25th Jun, 2019
What is Bitcoin?
- Bitcoin is a Virtual Digital Currency. It means it does not come in the form of paper notes or metal coins. Its uniqueness is that it is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen.
- Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins with them. Behind the scenes, the Bitcoin network shares a public ledger called the "block chain". This ledger contains every transaction ever processed, allowing a user's computer to verify the validity of each transaction
- For a Bitcoin transfer to be executed and validated, a mathematical puzzle must be solved by an arbitrary computer in the global bitcoin network, which anyone can join. The puzzle solver is called Bitcoin Miner, who is rewarded with some amount of bitcoins.
HOW DOES ONE ACQUIRE BITCOINS?
- As payment for goods or services.
- Purchase bitcoins at a Bitcoin exchange.
- Exchange bitcoins with someone near you.
- Earn bitcoins through competitive mining.
WHAT ARE THE ADVANTAGES OF BITCOIN?
- Payment freedom – It is possible to send and receive any amount of money instantly anywhere in the world at any time. No bank holidays. No borders. No imposed limits. Bitcoin allows its users to be in full control of their money.
- Very low fees – Bitcoin payments are currently processed with either no fees or extremely small fees. Users may include fees with transactions to receive priority processing, which results in faster confirmation of transactions by the network. In addition, services exist to assist merchants in processing transactions, converting bitcoins to fiat currency, and depositing funds directly into merchants' bank accounts daily. As these services are based on Bitcoin, they can be offered for much lower fees than with PayPal or credit card networks.
- Attractive for micro-transactions – Because the fees are so low, bitcoins can be used in transactions that are economically unattractive for most merchants, especially in developing countries.
- Fewer risks for merchants – Bitcoin transactions are secure, irreversible, and do not contain customers’ sensitive or personal information. This protects merchants from losses 3 caused by fraud or fraudulent chargebacks, and there is no need for payment card industry compliance. Merchants can easily expand to new markets where either credit cards are not available or fraud rates are unacceptably high. The net results are lower fees, larger markets, and fewer administrative costs.
- Security and control – Bitcoin users are in full control of their transactions; it is impossible for merchants to force unwanted or unnoticed charges as can happen with other payment methods. 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.
- Transparent and neutral – All information concerning the Bitcoin money supply itself is readily available on the block chain for anybody to verify and use in real-time. No individual or organization can control or manipulate the Bitcoin protocol because it is cryptographically secure. This allows the core of Bitcoin to be trusted for being completely neutral, transparent, and predictable
WHAT ARE THE DISADVANTAGES OF BITCOIN?
- Acceptance – Many people are still unaware of Bitcoin. Every day, more businesses accept bitcoins because they want the advantages of doing so, but the list remains small and still needs to grow in order to benefit from network effects.
- Volatility – The total value of bitcoins in circulation and the number of businesses using Bitcoin are still very small. Therefore, relatively small events, trades, or business activities can significantly affect the price. In theory, this volatility will decrease as Bitcoin markets and the technology matures. Never before has the world seen a start-up digital currency, so it is difficult to forecast how it will play out.
- Ongoing development – Bitcoin software is still in beta with many incomplete features in active development. New tools, features, and services are being developed to make Bitcoin more secure and accessible to the masses. Some of these are still not ready for everyone. Most Bitcoin businesses are new and still offer no insurance. In general, Bitcoin is still maturing.
- Harm to Environment- Bitcoin mining employs massive computer hardware setups consisting of GPUs and ASICs, whose operation emits Giga Tonnes of Carbon Dioxide in the environment.
SCOPE OF BITCOIN IN INDIA
A country like India which has recently faced demonetization has developed great affection for cryptocurrencies in the recent past. It has been nearly five years since bitcoin made its debut in Indian Financial markets. In India, the transactions made through cryptocurrency are on the rise despite the notifications circulated by the finance ministry. This makes it clear that the upcoming future of bitcoin in India is dazzling. There are about 1548 cryptocurrencies currently operational in the market available as an alternative to Bitcoin.
Since bitcoin is not available in the physical form, this virtual currency can be converted into physical form by listing it on various online exchange platforms. Taxing the cryptocurrency is another way to legalise this currency. It becomes clear that it is a risky investment option, but there is no harm in opting for a calculated risk.