are recorded in the virtual ledger of blockchain technology. There is an account of who Bitcoin went from to whom. This proves ownership of Bitcoin.
How Bitcoin is priced
Without the control of the central bank or government, a country’s economy, monetary policy, inflation rate and economic development cannot determine the value of bitcoin. The factors that influence its pricing are:
1. Bitcoin demand and supply.
2. The cost of making bitcoin through mining.
3. Remuneration received through blockchain transaction verification.
4. The amount of conventional bitcoin.
5. Is exchanged through that.
6. Bitcoin transactions are restricted by various states
7. Bitcoin’s internal management system
Let’s start with demand and supply
As the central bank issues new banknotes, bitcoin is introduced in a process called ‘mining’. Anyone can help perform transactions on Bitcoin and ensure the security of the Bitcoin network. For this you have to set up special computer parts, you have to solve mathematical problems. This is known as mining. In return they get bitcoin as a reward.
The supply of bitcoin is affected in two ways. First, the rate at which new bitcoins are created through mining is pre-determined. This rate will continue to decrease over time. For example, in 2016, the total bitcoin growth rate was 6.9 percent. In 2017 this rate was 4.4 and in 2018 this rate was 4 percent. As the demand for bitcoin grows, so does the supply.
Second, according to the Bitcoin protocol, a total of 2 crore 10 lakhs bitcoins will be introduced. If the total amount of bitcoin touches that number, it will no longer be possible to create new bitcoins through mining. That means the total amount of bitcoin is limited.
Till December 2020, a total of 1 crore 85 lakh 87 thousand bitcoins were in circulation in the market. That’s 88.5 percent of the total bitcoin supply. The number must have increased in so many days.