Bitcoin: the “digital gold” that opened a new era in the world of investing
In 2009, amid the aftershocks of the great financial crisis, an idea was born that fundamentally rewrote everything we had thought about money and saving until then. A new, independent monetary system was launched: Bitcoin.
But how did a simple idea become one of the most sought-after investment assets in the world?
Why is Bitcoin called digital gold? (Without the tech jargon)
Traditional currencies (like the forint, the euro or the dollar) are controlled by states and central banks. If they decide to, they can print more of them at any time – but over time this leads to inflation, in other words, to our money losing its value.
Bitcoin, on the other hand, works completely differently:
No boss, can't be manipulated: It isn't controlled by any single bank or political decision-maker. It runs on an open, worldwide network whose rules nobody can rewrite as they please.
Its supply is strictly limited: Just as there is only a limited amount of gold in the Earth, there can be at most 21 million bitcoins in the world in total. Nobody can ever “print” more than that. This scarcity is one of the greatest sources of Bitcoin's value and security.
You can start with just a few thousand forints: Many people think they have to buy a whole Bitcoin, which today costs many millions of forints. In fact – just as you can buy even a single gram of gold – Bitcoin can be divided into tiny fractions, so anyone can become an owner with as little as a few tens of thousands of forints.
How much can it grow? (A real example)
Over the years, Bitcoin has grown from a novelty known to few into an asset sought after by the world's big banks and small investors alike. Let's look at what this means in practice over one specific year:
At the start of 2023, the price of a single Bitcoin was about 16,500 dollars.
By the end of 2023, the price was approaching 42,300 dollars.
That meant an increase in value of nearly 156% in a single year.
What did this mean for your wallet?
If at the start of 2023 you had bought just 100 dollars' (or, for example, 100,000 forints') worth of Bitcoin, by the end of the year your investment would have grown – not counting exchange costs – to about 256 dollars (or 256,000 forints). Although the price fluctuates along the way, it is the long-term growth potential that leads millions around the world to put their savings into it.
What moves the price of Bitcoin, and how can you profit from it?
The price of Bitcoin isn't set by a committee but by the simplest law of the market: supply and demand. Because the supply is finite (remember the 21 million limit!), whenever buyer interest grows around the world, the price inevitably starts to rise.
Economic news and trust: When large companies, investment funds or even countries decide to buy Bitcoin, it generates huge demand.
The market never sleeps: While traditional stock exchanges close in the afternoon and don't operate at weekends, the Bitcoin market is open 24 hours a day, 365 days a year. You can access your money at any time, even at midnight on a Sunday.
Predictable patterns: Informed investors and traders don't leave their decisions to luck. They watch market sentiment, analyse past price movements and learn to recognise the moments when it is worth entering the market.
One of the most exciting parts of investing is precisely the moment when you understand when and why the value of an asset changes, and can turn that knowledge to your own financial gain.
But to invest with complete peace of mind and confidence, it's worth taking a look under the bonnet as well: in the next part you'll get to know the incorruptible technology that guarantees Bitcoin's security.
How does Bitcoin mining work?
There is no bank or central institution behind Bitcoin. That raises the question: who keeps a record of transactions, and what guarantees that nobody can cheat? The answer is mining. This is the process that verifies and records transfers, maintains the security of the network, and through which new bitcoins enter circulation.
The blockchain: a shared, public ledger
In the traditional monetary system, the bank keeps the accounts and decides which transaction is valid. With Bitcoin, this role is filled by a public, digital ledger that contains every transfer. Anyone can view this ledger, but no single party can change it at will. This is the blockchain.
The miners' job is to extend this ledger with new entries, in such a way that the authenticity of the entries can be verified.
The mining process in three steps
1. Collecting the transfers
Bitcoin transfers don't go into the ledger straight away. First they go into a waiting list (the mempool), from which miners collect them and arrange them into a data package. This package is called a block: essentially the next page of the ledger, which typically contains several thousand transactions.
2. Solving the computational task (Proof-of-Work)
A block can't simply be added to the ledger. The miner first has to solve a computational task that proves they have put real resources, that is, computing capacity and energy, into the work.
The task is like finding the combination of a combination lock: there is no formula or shortcut, and the right solution can only be found by trial and error. For this, miners use machines built specifically for the purpose (ASICs), each of which can make several hundred trillion attempts per second.
The miner with more computing capacity can make more attempts and is therefore more likely to find the solution first. Success is thus proportional to the resources invested.
3. The reward
The first successful miner may add their block to the blockchain, and receives two kinds of income for it:
Newly issued bitcoin. This is the block reward, currently 3.125 BTC. This is the only way new bitcoin can enter circulation.
Transaction fees, paid by those who initiate the transfers.
The block reward is halved roughly every four years (this is called the halving). This is why the issuance of new bitcoins keeps slowing down, and the total supply can never exceed 21 million.
Why does this system guarantee Bitcoin's security?
Past data practically cannot be changed: If someone wanted to alter a transaction that had already been recorded, they would have to redo the computational task of that block and of every block after it, and do it faster than all the other miners on the network combined. That would take so much computing capacity and energy that such an attack is practically impossible to carry out, and economically not worth it.
The same bitcoin can't be spent twice: Because every transaction goes into a single shared ledger that everyone verifies, it can't happen that someone sends the same amount to two different recipients.
No central party is needed: The system is run not by a bank or an authority but by thousands of independent miners around the world, who check each other's work.
The pace of issuance is predictable: The protocol adjusts the difficulty of the task to the network's total capacity (difficulty adjustment). If more miners join, the task becomes harder; if fewer, easier. This way a new block is created every 10 minutes on average, regardless of how many machines are working on the network.
In summary
Mining is the foundation of how Bitcoin works. It records transactions in a system without a centre, it makes the ledger practically unchangeable after the fact, and it governs the issuance of new bitcoins at a fixed, predictable pace. This security is guaranteed not by an institution but by the continuously growing computing capacity invested in the network.