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, Original author: Olga Kharif and Edward Robinson, reprinted with permission by Odaily.

Bitcoin is crazy, really. Tesla founder Elon Musk just changed the personal signature of his Twitter account to "#bitcoin", which immediately stimulated the price of the "king of cryptocurrency" to soar by 20%.

In fact, since the end of 2020, the price of Bitcoin has almost quadrupled, and this rally seems to bring people back to the heyday of the cryptocurrency market three years ago. But in 2017, after surging to almost $20,000, bitcoin's price plummeted, losing more than two-thirds of its value, at a time when few thought bitcoin would evolve into a useful form of money for most transactions. However, following the latest roller coaster of turmoil, more and more institutional investors are beginning to speculate that bitcoin acceptance will further increase, and it can also hedge against inflation better than gold, and may even shake the entire traditional financial world.

1. Why is Bitcoin making a comeback?

In 2020, due to the new crown virus epidemic, the global financial market experienced severe shocks, "stimulating" Bitcoin to take a big step towards the mainstream. In October 2020, the global payment giant PayPal Holdings Ltd. announced that it will allow customers to use Bitcoin to purchase goods and services. Some large financial institutions have also begun to invest funds in cryptocurrencies, making it easier for their investors to invest in their portfolios. Add bitcoin. At the same time, many countries around the world have begun to inject a large amount of liquidity into the financial system to stimulate a rapid economic recovery, but this approach has also sparked debates about inflation. Avoid asset shrinkage.

2. Will Bitcoin be another bubble?

In fact, every price increase seems to test the true Bitcoin believers in the market and attract public attention-on January 7, 2021, the total market value of cryptocurrencies exceeded $1 trillion for the first time. Today, red-hot financial technology startups such as Robinhood and Revolut have made cryptocurrencies a key part of their daily transactions. Nonetheless, investing in cryptocurrencies is still fraught with risk, and since most cryptocurrency investment vehicles are not yet regulated, the market prices of many cryptocurrencies, including Bitcoin, are vulnerable to market volatility. At the start of 2021, the price of Bitcoin has soared so staggeringly fast that it dwarfs nearly every financial asset boom cycle of the past 50 years.

3. Who is buying and using Bitcoin?

High-profile fund managers like Mike Novogratz and Alan Howard have invested hundreds of millions of dollars in Bitcoin and other cryptocurrencies. A 2020 survey by Fidelity Investments found that 36% of institutional respondents already hold cryptocurrencies in their portfolios, and 60% expressed interest in Bitcoin and other cryptocurrencies (This indicator is less than 50% in 2019). To be sure, Bitcoin is still a relatively "light" trading market, and those "giant whales" who control a large number of tokens carry a lot of weight in the crypto alternate market. According to researcher Flipside Crypto, according to the anonymous accounts tracked in the digital currency distributed ledger, less than 2% of the "giant whales" control 95% of the total supply of available tokens. There will likely be ripple effects throughout the ecosystem. Bitcoin is not only a "consensus concept" adhered to by believers, but at the same time there are many pragmatic financial traders in this field, so everything is possible.

4. What is the appeal of Bitcoin to investors?

In short, greed and fear. Supporters of Bitcoin believe that with the participation of institutional investors, Bitcoin has become a mature asset. But some people also question whether the recent rise of Bitcoin has similarities with the growth of traditional financial assets. With traditional assets such as government bonds yielding next to zero, or even negative yields, many hedge funds are looking for alternatives when they find that bitcoin prices are climbing and fears of missing out are growing. this emerging asset. While some cryptocurrency naysayers keep reminding that another crash is inevitable, many have changed their minds recently — enough people seem to believe in Bitcoin. In addition, there is also more discussion in the market, hoping to include Bitcoin as a legal hedge against inflation risks and a weak dollar.

5. Why is Bitcoin compared to gold?

As a scarce resource, gold has long been an effective hedge against inflation, and it soared to an all-time high in August 2020. In response to the new crown virus epidemic, many countries have accelerated the printing of money by the treasury, resulting in the depreciation of their currencies, but miners cannot inject gold into the market. Part of Bitcoin's appeal is that it's not controlled by a government or its monetary policy, and has a fixed supply -- a more constrained supply than even gold. With governments and central banks rolling out "stimulus measures" that have also sparked fears of inflation for many, attention to bitcoin as "digital gold" is also more than ever. If bitcoin can attract as much money as is currently invested in gold, in the long run, bitcoin could theoretically be worth more than $146,000 in the future, according to market strategists at JPMorgan Chase & Co.

