Bitcoin: The excitement of cryptocurrency in 2017 explained
By Online Desk | Published: 29th December 2017 03:33 PM |
A lot of inquisitivity and confusion has prevailed over ‘Bitcoin’ this year. While economists and businessmen could barely fathom what it was, others are still left wondering over the term. The surprise over the unexpected rise and fall of bitcoins in the market has led to increased public interest, with more people now looking to invest in this virtual currency.
What is bitcoin?
Bitcoin is a cryptocurrency - a currency that exists only on the internet. It can be used for all transactions that accept bitcoins including selling and buying of the virtual currency.
Bitcoin transactions are in a virtual space and hence are free from the government control and bank charges. Though it can be used for everyday transactions, people are predominantly using it as an investment tool. Something to invest into that will have a higher rate at a later point in time.
Why was Bitcoin in news this year?
Bitcoin’s price jumped this year, leading people to think this could be high-return albeit risky investment area. The sudden jump in the market rate of the bitcoins in December crossing USD 19000 mark created an uproar in markets all over the world and ever since, discussions over Bitcoins have become prevalent.
Due to the sudden increase in the bitcoins' market rate, governments from all over the world were forced to take into account the power and popularity of cryptocurrencies. At the same time, several other platforms started enquiring and dealing in the different cryptocurrencies.
A bitcoin is valued around Rs. 12.5 lakh (on December 27) and the spike and volatility of the cryptocurrency has come under the radar of the Indian government too.
Observing that the market for bitcoins cannot be ignored, regulator of Securities and Exchange board of India (SEBI) Chairman, Ajay Tyagi has said a government panel is looking into cryptocurrency as it hasn’t been legalised by the RBI or any regulator. Anyone using bitcoins and carrying out transactions will be under the scanner of the government.
How did the bitcoin come into existence?
It was invented in 2009 by Satoshi Nakamoto. It is not clear whether it was only one person or a group responsible for creating cryptocurrency.
The Bitcoin started in the form of open source technology. In 2011, when the technology started becoming a popular decentralized and unchecked mode of transaction, the creator, Satoshi Nakamoto disappeared from the internet. Before vanishing he turned over the domains and source codes to the bitcoin community for free.
How does one get a bitcoin?
A bitcoin can either be bought from another seller or can be ‘mined’. It is not necessary that one should buy a whole bitcoin, a fraction of it can also be bought, similar to how shares of a company work. Buying a bitcoin is really easy as many e-wallets have come up with the facility to sell and transact in bitcoins.
What is Bitcoin mining?
Bitcoin mining is a complex process of creating bitcoins. Miners from all over the world compete simultaneously to earn these virtual coins.
Every transaction ever made in the bitcoin network is recorded in the blockchain, which is like a digital ledger, accessible to everyone on the network. Bitcoin miners verify all the transaction data to eliminate any chance of fraud and when there are a particular number of transactions, it makes a block. This block is inscribed by the miners into the blockchain.
Adding a block to the blockchain is a tedious process. Miners convert the block into a code sequence known as 'hash'. Creating a hash requires digital coding, mathematical computations and heavy external hardware. The hash generated is added to the blockchain. A miner gets 12.5 bitcoins for a single hash he successfully adds to the blockchain.
Sakoshi Nakomoto, the creator established a protocol that only 21 million bitcoins can be mined ever. Till now about 12 million bitcoins have been mined. With every passing year the number of bitcoins available for mining is reducing thus increaing the value of bitcoin as the demand grows because the supplies become lesser.
What can the Bitcoin be used for?
Bitcoins can be used as any other currency to buy and sell products. But in India the cryptocurrency is still not very much in use. E-commerce websites Amazon, Flipkart and MakeMyTrip have voucher programs that can exchange bitcoins for money.