FAQ: Things to Know About Bitcoin - The New Indian Express

FAQ: Things to Know About Bitcoin

Published: 07th January 2014 04:42 PM

Last Updated: 07th January 2014 04:42 PM

What is bitcoin?

Bitcoin is a concept of virtual currency introduced in 2009 which was first launched by a pseudonymous developer, Satoshi Nakamoto. Also known as Crypto-currency can be traded for other currencies.

How does bitcoin work?

The concept of Bitcoin is all digitalized and hence for those who wish to invest in it, need to have a mobile application called Bitcoin Wallet which is available on Google Play and other online Play Stores.  You can also download computer program which provides the users with a personalized Bitcoin wallet in which you can easily receive and send Bitcoins.

Bitcoin has a system behind the scenes, for public ledger called “block chain.” This ledger contains every transaction that has been processed so far in terms of Bitcoins. Each transaction is protected by digital signatures corresponding to the sending addresses, which allows all the users to have control; over sending Bitcoins from their Bitcoin addresses. This is process is known as “mining.”

Do people really invest in bitcoins?

Yes, people do invest in Bitcoins. IT was not a very popular activity before, but with time the popularity of this has increased to such an extent that at the end of August 2013, the value of Bitcoins exceeded up to US$1.5 billion with millions of Bitcoins exchanged daily.

Which all countries are in favour of bitcoins and which are against it?

 USA has said that prevailing money laundering laws would apply to Bitcoin as well. China, the second largest economy has banned the domestic third-party payment companies to stop the virtual currency in the country.

Indian authorities are still considering Bitcoins and might issue an advisory to warn against the potential risks associated with Bitcoins.

Across India, some of the retail outlets have expressed their willingness to accept Bitcoins. There are some companies in Iran which have evaded sanctions by using bitcoins for payments. One such company is persianshoes.com

How can you buy bitcoins?

There are two ways of investing in Bitcoins. One, you can buy then by paying real currency or take the Cloud Hashing route. But, experts have warned against investing through Cloud Hashing services, which offer “mining contracts.”

How to make bitcoin payments?

Bitcoin payments are just the way you make Debit or Credit card payments. All the Bitcoin payments are made from a wallet application, which can be done from a smartphone or a computer. All you require is the recipient’s address, the payment amount and then pressing send.

You can also scan the QR code or utilize the NFC technology to connect two phones.

What can you purchase with bitcoins?

There is a list of websites which accept bitcoins for payments, which means you can purchase from underwear to mini cannons for bitcoins. These transactions are completely anonymous and it cannot be traced back to you, which can also be looked upon as a disadvantage.

 What are the disadvantages of bitcoin?

Since all the transactions are done anonymously, there are a lot of drug dealing activities which occur with the help of bitcoins. A drug website called Silk Road in USA was recently shut down by FBI which transacted using bitcoins. The currency’s volatility is that many people view it as an investment than a currency. There are just people who use bitcoin as currency; most of the people use this as an investment.

How is the value of bitcoin determined?

The value of bitcoin is determined by the demand supply cycle. It depends on how much one wants to invest unlike other currencies which are determined by several factors such as printing more notes or interest rates

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