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Bitcoin: Everything You Need to know

Bitcoin: Everything You Need to know

BITCOIN: THE FUTURE CURRENCY

The world is witnessing the rise of a new currency system, which goes by the name of Bitcoin. It is destined to be the future currency of the world. Currently, 1 bitcoin is worth almost 8,50,000 rupees, which changes very frequently.

What is Bitcoin?

Bitcoin is a cryptocurrency, which roughly means that it is a digital currency which is generated and regulated by using encryption techniques. Moreover, it operates independently of any institution or government.

How can a currency be valid if it doesn’t require any certification or validation from the government?

This is more of a philosophical than a technical question. For understanding this, we must think about the origin of money or what was there before money. Indeed there was the barter system, now we have currency notes or paper with some value accorded to them. The role of government is to merely regulate and control this money. We can conclude that anything which has some value and more importantly the trust of its users is money. A currency loses all its importance once people stop trusting it. Let’s start trusting Bitcoin, a digital currency. Presently more than hundred thousand merchants deal in Bitcoins. The idea of decentralizing currency is very energetic and has the potential to revolutionise the way we think of money.

The rise of Bitcoin:

Image result for the rise of bitcoin

image source – the internet

In August 2008, the domain name Bitcoin.org was registered by Satoshi Nakamoto. The face behind this name is still a mystery. No one has ever seen or met Satoshi Nakamoto, though some have claimed to have known him. Nakamoto implemented the bitcoin software as open source code and released it in January 2009.

How does it work?

It is a peer-to-peer payment system. This means that no third party is involved in any manner. Since no third party is involved, transaction cost is zero and it also maintains the anonymity of the people involved. No authority is keeping track of the payments.

The network is designed in such a way that it hands all the transactions by itself.

How can you get Bitcoins?

  1. Bitcoin Exchanges: These are special platforms where you can buy bitcoins in exchange for money. There may be many exchange platforms working in a country. In India, you can buy bitcoins on Zebpay and Unocoin in exchange for India Rupee.
  2. Mining: There are people who solve intricate mathematical riddles to generate new bitcoins. Relatively few people have managed to decipher the codes needed to extract bitcoins from the 21 million locked inside the mathematical problems set by its creator, the software engineer whose true identity is unknown but who goes by the name Satoshi Nakamoto.
  3. Payment: You can get bitcoins as payment from any other bitcoin user.

Advantages of Bitcoins:

Image result for bitcoin advantage

image source – the internet

Control – Bitcoin users have full control of their transactions; it is impossible for merchants to force unwanted charges as can happen with other payment methods.

Privacy and security – Bitcoin payments can be made without personal information tied to the transaction. This offers strong protection against identity theft. Bitcoin users can also protect their money with backup and encryption.

Freedom of payment – It is possible to send and receive bitcoins anywhere in the world at any time. No bank holidays. No borders. No bureaucracy. Bitcoin allows its users to be in full control of their money.

Disadvantages:

Image result for bitcoin threats

image source – the internet

Anonymity – Even though every transaction in listed in a ledger which is open to all, only the Wallet IDs are visible, which makes it impossible to trace the transaction to the user. This feature has made bitcoin the currency of drug dealings and other illegal activities.

Insecure future – Like any other asset, the value of Bitcoins fluctuates with time, there is no certainty. An early investor in Snapchat has been quoted on the Web as saying that by 2030, the value could be as high as $500,000. Whereas  JP Morgan’s Jamie Dimon was seen quoting that it is a fraud which will soon blow up.

Volatile nature of currency – The value of bitcoin changes very drastically and frequently. These changes can be attributed to the fact that very less number of people use bitcoin hence small events have a great impact on its value. As its user base will grow the stability will be induced.

The pain of the government – The government has its own worries when it comes to bitcoins, though not very prominent right now. Governments are known to keep things under control and a commodity as currency is always under tight surveillance. Losing control over money is the worst nightmare for a government.

Experts also suspect that government agencies have started finding ways to suppress the rise of Bitcoins as it is a serious threat to the dominance of government and its control on the economy.

With all speculations and fancy dreams, Bitcoin promises of a decentralized global currency. At present we cannot say much, but philosophically a government free currency is a need in a free world.

References:

  • bitcoin.org
  • theguardian.com

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About Rohan_Raj

I am pursuing mechanical engineering at the national institute of science and technology. I belong to Darbhanga, Bihar. My fields of interest are Thermodynamic analysis, Astronomy, Astrophysics.

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