What is bitcoin?
Bitcoin is a cryptographically secured digital currency that operates outside of the mandate of a central authority. It was created in 2009 by the pseudonymous Satoshi Nakamoto, and originally conceived as a method of payment that wouldn’t be subject to government oversight, transaction fees or transfer delay – unlike traditional ‘fiat’ currency.
Back in 2010, bitcoins were worth around 0.003 cents each. As of October 2017, that figure is upwards of $4200 – though this value has proved volatile, with frequent intraday swings. In that time, hundreds more cryptocurrencies have emerged, all with unique features and applications. Few of these have any significant value, but bitcoin does have its rivals in the form of ether and bitcoin cash, and – to a lesser extent – litecoin, ripple and stellar.
Commodity or currency?
Bitcoin was initially devised as a method of payment, and in certain cases functions as exactly that. But it both lacks widespread adoption and is currently far too volatile to provide a real alternative to fiat currency: vendors need to revise their prices constantly in response to its swings in value.
This means bitcoin is used first and foremost as an investment, resembling gold and other precious metals more than it does traditional currencies. Like commodities, it is beyond the direct influence of a single economy, and largely unaffected by changes in monetary policy.
Remember that while bitcoin isn’t affected by many of the factors that affect traditional currencies, there are a number of unique influences it has to contend with.