What started as a brilliant effort to globalise currencies using technology has today, taken various sharp turns making readers, investors and hackers wonder about the future of Bitcoin.
A lot has been said and done about Bitcoin. Many might not have even heard of the name until recently. The following article aims to be a dummies’ guide to the Bitcoin saga invoking all the curious minds.
What is Bitcoin?
Bitcoin is a virtual and digital currency like the dollar, dirham or rupee. Just that, due to its virtual nature, you can never touch this currency or feel it. It can be used as a form of money to transact across the world, where it is accepted. The only difference is that, there is no third party viz. banks or financial institutions, in between. The seller and buyer directly come into contact, virtually, and make the transaction. Since there is no presence of third party here, there is very minimal or absolutely no transaction or processing costs involved. In simple terms, A sells something to B. B pays for it through Bitcoin. No one other than A and B know each other’s identity, however this unique transaction ID will appear on a public ledger to ensure everyone knows there’s been a transaction for so much of Bitcoins between two entities.
How it all began?
This peer to peer system of Bitcoin (read currency) exchange was introduced by a pseudonymous developer Satoshi Nakamoto, in the year 2009. Till date, there is no concrete information on whether this is an individual or a group of people. There has been a lot of speculation on the identity but no one has been able to crack this mystery.
There has always been a lot of discussions on the invention of e-cash technologies by various individuals in the past. In the year 2008, Nakamoto published a paper ‘Bitcoin: A Peer-to-Peer Electronic Cash System.’ In the year 2009, the Bitcoin network came into existence. Soon a lot of organisations (online) started to accept Bitcoins as a form of currency for payment. Though there have been unpredictable ups and downs in the Bitcoin growth graph, it never ceased to exist.
Why Bitcoin is such a success?
The invention of a free global currency made the curious people go bonkers over this and since initially it involved no money, everyone wanted to try it. As there is no bank or any other financial institution, there is absolutely no intervention and the transaction is fast and free. The said advantages of using this currency are that one has the freedom to pay whomever, whenever and for whatever one wants. There is no limit or border restriction. The blockchain is an open ledger, which records all Bitcoin transactions that take place in the world all the time. The details of the transactions are available on the blockchain website. This means 100 percent transparency.
Why is Bitcoin so slow in sustaining the momentum?
Well, everyone is weary of the unknown and is sceptical to change. Bitcoin is similar to the internet revolution because people could never really fathom the way the internet was going to conquer the world. But today, all our lives are interlinked in some form or the other because of this powerful technology. Many say that the same could be the case with Bitcoin.
The obvious disadvantage of this technology is that, well it is technology. It can be upgraded, hacked, replicated or even destroyed. Since there is no centralisation, there is always this fear of uncertainty. While one half of the world is tech savvy, there is this other half of the world that is still ignorant of the technological advancements.
Why is Bitcoin so scandalous?
Bitcoin is the seducing rebel that tempts everyone by its mystifying nature. Decentralised system, anonymity of transaction and global presence make Bitcoin an ideal platform for illicit transactions including money laundering. Several Bitcoin exchanges have swindled their clients’ money and have blamed it on poor security issues. There is a study that revealed that 45% of Bitcoin Exchanges end up closing operations. Sometime in the month of October, 2013, the United States seized several millions worth Bitcoins from Silk Road, a famous online black market for illegal drug trade and many such activities. To this date, there has been thefts and cybercrime being reported, making this Bitcoin journey a very vandalising one.
To B or not to B?
The future of Bitcoin is unknown. While some say it could supersede dollar to become the most influential currency in the world, there’s another school of thought that predicts the value of Bitcoin to fall down to zero dollars, from its current value of approximately 500 USD. Many with a brave heart use this opportunity to turn this saga into an investment instrument due to its high volatility in price. There was also a recent article on how Bitcoin might pose as a threat to exchange houses. This comparison is baseless and with such instability and lack of information, people would rather send their hard earned money through reliable channels than through some medium that is still at its nascent stage!
Interesting facts about Bitcoin
- In late 2013, the price of a single unit of Bitcoin rose from 200 USD to more than 1000 USD.
- The first transaction of Bitcoin was in the year 2010, two pizzas were bought using 10,000 Bitcoins. Today that pizza order is worth 1 million Euros.
- The companies, Robocoin and Bitcoiniacs, were the first ones to launch Bitcoin’s first ATM in Vancouver, BC, Canada in the year 2013.
- The maximum number of Bitcoins that can be generated ever is capped at 21 million. So far over 12 million Bitcoins have been generated.
- Overstock, Reddit, WordPress, Zynga, PayPal and eBay are some of the major retailers accepting Bitcoins.
- Virgin Galactic, the Richard Branson-led aviation company, has started accepting Bitcoins for customers, who are interested in flying to space.
