3 Bitcoin Facts You Should Know


What a 180° turn of events. After increasing 61 percent in 2021, Bitcoin (BTC-1.4 percent) has plummeted 56 percent so far this year. And the entire cryptocurrency market has fallen off a cliff, with a value of $931 billion as of this writing (compared to a peak of approximately $3 trillion in November 2021).

Despite the overwhelming negativity surrounding the asset class, investors should strive to comprehend some essential information about this developing technology, particularly Bitcoin.

1 The goal of Bitcoin

With all of the latest advances in the crypto realm, such as decentralized finance (DeFi) protocols and non-fungible tokens (NFTs), the picture can become hazy as to what exactly Bitcoin's actual purpose is. Many consider Ethereum to be the world's decentralized computer since it has become the leading destination for these novel use cases.

Bitcoin, on the other hand, was designed to be primarily a peer-to-peer payment network. The goal back then, as now, is for anyone with an internet connection to be able to send Bitcoin directly to anyone else without the need for a middleman. This appears to be a basic concept, but it was revolutionary, especially in the aftermath of the Great Recession, when huge financial institutions, whose entire business models are based on extracting fees, were under scrutiny.

Sending money across borders is a clear use case for Bitcoin. The $590 billion global remittances market to low- and middle-income countries are ripe for disruption. The usual fee to send money from the United States, which is around 5%, would be eliminated if Bitcoin's network was utilized instead. Consider the economic impact this could have in impoverished countries.

2 Bitcoin's consensus process

Because cryptocurrencies are based on decentralized networks with no centralized authority managing everything, there must be a means for all participants to agree on the status of the blockchain and add new transactions to it. Since its inception in 2009, Bitcoin has used a proof-of-work (PoW) method. This means that miners must utilize expensive computers to solve complex mathematical riddles in order to be granted permission to validate new transactions.

Bitcoin was a game changer when it originally came out, but many people are now seeing the limitations of its PoW method. It consumes a lot of energy because operating and cooling large computers all the time is expensive and bad for the environment. This is an argument that many bears like to use.

Furthermore, despite the fact that the Bitcoin network has never been hacked, this security comes at the sacrifice of speed. According to, Bitcoin can only process three transactions per second, which is significantly slower than the 65,000 transactions per second that payments behemoth Visa can do. If Bitcoin is to make a genuine push toward real-world acceptance, its throughput must drastically increase.

3 The historical performance of Bitcoin

A discussion of Bitcoin would be incomplete without mentioning its prior performance. This leading cryptocurrency has earned a total return of 705. over the last five years (as of June 28). While this outperforms the S & P 500 (74% five-year total return) and gold (46%), it has been accompanied by significant volatility.

Even if a company has good fundamentals, a promising future, and a low valuation, extreme price changes might frighten investors. This problem is worsened when it comes to cryptocurrencies, where daily price movements of more than 10% are common. Anyone who has benefited from Bitcoin's previous spectacular returns has surely had to endure the ups and downs. And this is likely to continue in the future.

The fact that there will only ever be 21 million total bitcoins contributes to Bitcoin's continuing price increase. Satoshi Nakamoto, the mysterious Bitcoin founder(s), purposefully designed and permanently incorporated this cap into the network's code. This was done to prevent the cryptocurrency from being diluted by the ongoing minting of new coins, which is frequent with other tokens.

You now have three must-know facts about the world's most valuable cryptocurrency to help you make better financial decisions.