Bitcoin, a crypto-currency, became the cynosure of attention and gained importance rapidly in the recent past. The world has conflicting views on Bitcoin, with Japan considering it legal tender and JP Morgan Chase CEO calling it a little more than ‘fraud’.
What is bitcoin?
Invented by an unknown person called Satoshi Nakomoto, Bitcoin is the world’s first decentralised digital currency that works without a bank or an administrator. Bitcoin transactions are verified through a cryptograph and recorded in a public ledger called blockchain. It was released as open-source software in 2009. It falls under the scope of crypto currency and is the first and considered most valuable among the others.
How does Bitcoin work?
Bitcoin is a virtual currency, designed to be self-contained. It doesn’t need an intermediary to move and store the money. It is obtained by the process of mining. Bitcoins are presented as rewards for mining. They are obtained by solving complex math puzzles. They can be exchanged for services online or purchasing of goods. One can even keep them as an investment and wait for their value to increase over the years. Currently, a winner is rewarded with 12.5 bitcoins every 10 minutes.
Bitcoin can also be purchased and sold on bitcoin exchanges, using different currencies. Bitstamp, Coinbase, Bitfinex are some examples of exchanges. They can also be digitally transferred through mobile phone or computers, in a manner similar to sending money digitally.
Bitcoins are generally stored in ‘wallets’. It is essentially a personal database that can be stored on your computer smartphone, or even somewhere on the cloud.
Every bitcoin transaction is carried out anonymously. They are recorded in a public log, but the names of the buyers and sellers are not revealed, only their wallet IDs. This also doesn’t allow the buyers and sellers to be tracked. Due to this, this mode of payment has gained popularity with those indulging in illicit activities such as drug trade.
Future of Bitcoin
Bitcoin, having just gained popularity, also has an unpredictable future. Bitcoin remains unregulated in most countries, although countries like Japan, China and Australia have begun weighing the possibility of imposing regulations. It has also been a cause for most governments as they have very little control over the currency, which also poses a problem in taxation.
Many consider bitcoin the future and have classified it as a 21st century version of gold while many others are apprehensive about its credibility. Its prices are expected to remain volatile in the coming years. But whether it is here to stay or just a passing fad, only time will tell.