If you read the title, there are two words which are believed to be same or both mean same. They are “money” and “currency”. Actually, they are not; the reason for this misconception is the complexity of the monetary system that we follow. The main difference between money and currency is money = currency + store of value. Currency is the medium of exchange, a unit of account, portable, durable, and interchangeable. But it cannot store the value for long period of time because the government can print more currencies and dilute the supply of currency.
Mike Maloney – in his book “Hidden Secrets of Money” says “Your true wealth is your time and freedom. Money is a trading tool that stores the economic energy that is your time and freedom, whereas currencies leak them away. Gold and silver are the ultimate money simply because of its properties. Fiat currencies are based solely on confidence and return to their intrinsic value of zero.”
Another matter of difficulty is Money transfer. It takes few seconds to send an email to another part of the world; you can make a live video call to your friend or a family member in US or UK. But you can’t send or receive ₹10,000 from them instantly; it takes few days or weeks to send money through a banking system.
Banks manages all business and transaction logics like authentication, identification of people, clearing, settling, record maintenance etc. But they are facing a problem because they are centralized and they can exclude billions of people from global economy, many people don’t have bank account or don’t have good credit card rating. Banks take about 15 to 30% of the money for a transaction from one country to another and they take all our private data which could be misused by any third party in between bank transaction.
Is there a solution for these problems??
Yes, there exists a solution, in fact, a better solution if there exist anything else based on speed, transaction fee, security, privacy, record keeping, verification, validation, etc and mainly it stores the values.
On October 2008 an anonymous person or group of people named Satoshi Nakamoto proposed a paper. He spoke about new electronic cash where he developed a protocol and digital cash called bitcoins.
On January 2009 the Bitcoin network came into existence with the release of the first open-source bitcoin client and issuance of first bitcoins.
What is Bitcoins??
If you ask this question to someone who knows about the same, cryptocurrency you may get different answers. Because it’s little tricky to explain cryptocurrency, virtual money that exists in a cyberspace”.
It is digital money that can be sent to someone anywhere around the globe in split seconds from human to human through his cell phone or computer, at almost no cost.
Who will maintain records of all transactions?? , Who owns this system?? , How is bitcoins supplied to the users??
Well the records are maintained by a public ledger called Blockchain. Blockchain is a distributed database to achieve independent verification of chain of ownership of any bitcoin account; each network node stores its own copy of blockchain. A network node can validate the transaction and add them to their copy of the ledger addition to other nodes. These nodes are operated by people around the world with powerful GPU’s and ASIC processors called miners. Miners keep the blockchain complete and unalterable by repeatedly verifying and collecting newly broadcast transaction into new group of transactions called block. Each block contains the cryptographic hash of previous block, using the SHA-256 hashing algorithm, which links it to previous block, thus giving the blockchain its name. The successful miners finding the new block will be rewarded with newly created bitcoins.
The bitcoin software is designed such a way that there can be only 21 million bitcoins in existence. Already there are about 14 million bitcoins in existence and the number being updated roughly for every 10 minutes and the rate at which they are released will drop by half for every 4 years until all 21 million bitcoins are in circulation. When I say there’s only 21 million bitcoins can exist there is a question that “there are billions of people in the world how there would be enough supply of bitcoins for every users??” Bitcoin can be divided into smaller parts in fractions. The smallest unit of bitcoins is called Satoshi named after the creator. One Satoshi is equal to 0.00000001 bitcoins.
How to store or hold bitcoins??
A wallet stores the information necessary to transact bitcoins. And physically it’s not a coin, but it holds 2 kinds of cryptographic keys.
There are two ways of holding bitcoins, you can participate in bitcoin network yourself by storing the necessary keys in your hard drive. Or you can delegate this function to third party wallet services like zebpay, coinbase, etc.
How to send or receive bitcoins??
Bitcoin uses public key cryptography, there are two cryptographic keys one is private key and another is public key. A wallet is collection of these cryptographic keys public key is used as a bitcoin address and it is public you can share this address to sender to send bitcoins or he can share this address in the form of QR code. Private Key is another half of the cryptographic key; miners will find the right private key of the receiver by solving the cryptographic hash and adds it to the block to validate the transaction.
These things differentiate bitcoin transaction from credit card transaction, where there is no risk of private information of user being stolen and you don’t need to give your private information or fill an application form to prove your identity to open an account and you don’t need to remember long passwords or for an OTP verification. Hence you don’t need to trust any third party for a transaction.
Value of bitcoins!!
Value of bitcoins keeps changing and now it has overtaken the value of gold. When this article was written the price of bitcoin was $ 2,374.98 = ₹152,865.65 If you want to send or receive ₹100 in bitcoins you can send it as 0.00065417BTC.
How did bitcoins get so expensive?? Many people say bitcoins overvalued. But the fact is it keeps changing, value of bitcoins is volatile. It may go up to $5,000 or may fall to $100. The main factors that control the bitcoin price is trust and they are often called as bitcoin believers. All bitcoin users trust in bitcoins and make the transactions.
The other reason is the supply of bitcoins is fixed to 21 million and hence the price will rise with raise in demand.
Can the bitcoin wallet be hacked or make a fraud transaction??
NO, bitcoin wallets cannot be hacked or make a fraud transaction since all the transactions being monitored and verified by the blockchain network.
There is way where you can screw yourself; this is not a hack or anything of a kind. But you will lose all the bitcoins you have if your private key is lost. Blockchain network will not recognize any other evidence of ownership. Well this can also be used as feature to avoid misusing others wallets for a fraud transaction.
In 2013 one user claimed to have lost 7,500 bitcoins, worth $7.5 million at the time, when he accidentally discarded a hard drive containing private keys.
Is there any negative point about bitcoins??
-According to some currency experts bitcoins is unreliable; too much of mystery.
-Its being working on an algorithm, what if there is another person who comes up with a better algorithm for digital money or better than that, there goes the value of bitcoins. Currently there are many cryptocurrencies but bitcoin is number one and no other cryptocurrency has the half of the value of bitcoins.
-There are some places bitcoin are used for illegal activities like to purchasing drugs or other things using bitcoins and some hackers infecting ransomwares taking advantage of anonymity offered by bitcoins made some governments to think about banning it in their country. (But this will not affect the bitcoin users as mentioned above and many things that are banned in some country can be bought without bitcoins)
– On 6th august 2010, a major vulnerability in bitcoin protocol was spotted. Transactions were not properly verified before they were included in blockchain, which permits user to bypass bitcoin’s economic restrictions and create an indefinite number of bitcoins. On 15 august, the vulnerability was exploited; over 184 billion bitcoins was generated and sent to 2 addresses. Within an hour the transaction was spotted and erased from the transaction log after the bug was fixed and network was updated with new version of bitcoin protocol.
What if bitcoin is banned?? , can anyone stop bitcoin network or stop anyone from using it??
Answer is NO,
Bitcoins is the first decentralized currency. It’s just like the internet it can be banded in some places but no one can shut it down. It is different from fiat currency’s like dollars, euro, Indian rupees which are connected to governments or banks. There are no presidents or kings who can stop bitcoins. But it can be made difficult to use by the governments or banks by not allowing people to use their network to buy or sell bitcoins.
Finally, at present day there are more than 700 cryptocurrencies similar to bitcoins. Which has their own goals like steem which is backed by a social media called steemit.com which pays its users from the profit they make out of each up votes or resteem(similar to retweet) or comment on the posts to support the content creators. And there is some other which doesn’t have any uses.
Share your opinion on the comment section below. Thank you.
(image sources: Google images with usage rights: free to use or share and modify)