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Showing posts with label Disadvantages. Show all posts
Showing posts with label Disadvantages. Show all posts

All about Cryptocurrencies including Bitcoin

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. 

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