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Increased use of internet along with the rapid development of technology, have led to theproliferation of virtual communities. Some of these communities have introduced andcirculated their own currency for exchanging goods and services. Bitcoin is currently consideredthe most popular among these virtual or digital currencies.Bitcoin is the world’s first completely decentralized peer-to- peer digital currency;cryptocurrency and worldwide payment system, where the system works without a centralbank or single administrator. This facilitates the transactions to take place between usersdirectly, without an intermediary. Bitcoin was introduced in 2008 with the publication of apaper titled “Bitcoin: A Peer-to- Peer Electronic Cash System,” written under the alias of SatoshiNakomoto. Nakomoto combined several prior inventions such as b-money and HashCash tocreate a completely decentralized electronic cash system, that does not rely on a centralauthority for currency issuance or settlement and validation of transactions.Bitcoin is a collection of concepts and technologies that form the basis of digital money eco-system. This innovation represents several decades of research in cryptography and distributedsystems which includes four key innovations brought together in a unique and powerfulcombination. Bitcoin consists of:? A decentralized peer-to- peer network (Bitcoin Protocol)? A public transaction ledger (Blockchain)? A decentralized mathematical and deterministic currency issuance (Distribution Mining)? A decentralized transaction verification system (Transaction Script)Units of currency called bitcoins are used to store and transmit value among participants in thebitcoin network. Users communicate with each other using the bitcoin protocol primarilythrough the internet and can transfer bitcoins over the network to do anything likeconventional currencies including buy and sell goods, send money to people or organizations,or extend credit. Users of Bitcoin own keys that allow them to prove their ownership oftransactions in the bitcoin network, unlocking the value to spend it and transfer it to a newrecipient. Those keys are often stored in a digital wallet on each user’s computer. Possession ofthe key that unlocks a transaction is the only requirement for spending bitcoins, whichultimately provides the entire control to each user.Bitcoins aren’t printed, like dollars or euros – they are produced by people, and increasinglybusinesses, running computers all around the world, using software that solves mathematicalproblems. It is created as a reward for a process called “mining”.It facilitates the user to send money from any device to anyone, anywhere at any time. Easinessof transferring the money from person to person is the main characteristic of Bitcoin. Securitydue to strong cryptography, decentralization of the system and the low fees could beconsidered as other salutary features of Bitcoins.USERS OF BITCOIN:Bitcoin is a technology which can be considered as a language for exchanging value betweenpeople. A user must download an application or use a web application to join a bitcoin networkand to start using the currency. Since Bitcoin is a standard, there are many implementations ofthe Bitcoin client software. There is also a reference implantation, known as Satoshi client,which is managed as an open source project by a team of developers and is derived from theoriginal implementation written by Satoshi Nakamoto.The three main Bitcoin clients are:? Full Client: A full client or full node is a client that stores the entire history of bitcointransaction, manages the user’s wallets, and can initiate transaction directly on thebitcoin network.? Lightweight Client: A lightweight client stores the user’s wallet but, relies on third-party-owned servers for access to the bitcoin transactions and network. The light client doesnot store a full copy of all transactions and therefore must trust the third-party serversfor transaction validation. This is similar-to standalone email client that connects to amail server for access to a mailbox, in that it relies on a third party for interactions withthe network.? Web Client: Web clients are accessed through a web browser and store the user’s walleton a server owned by a third party. This is similar-to web mail in that it relies entirely ona third-party- server.The choice of bitcoin client depends on how much control the user wants over funds. Forexample, a full client will offer the highest level of control and independent for the user. MobileClients for smartphones, such as those based on Android system, can either operate as fullclients, lightweight clients, or web clients. Some mobile clients are synchronized with a web ordesktop client, providing a multiplatform wallet across multiple devices but with a commonsource of funds.CAN BITCOIN BE CONSIDERED AS MONEY?A traditional money fulfills three functions– medium of exchange, unit of account and store