DIGITAL CURRENCIES AS A FUTURISTIC EXCHANGE// The deals behind bitcoin

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Author: @madridbg, through Power Point 2010, using public domain images.

Greetings dear members of this prestigious platform, continuing with the thematic approach in relation to Bitcoin as a futuristic exchange currency, in this third installment we will be addressing the offers and demands behind the BTC. Therefore, we must know that any financial asset is moved by an intrinsic correlation between the demand for the asset and the quantity offered of it taking into account the selling price.

In this way and for practical reasons, we will focus our attention on the BTC offers, which are determined by a process that we will call mining, which resembles the extraction of metals such as gold, hence its marked difference when compared to fiat money, where central banks control the printing of assets such as the dollar or any traditional currency.

Fig. 2. The mining process is carried out by state-of-the-art computerized equipment. Author: Marco Krohn

The mining process is the only valid way to inject money into the Bitcoin network, it consists of solving mathematical problems through the use of computer equipment and those responsible for performing this arduous task are called miners, who are responsible for validating transactions on the network in exchange for financial incentives.

One of the great advantages of BTC over the traditional economy is based on the fact that it minimizes expenses due to counterfeiting problems as a result of its integration in block chains which are considered as a universal accounting record where we can visualize and review all transactions that take place in the network. The supply process is fundamentally based on the completion of blocks, which in a way are the new bitcoins generated and used to compensate the work done by the miners.

Fig. 3. Block completion allows to generate the BTC that will be the miners' rewards. Author: Jae Rue

It is important to note that the production of BTC is not arbitrary or a decision of a conglomerate, because as new BTC are generated, the mathematical problems are more complex and are reduced by half every 210,000 blocks, which is why it is estimated that by the year 2140 the stipulated limit will be reached, which is an average of 21 million Bitcoin present in the network.

Therefore and based on the above we can establish that the supply of BTC is somewhat fixed or inelastic and due to how complicated the mining process has become, the price of the same has reached important values, making bitcoin the benchmark in terms of cryptocurrencies. Therefore, if you found this information timely I invite you to leave your contribution in the comments section.


BIBLIOGRAPHY CONSULTED


[1] Michael McLeay, Amar Radia y Ryland Thomas. (2015). Money in the modern economy: an introduction. Journal of Institutional Economics, vol. 17. Number 33. Article: Online Access

[2] Michael McLeay, Amar Radia, Ryland Thomas. Money in the modern economy: an introduction. JOURNAL OF INSTITUTIONAL ECONOMICS, VOL. 17, NO. 33. Article: Online Access


OF INTEREST


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8 comments
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Hi @madridbg
The best thing is halving that is becoming a reason that more and more people involing in bitcoin investment. In paper money case, there is no limited supply.

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Hello @luckyali you are absolutely right in your analysis, although we have to be aware that as we generate more BTC the mining process becomes more complicated and even more so for new miners. Thanks for your comment

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friend @madridbg, within all this that we are living today there are many positive points, really, and those who are accustomed to the traditional scheme may have some difficulties to learn the new, or perhaps there is resistance, however, it is always necessary to contemplate that things can change.

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Greetings @josevas217, I think we all must adapt to new investment methods, it is a good opportunity to be updated and be able to compete with new technological advances. Thanks for your contribution

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