Bitcoins are a new form of digital money that is popular in many countries. They are not regulated by any Government and no one can set an overruling price on its transaction value. Bitcoins are controlled by the people who own it. So how exactly is a Bitcoin priced? And will that price be universally accepted? These are the questions that will be answered in this article.
Tracing the origin of Bitcoins
In 1998, Wei Dai suggested the idea of a currency that is created and protected by cryptography, completely opposite to the current scenario of a controlled currency.
In 2009, Satoshi Nakamoto proposed the first Bitcoin specification, as an example of Cryptocurrency. He published the proof of concept in a cryptography mailing list. Bitcoin was the first real implementation of Cryptocurrency.
Shortly after, he left the project and other developers continued his work.
While Nakamoto was the first to propose the idea, he does not ‘own’ Bitcoins as a concept or as a currency. It is the first currency that runs on consensus. In reality, Bitcoin is an entry stored in a big public ledger called Blockchain. The Blockchain tracks the movement of the ownership of the coins, which is approved by using the owner’s private keys.
How is Bitcoin valued?
Bitcoin’s value is derived from a combination of unique factors. Bitcoin is scarce. Creating a single Bitcoin takes a tremendous amount of work and there can only be a limited number of coins in circulation.
Bitcoin also has a utility, i.e. usability. They are used as currency for transactions all over the world with no geographical restrictions and offers complete anonymity in transactions. These characteristics make it a valuable commodity.
Gold has a particular value because it is rare and hard to obtain. It has many utilities, ranging from Jewelry to electronics and is even used as currency.
Its price is determined by the amount of gold available, price the buyer is willing to pay and the price the seller is willing to sell at.
Flat currency like USD has a value because the US Government gives it a legal tender status and accepts all the taxes and fines only through that currency.
Why is Bitcoin used as currency?
Bitcoins have gained acceptance as currency because
- They are scarce
- They cannot be counterfeited
- The transactions are easily verifiable via the Blockchain
- Once confirmed, the transactions are irreversible
- They can be traded anonymously, and
- They cannot be double spent.
Their wide acceptance, limited supply and decentralized nature, all add up to make them a uniquely useful as currency. The total number of Bitcoins was capped at a specific number when it was first started and so they do not get devalued due to inflation.
Who determines Bitcoin’s conversion price?
Bitcoin’s price is not the same as its value. Bitcoin’s price is determined in the market, by the variation in the demand and supply.
The buying and selling activity that happens on different Cryptocurrency Exchanges around the world determines the price of Bitcoin. It is quite similar to how shares of a company are traded in the stock market.
If buyers expect the value of Bitcoins to increase in future, they will bid to buy it today and some buyers may bid a higher premium than others. If the buy orders are more than the sell orders, the buying pressure kicks in and the price may move up.
The constant buying and selling activity moves the price up and down throughout the day and night. Since this currency is not limited by geography, this is a 24/7 activity.
What is a Bitcoin Calculator?
Bitcoin Calculator is a simple tool that tracks the current price of Bitcoin in specific Exchanges. Its helps in finding Bitcoin’s price against a flat currency like a Canadian dollar or a US dollar or another Cryptocurrency like Ethereum.
Most calculators base their conversion on their preferred currency, the US Dollar. But there are a few Exchanges like CoinSquare, which deal mainly with Canadian customers and thus offer a Bitcoin to Canadian dollar conversion.
As of today, Bitcoin’s price in Canadian dollars is 1BTC = 9926.23 CAD.
The best Bitcoin calculator online is Coindesk. Coindesk runs a fairly simple Bitcoin calculator that can help to find out the BTC to CAD conversion value at any point in time.
XE.com runs a reputable currency calculator and they now show Bitcoin conversion for most of the major currencies.
Almost all Cryptocurrency Exchanges also run their own Bitcoin calculators. It will typically show the exact price a person would pay when purchasing Bitcoins or selling them on their Exchange. They may charge additional fees to take a deposit and for the actual conversion transaction. So it is important to read all the fee information before making a buy or sell decision.
Bitcoins in Canada
Canada was one of the early adopters of Bitcoin. It is also home to many Cryptocurrency startups and Bitcoin ATMs. Two of Canada’s big cities, Toronto and Vancouver are known as “Bitcoin hubs” because of the number of Bitcoin startups based in these cities.
Canada boasts of thousands of merchants who accept the cryptocurrency. Recently, Starbucks introduced Bitcoin as an accepted payment model.
Bitcoin’s legality in Canada
Bitcoins are not recognized as legal tender in Canada. All transactions conducted using them are considered as barter transactions. After they became popular, Canada Revenue Agency took aim at Bitcoins via Tax bulletin, IT-479R, Transactions in Securities.
So based on how they are used, Bitcoin transactions can be considered as Taxable gains, income or capital.
If a person wants to buy Bitcoins using CAD, it is best to approach an Exchange which provides a direct conversion from CAD to Bitcoins, like CoinSquare. Otherwise, the Canadian dollar will be first converted to US dollar and then into Bitcoins and some money will be lost in Forex conversion. It is also important to check for additional fees involved in the transactions and to be aware of the tax implications of converting Bitcoin into regular currency.