Until 2009, few people, if any, had heard about the virtual currency called Bitcoin. In 2008, this new form of currency, otherwise known as a cryptocurrency was invented. To date, no one knows who created the Bitcoin, but its invention has been attributed to a person or a team of individuals who used the name, Satoshi Nakamoto. The cryptocurrency was formally launched in 2009 and came into the market as open source.
Advantages of Bitcoin
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As a cryptocurrency, Bitcoin has certain distinct advantages. It is a decentralised digital currency that does not have any control or governance by the banks of any nation. It is not controlled by the government of any country. The currency operates across a peer-to-peer network, eradicating the need for any third-party or intermediary. All transactions that use this cryptocurrency are verified electronically by network nodes. These transactions are encrypted and stored on a distributed ledger system known as a blockchain.
The blockchain derives its name from the way it operates. It is a chain of blocks, where every block contains a hash code connecting it to the previous block, all the way to the first one, which is known as the genesis block. This ensures that the system cannot be easily hacked into, as it is extremely difficult to alter the information contained across the entire chain. When a Bitcoin transaction happens, the information is sent to this network using purpose-built software applications. At this point in time, the network nodes validate these transactions and write them into the respective ledgers. The information is then broadcast to the other nodes within the system. Apart from data protection, the system also ensures that double-spending is prohibited. To make this happen, every input needs to have a previous unspent output within the blockchain. The first commercial transaction using Bitcoin took place in 2010 when the cryptocurrency was used to pay for two pizzas. At the time, the value of the Bitcoin was very low and the transaction was done for 10,000 Bitcoins.
How are Bitcoins generated?
Bitcoins are created through a process known as mining. It is essentially a service that creates records by using the processing power of computers. This activity maintains the sanctity of the blockchain, ensuring its consistency and completeness. At the same time, the process also ensures the security of the transactions, by making them un-alterable through the use of an SHA-256 cryptographic hash, which links across the blocks through the entire chain. However, every new block must have proof of work (POW), to ensure its acceptance by the entire network.
In the early days, Bitcoin miners used powerful computers known as GPUs (graphics processing unit) for this operation. These computers were faster and more adaptable in creating POW algorithms. However, today mining operations for Bitcoins been taken over by companies and these companies use large data centres, fitted with dedicated, specialised mining hardware. The mining companies generate Bitcoins through this intricate, expensive and energy-intensive process. Despite the complex security process, Bitcoins have been stolen from exchanges. The cryptocurrency has also come under criticism for the gigantic amounts of electricity used by the mining companies, at a time when the entire world wants to conserve energy and move towards green energy.
The legal status of Bitcoin
Due to the decentralised nature of the cryptocurrency, its regulation has been difficult. Since the currency is mainly traded in online exchanges, its use in the early days was fraught with controversy. Bitcoins have certain unprecedented characteristics that no other currency has seen before.
- There is no central authority.
- There is no central repository server – the cryptocurrency operates through a peer-to-peer network.
- Central storage like currency holdings in a bank does not exist. Bitcoins use a distributed ledger system.
- The distributed ledger is accessible to everybody, and anyone can store it on their computers.
- The administration of the cryptocurrency is also distributed. Its ledger is maintained by a network of Bitcoin miners.
- An amazing feature of the system is that anyone can become a miner.
- Additions to this distributed ledger system are highly competitive. Any miner can create a new block, and it is impossible to predict who will.
- New Bitcoins are generated as a reward for creating a new block. Therefore, anyone within the network can achieve this target. According to the protocol, only 21 million Bitcoins can be created.
- New Bitcoin addresses require no approval system for its creation and anyone can create it.
- Transactions do not need approval, and a confirmation is generated by the network once the transaction is deemed legitimate.
Several national banks across the world felt threatened by the new autonomy and lack of control presented by Bitcoin. In September 2017, China started the process of imposing a ban on trading in Bitcoins. The ban formally came into effect in February 2018. In the US, warnings were issued about trading and investments in Bitcoins. In July 2018, the Commodity Futures Trading Commission in the United States reiterated that any form of trading in cryptocurrencies is speculative and that there could be inherent risks associated with theft from hackers, as well as fraud and misrepresentation. Earlier, similar warnings had been issued by the European Banking Authority, regarding the price volatility of Bitcoins, absence of regulatory structure and the risk of fraud.
Risk of price manipulation
In May 2018, an investigation was launched by the US Justice Department about the possibility of price manipulation. The final price settlement of Bitcoin futures in the US is dependent on four cryptocurrency exchanges. The investigation looked into transaction data on these four exchanges in order to detect any unfair market practices.
History of the Bitcoin price
Bitcoin inventor Satoshi Nakamoto is estimated to have mined close to 1,000,000 Bitcoins, before handing over the controls to the Bitcoin Foundation and retiring from public life. By 2011, Bitcoins started to have parity to internationally accepted currencies. At the time, the Bitcoin price in US dollars was only $ 0.30. In 2011, the average USD to GBP price was 1.60. Therefore, the Bitcoin to GBP conversion was approximately 18p. Some people bought Bitcoins at this price. Imagine how rich they are today! Bitcoin closed in the year 2011, with the Bitcoin to GBP price at £3.29. However, Bitcoin to GBP prices faced extreme volatility at the time, with the Bitcoin to GBP price rising to £19.68 in June that year, before heading into a downward spiral.
