What are bitcoins? -a detailed overview

Off lately, bitcoins are gaining a lot of buzzes. The currency which went on from a 1000$ threshold to 19000$ in one year. And then plummeted 50% in first half of 2018. This surely has created a wave amongst fintech institutions.

 

So what is the deal with bitcoin?

 

This article shall help clear all the conjectures around the topic. Let’s have a look at its brief history first.

 

Birth of Bitcoins

 

Bitcoin was created in 2009 by a person (or group) who called himself Satoshi Nakamoto. His goal was to create a parallel transaction mechanism other than the conventional currencies like Dollar, Pound, Rupee, etc. After successfully implementing the concept, he handed over the source coding to a group of individuals, who are now spread across and are generating coins on their own.

 

Definition of Bitcoin

 

Like other cryptocurrencies (Ethereum, Litecoin, etc.), this is a digital currency. It’s not printable tender. It’s decentralized i.e. there is no government or institution has to control over it. Owners are anonymous; rather than using names, tax IDs, or social security numbers, bitcoin connects buyers and sellers through encryption keys.

 

Why did Bitcoins get so much of traction?

 

Since bitcoins are decentralized and controlled by a group of individuals, it gained the attention of many people, some even the notorious types.

 

As stated earlier, there is no institutionalized control over these type of cryptocurrencies. It is run by a group of coders who interact with each other on a certain frequency and decide what to do next.

 

The point worth to be noted is this system is parallel to the conventional system; it attracts individuals and groups who are uncomfortable with the control which banks or governmental institutions manifest on their money.

Why did bitcoin prices fluctuate so much?

 

Because the coins are generated by an algorithm and were limited in supply, unlike the general currencies like Dollar, Pound, etc. which can be printed in any quantity to increase liquidity and dominate the valuations. The supply of Bitcoin is always limited hence there is a high demand for the same.

 

How are the bitcoins generated?

 

Coin generation is a very complex process which involves running a complex algorithm. This process is called mining. It requires a very advanced computer with a high energy consumption to generate one coin. Hence it is time taking as well. A typical miner costs around 500$ to 2000$.

 

Read about blockchain technology- the main ideology behind every cryptocurrency

 

Risks associated with bitcoins

 

1. Hacking: This is one of the prime concerns associated with any cryptocurrency. There have been incidents wherein people got mugged. Apparently, many governments have already put a ban on bitcoins.

2. Tax Dilemma: Many countries are uncertain about ideal tax policies for such funds accumulation.

 

However, the Indian government recently announced that bitcoins or any other cryptocurrency will be considered under the tax radar which came as an effect of demonetization revolution in India, and many people were using bitcoins to stash black money.

 

Are bitcoins legal or illegal?

 

The legal status of bitcoins varies from countries.

 

Bitcoin is legal in EU, Morocco, Nigeria, South Africa, Namibia, Zimbabwe, Canada, US, Mexico, Costa Rica, Nicaragua, Jamaica, Trinidad & Tobago, Argentina, Brazil, Chile, Colombia, Cyprus, UAE, Israel, Saudi Arabia, Jordan, Lebanon, Turkey, Iran and many more.

 

Few countries are irresolute about their stand, for instance- India. Major financial institutions, like banks, do not accept bitcoin payments.

 

Hope this was informative. Share your thoughts in the comments section.

 

Authors: Shubhrangshu Halder

Sneha Banerjee

 

A Snehaa Speaks Original

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