6. Is Bitcoin legal now?

For those investors with market instincts, they may be more willing to dabble in Bitcoin because of better protection measures in Bitcoin. Of course, there is also the risk of losing millions of dollars if you forget or lose your password. Over the past few years, Bitcoin has also developed a more robust financial infrastructure, with custodial services (with proper licenses and credentials) and exchange services, thus attracting large, regulated investors. As an example, the U.S. Treasury Department has proposed requiring banks and other intermediaries to maintain records and file reports on cryptocurrency transactions in order to verify the identity of customers for certain cryptocurrency transactions. In addition, many central banks, including the Federal Reserve and the European Central Bank, have begun to study how to digitize sovereign currencies, that is, to develop central bank digital currencies. However, U.S. Treasury Secretary Janet Yellen (Janet Yellen) believes that Bitcoin and other cryptocurrencies are still associated with fraud, money laundering, tax evasion, cyber theft and other activities.

7. What exactly is Bitcoin?

Born out of the 2008 financial crisis, Bitcoin is a remarkable form of money: Bitcoin is not a currency that you can hold, nor is it issued or backed by a national government. At the heart of Bitcoin and its imitators is a set of software protocols used to generate digital tokens that are difficult to counterfeit and reuse and whose transactions are traceable. Still, Bitcoin has value only within the bounds of its consensus.

8. Where did the Bitcoin system come from?

The concept of Bitcoin was proposed in 2008 in a white paper written by a person or group of people using the name Satoshi Nakamoto, whose identity remains unknown so far. In fact, many online games were already using virtual currencies before Bitcoin came along, but what sets Bitcoin apart is the key idea behind it: the blockchain. The blockchain is a publicly visible, largely anonymous online ledger that can be used to record bitcoin transactions. The frenzy gripped the cryptocurrency market in 2017, when bitcoin soared from $789 to $19,000, thousands of people touting tokens in "initial coin offerings (ICOs)" only to see many lose money as the bear market set in .

9. What is blockchain?

Imagine what would happen if you used your bank to transfer money online? They first verify that you have enough funds, then subtract the corresponding amount from the account maintained by the bank itself, then your account balance is changed in one giant database, and then it is credited to another database . Even though you are logged into your so-called, own account, the transaction is completely under the control of the bank and you only see the result of the transaction. Throughout the transaction, you trust the bank to withdraw the appropriate amount and you trust the bank not to spend the money again. The blockchain is the database that performs this series of transaction tracking functions, the only difference is that there is no bank or any other centralized institution involved in the whole process.

10. Who is performing the bitcoin banking functions?

Bitcoin transactions are all completed by reaching a consensus on a decentralized network. People can conduct Bitcoin transactions through sites that provide electronic "wallet" services. These sites upload data to the blockchain network, and new transactions will be bundled in together, and then broadcast to the entire network for verification by so-called Bitcoin miners. In 2020, the bitcoin block reward will be halved, which means that the number of new bitcoins distributed by the bitcoin network to miners to verify transactions will be halved. Many people believe that this is one of the reasons for the recovery of bitcoin prices. The Bitcoin block reward halving occurs every three to four years and is designed to slow down the mining of new Bitcoins. If all 21 million Bitcoins are dug out, mining production will stop completely, but the entire process is estimated to take Not until 2140. By the end of 2020, the total number of bitcoins mined in the market exceeded 18.5 million.

11. Who can be a miner?

• In fact, anyone can become a Bitcoin miner, as long as you have a very fast computer and a lot of electricity. The transaction data in each Bitcoin block is encrypted by a formula that can only be unlocked through large-scale repeated calculations. Miners are the first to solve this difficult problem, which requires massive computing power. If a miner is the first to verify the transaction, the resulting data can be added to the linked data blockchain, at which point the miner will be rewarded with newly issued bitcoins. Because each block contains data links to earlier blocks, trying to spend the same bitcoin twice means that all blocks in the entire chain must be modified, and the workload and cost are huge, so this model effectively guarantees the network Safety. Plus, as miners compete, they mutually verify each other's work on every transaction.

• 12. Can other cryptocurrencies replace Bitcoin?

• The number of cryptocurrencies and crypto-tokens on the market is growing—now in the thousands—but Bitcoin remains the most famous, time-tested, and valuable cryptocurrency, and is widely regarded as the most recent A cryptocurrency with a potential store of value function. Other cryptocurrencies serve different purposes, such as:

Ethereum is a cryptocurrency network that can issue DeFi tokens;

So-called stablecoins, such as Tether, are cryptocurrencies whose prices are pegged to the U.S. dollar or other fiat assets;