All about
Crypto-currencies including Bitcoin
By Dr. Lalit Kumar Setia | @drlalitsetia
| drlalitsetia@gmail.com | Created 26th
Jan, 2018
Updated 3rd August, 2019
The Bitcoin
is a crypto-currency, and after the surge in its value the companies are
planning to launch global crypto-currencies. For example, Facebook announced to launch
Libra along with MasterCard, Uber, Vodafone Group and Spotify in the year 2020.
However, the Libra is quite different from Bitcoin as it will be a virtual
currency backed by reserve of diversified government securities and low
interest deposits (known as Libra Reserves) controlled by Libra Association (a
Non-profit Organization in Geneva). These Libra Reserves will be used to
maintain price stability of Libra Currency.
Would Digital Currencies take place of Central Currencies?
With the launch of Digital Currencies
including Crypto-currency Bitcoin; the credit creation through Central
Currencies will be affected badly. The effect of monetary policy to control the
liquidity of an economy will not be possible through the help of Central Banks
of the economies. However, at present the Digital currencies are in their
infancy stage, but there are chances that these currencies will soon take over
the place of Central Currencies. With these emerging Digital Currencies, the
people without bank account will also be able to perform the digital
transactions. In the words of Facebook, “Libra is a tool to enable the unbanked
population to join their network and transact digitally without the cost and
hassle of going through banking networks”. The banking services are paid and
every person around the world bear the cost of having banking operations; with
the emergence of digital currencies like Crypto-currency Bitcoin and Virtual
Currency Libra; the chances to avoid expenditure on banking services seem to be
possible.
How to acquire Bitcoins and what are advantages and
disadvantages of using Bitcoins?
As per the
data from CREBACO, an intelligence firm, everyday nearly $1 Million amount is
traded from Indian Exchanges, through transactions in crypto-currencies i.e.
Bitcoin, Ripple, and Etherium with 12 exchanges including Zebpay, Unocoin,
Coinsecure, WazirX, Koinex etc. Around the world, $1.5 Billion are transacted
among 50 Lac investors. In 2018, the Reserve Bank of India (RBI) has issued
instructions to restrict the banking consumers of Indian Banks to make
transactions in Bitcoins. This decision is taken to avoid the loss incurred by
using Bitcoin as a tool of transferring money at cheaper cost. But still, the
Bitcoins are lucrative investment for international investors. The
Bitcoins can be bought at Bitcoin exchanges (operated outside India) and can
also be earned through competitive mining. However, the payments in Bitcoin
don't require any merchant like in case of payments through Debit or Credit
cards (requiring Bank as merchant). The payments can be made through Bitcoin
wallet (an app in smart phone or computer) by simply providing recipient’s
address, payment amount, and clicking send button. No fee is imposed or charged
for using Bitcoin wallet even if lacs of Bitcoins are transferred from one user
to another. These transactions also donot contain customer’s personal
information however, the information relating to Bitcoin’s supply remain available
on block-chain to verify and use on real-time basis.
Due to
security through cryptography, no one can control and manipulate the protocol
of Bitcoin. The major drawback of Bitcoins is that the number of businesses
using Bitcoin is very small and the software of Bitcoin is also not properly
developed. There is scope for making the software more secure and accessible to
large volume of users. The cryptographic algorithms which are used to protect
online banking, are also used to protect Bitcoin payments and therefore is
being trusted by its users.
Looking at Bitcoins as an Opportunity to be Richer?
Due to
growing interest in acquiring and trading in Bitcoins, this crypto-currency has
business opportunities. However, nobody can give guarantee of growth or fall in
the prices of Bitcoins. In case of Bitcoins, there are ways to make money by
mining, speculation and running businesses through using Bitcoins as an
entrepreneur. The risk is high because no one is controlling Bitcoins and there
is no guarantee of profit; Bitcoins are as virtual as credit card and online
banking networks.
In physical
form, the Bitcoins can be stored with the help of taking Denarium coins (which
are assembled and packed in Finland, usually dispatched in 3 Business days
however may take 3-6 weeks time to get delivered to the buyer). If used without
physically stored, then also the Bitcoins are valid and secure for trade. The
Bitcoins are secured with private key(s) and if any user lost the wallet, it
becomes impossible to recover Bitcoins. The lost Bitcoins remained in the
block-chain and become out of circulation, making price of Bitcoins go higher
due to decrease in supply than demand of Bitcoins.
*Copyright © 2018 Dr.
Lalit Kumar. All rights reserved.
