Despite being over a decade old, it was only in the last few years that Bitcoin has garnered the attention that it deserves. In the last year if we’re really being honest. Before we dive into the topic in question today, let’s have a quick recap on how this cryptocurrency operates. We’ll also have a look into how it came into existence as we answer the question of “can Bitcoin crash?”
How Did Bitcoin Come About?
Many people have heard the name Satoshi Nakamoto, but few know the actual story about how Bitcoin came into existence. Hold up, we’re not blowing the lid on the identity behind this mysterious enigma, that’s a story for another day. The concept of Bitcoin came about after Nakamoto witnessed the all round devastation caused by the Global Financial Crisis from 2007 to 2009. In seeing this, one can only imagine from a first hand account, the developer/s wanted to create a new financial system that didn’t rely on governments, banks, financial institutions, and the higher powers that control them.
Nakamoto set out to create a payment system that relied on a network infrastructure where protocols defined the operations and those interested could maintain them. They wanted to find a way for people to be able to transfer funds without having to sign their life away. To create a world where no one should be exempt from a banking system due to not having the right paperwork, resources, or geographical privilege. Where every day people could not have their possessions stripped from them due to bad decisions made by banking executives they’ll never meet. On 31 October 2008, the world learnt that Nakamoto had succeeded as it was introduced to Bitcoin: A Peer-to-Peer Electronic Cash System.
What Are The Fundamentals Of Bitcoin?
As we explore the question “can Bitcoin crash”, let’s dive into the Bitcoin basics. In some ways these set Bitcoin apart from other currencies, and in others they are the very essence of what Satoshi Nakamoto wanted to create. Here are a few fundamentals every Bitcoin newbie needs to know:
- Bitcoin is entirely digital. There is, and never will be, a physical form of the digital currency. While fiat currencies have notes and coins, Bitcoin, or any cryptocurrency, will never take on a physical form. That doesn’t mean Bitcoin has no value, it just means that the value it holds is represented digitally instead of physically.
- There will only ever be 21 million Bitcoin. This was written into its code before launching, and will not change. Nakamoto wanted to create a deflationary currency, and in further doing so they created a halving mechanism that would ensure the longevity and increase in value they desired. The halving mechanism reduces the miner’s reward every 210,000 blocks (roughly 4 years) to ensure that a limited amount enters circulation each year.
- The network is operated by nodes and miners. As the entire network is based on peer to peer transactions of value, it requires no middleman to approve the payment. However, it does require miners to verify and execute the transactions, and the nodes to store the history on the blockchain.
- Transactions cannot be reversed. Once the transaction is submitted to the blockchain it cannot be changed. Blockchain technology is designed to be immutable (cannot be changed) to prevent fraud and double spending.
- Bitcoin is exempt from counterfeit recreations. Unlike fiat notes, Bitcoin is digital and cannot be “recreated”. The blockchain network is designed in such a way that should someone be able to “recreate” the digital code, the network will reject any activity the coin is involved in. Due to the double spending rule, a Bitcoin cannot be spent twice as the network would reject the transaction immediately. Therefore making counterfeit Bitcoin would be completely useless.
Can Bitcoin Crash?
Looking more closely at can Bitcoin crash, the answer is no. As the entire network is decentralized, meaning that it does not depend on any governments, financial institutions, or governing bodies. As the network is operated by a community of anonymous nodes, no one person could shut Bitcoin down. Bitcoin belongs to everyone that participates in the network. Therefore, no one entity could cause Bitcoin to implode, and the same goes for if one node were to crash, the rest of the network would be able to hold the pieces.
There is the whisper of whether Bitcoin could be hacked, but this too is impossible as that would mean that the hacker has gained 51% of the network. It is currently believed that there are 10,000 full nodes (not counting the smaller nodes) that maintain the network. That would mean that a hacker has gained access to over 5,000 nodes on the network. Impossible. But we’ll get into this in our next installment, watch this space.
So in answering “can Bitcoin crash” the answer is a very definite no. Strap yourselves in, Bitcoin is here to stay for decades if not centuries to come. Built on the reliable backbone of blockchain, Bitcoin is as sturdy and durable as gold.