ofwealth. Bitcoin serves a role as a peer-to- peer network and a digital currency.As a medium of exchange, Bitcoin fulfills the condition of coincidence of wants; but it lacksliquidity as it is not widely accepted. The nature of high volatility makes it hard to predict andcan be considered as a risky instrument to store value. Bitcoin’s role as unit of account isconfined to a small group of businesses and individuals. Therefore, in the strictest sense, Bitcoincannot be considered as a traditional currency.BITCOIN VERSUS CONVENTIONAL CURRENCIES? Functions as Bitcoin issuance, transaction processing and verifications are carried outcollectively through peer-to- peer technology by the Bitcoin network, without a centralsupervisor to oversee the operations. In contrast, a conventional currency is issued by acentral bank.? Bitcoin is primarily designed as a digital currency. However physical bitcoins areavailable from companies such as BitBills, Casascius. Conversely, conventionalcurrencies exist primarily in physical form.? Bitcoin has limited acceptance so far, whereas conventional currencies have universalacceptance.INVESTING IN BITCOINSThe belief of Bitcoin supporters is the fact that digital currency would be the future. Those whoencourage it are of the view that it facilitates a much faster, no-fee payment system fortransactions across the globe. Although it is not itself backed by any government or centralbank, bitcoin can be exchanged for traditional currencies; in fact, its exchange rate against thedollar attracts potential investors and traders interested in currency plays. Indeed, one of theprimary reasons for the growth of Bitcoin is that they can act as an alternative to national fiatmoney and traditional commodities like gold.In March 2014, the IRS stated that all virtual currencies, including bitcoins, would be taxed asproperty rather than currency. Gains or losses from bitcoins held as capital will be realized ascapital gains or losses, while bitcoins held as inventory will incur ordinary gains or losses.Like any other asset, the principle of buy low and sell high applies to bitcoins as well.ADVANTAGES:Payment of freedom: It is possible to send and receive any amount of money quickly anywherein the world at any time. In addition to this the system allows the users to be in the full controlof their own money.Transparent and neutral: Availability of the finalized transactions to everyone due to blockchainis an added feature. What is visible, is the public address and not the personal information. As aresult, Bitcoin protects against identity theft. Bitcoin could be backed up to ensure the safety ofusers’ money. Transactions performed could be verified and checked at any time. The superiorfeature is that bitcoin protocol cannot be manipulated by any person, organization orgovernment and this due to cryptographical secure feature. Users could place their feature dueto its predictability, neutrality, security and transparency.Low fees: Currently there are no fees or very low fees within Bitcoin payments. Users mightinclude fees to process the transactions faster. Digital currency exchanges help merchants toprocess transactions by converting bitcoins into fiat currency and these services generally havelower fees that credit cards and PayPal.Reduction of risks for merchants: As transactions cannot be reversed and secure, merchants areprotected from potential losses that might occur from fraud. It is difficult to cheat due to publicledger or block chain.DISADVANTAGES:Lack of understanding and awareness: A good proportion of population are yet unaware ofdigital currencies and Bitcoins. Public and the workers need to be educated about and theapplication of Bitcoin as the list is relatively insignificant compared to traditional andconventional currencies.Risk and volatility: This is due to limited amount of coins and the demand for them. Also, it isnot widely accepted.No buyer protection: When goods are brought using Bitcoins and the seller doesn’t send thepromised goods and nothing can be done to reverse the transactions. This problem can besolved using a service like Clear Coin.No physical form: As bitcoins do not have a physical form, it cannot be used in physical storesand there is a requirement to convert to other currencies.In conclusion, Bitcoin is going to gain popularity and might even replace official currencies.Bitcoins can be helpful to many. Since they are an international currency, we can use them inany country without having to convert between currencies. The Blockchain secures and it letsto make sure that the money moves to the right person ultimately. People receiving Bitcoinswon't have to pay anything for the transactions. On the other hand, it has some disadvantages,but some of those are because Bitcoin is a new thing, so as time goes on they will be less of aproblem. It could be expected that Bitcoin the latest financial trend to create a revolutionarychange in the near future.

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