The following year, 2012, saw the prices of Bitcoin in GBP rise to around £8.36 at the close of the year. However, volatility continued with the prices falling by as much as 49% to 57% throughout the year, followed by a period of stabilisation. This rollercoaster ride of the Bitcoin in GBP prices kept prudent investors away. However, that year also witnessed the creation of the Bitcoin Foundation. This was done primarily to lend a direction to the development of Bitcoin, leading to renewed hope in the prices of Bitcoin in GBP.
The rise of Bitcoin
2013 was an important year for Bitcoin. The year witnessed the greatest price rise of 1 Bitcoin in GBP. At the start of the year, the value of 1 Bitcoin in GBP was £8.36. However, by the end of the year, the price of 1 Bitcoin in GBP had risen to £484. But, it was also a year in which the cryptocurrency became mired in controversy. In March of the same year, there were problems with the blockchain and the distributed ledger system split into two independent chains for a few hours, before the problem was rectified.
In the same year, the US authorities also seized around 30,000 Bitcoins from an illegal trading site called Silk Road. The authorities also started taking action against Bitcoin exchanges in the US if they had not registered with the appropriate legal authorities. After China prohibited the use of Bitcoins, prices started falling drastically. At the start of 2014, the price of 1 Bitcoin in GBP stood at £484 but reduced to £206 by the end of the year.
From this period of uncertainty, Bitcoins made a slow recovery. By the end of 2015, 1 BTC to GBP conversion price rose to £285. The price continued to rise throughout 2016 and by the beginning of 2017, the price of 1 BTC to GBP had risen to £804. 2017 marked the revival of Bitcoin prices, partly fuelled by a software upgrade on the Bitcoin network. This upgrade, called Segwit, improved prices by around 50%. By July 2017, the price of one BTC to GBP was approximately £2,216. By the end of the year, the price of one BTC to GBP stood at £10,816.
The Chinese ban on Bitcoin trading, which started in February 2018 saw prices plummeting. The Bitcoin to pound price dropped to approximately £4,974 on 5th February 2018. By January 2019, the Bitcoin to pound price was £2,882, down by 72% from the peaks achieved in 2018.
In February 2019, the Quadriga Fintech controversy surfaced, when the company’s founder was reported dead in India. The Canadian cryptocurrency exchange, subsequently filed for bankruptcy, with around $200 million unaccounted for. Despite this market shock, Bitcoin continued to perform well and by June 2019, the Bitcoin to pound price had risen to £10,000. In an act of legitimacy, Intercontinental Exchange, the company that owns the New York Stock Exchange (NYSE), started a Bitcoin exchange to trade in its futures.
The COVID-19 pandemic
It would be unbelievable if the global pandemic had not impacted Bitcoin. As the pandemic took hold around the world, BTC to GBP prices fell to approximately £3,225 and below. However, 2020 witnessed a lot of support for the cryptocurrency from financial companies, who moved a percentage of their total assets to Bitcoins. The payment gateway, PayPal also allowed its customers to buy and sell Bitcoin using their payment platform. By November 2020, the BTC to GBP price had recovered and stood at £16,016.
This new BTC to GBP price was at an all-time high, and reinforced the faith of investors, as the cryptocurrency was able to buck its performance, while under pressure from the economic situation caused by the pandemic. The revival of the Bitcoin GBP price witnessed other corporate powerhouses following suit in the support of Bitcoin. These included life insurance companies, who were converting a part of their assets to Bitcoin and the high-tech automobile company Tesla that invested £1.08 billion in Bitcoin. Based on these factors, the Bitcoin GBP price went up to £35,597. Earlier in 2021, the Bitcoin GBP price rose by approximately £3,846 in an hour, when the Bitcoin received an endorsement from Elon Musk, founder of Tesla. With that rise alone, the Bitcoin price GBP reached a price of £28,691.
Current status of the Bitcoin price GBP
The live price of Bitcoin to pounds is a dynamically changing price, just like any other global currency. Most live price charts will update the Bitcoin price GBP within five seconds. After a turbulent start, Bitcoin has now established itself as the most important cryptocurrency, which is in high demand. Due to this, the Bitcoin to pounds price is quite high. However, investors believe that the Bitcoin to pounds price will continue to rise in the future.
From a high of £35,597 on 8 February 2021, the Bitcoin price pounds has already reduced slightly to £34,301 on 12 February 2021. But the Bitcoin price pounds had earlier in the day reached a high of £34,487. So, as an investor, these illustrations should give you an indication of the fluctuation and volatility of the Bitcoin price pounds. Many precious metal investors are now turning to Bitcoin, as there is speculation that it may replace precious metals as a repository of value.
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