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cryptocurrency for that matter. But back then, cryptocurrency was just an idea in Satoshi’s mind. But now, there is trading worth millions on its platform of crypto exchange. and just like shares are traded on the normal stock markets, cryptocurrency has its own called the crypto exchange. To get an understanding of what Satoshi proposed we will have to have some idea of our economic history. The financial systems that we a part of are based on trust. The only reason that the currency notes and coins have any value in our country is because they are guaranteed by the central bank and the government. If you have a look at any note in your wallet. For instance, a 200 rupee note. It reads- “I promise to pay the bearer a sum of 200 rupees.” This is a promise made and signed by the Governor of the Central Bank, that is, the Reserve Bank. Your note holds no value without this guarantee and will be reduced to an ordinary paper if it does not have this signature. It shows you how powerful the government and the banks are as far as monetary policy is concerned.
The fact is that when you deposit your money in a bank, you give the bank permission to play with it. The banks make use of your deposits and give loans to companies and individuals which is how you also earn returns on your deposits also called interest. We have also seen in today's time how irresponsibly the banks handle our money by giving loans to big industrialists without performing adequate checks and then these loans become bad debts and depositors like us become the victims. In the last 3 years, three deposit-taking institutions have been failed namely- Yes Bank, PMC Bank, and Laxmi Vilas Bank. This is how banks can play a part in monetary policy. But even the decisions of the government can put the common man in a financial problem. Decisions like Demonetization which in one stroke terminated the 500 and 1000 rupee notes. Those in favor of bitcoins and cryptocurrencies are so because they do not want the government or central banks to have so much control over their money or currency.This was the original vision of why Satoshi proposed his idea. He imagined Bitcoin as an alternative financial system that would be based on software technology and would be outside the control of third parties You might be able to recall the Global Economic Meltdown of 2008 in which mega-investment bankers like Lehman Brothers had become bankrupt and cryptocurrencies were born after a situation like this. Bitcoin was the first to arrive. Later on, many other cryptocurrencies came up like Ethereum, Coinbase, Litecoin, Ripple, and CoinSwitch. In fact, at the beginning of last year, more than 2000 cryptocurrencies were available on the internet. Knowing what cryptocurrencies are is important but how crypto-technology works can be tricky. If truth be told, to understand this, one needs to know advanced mathematics and computer science which many of us don’t have but if you want to start investment or trading, then basic knowledge would suffice you.
Let us take the example of Bitcoins, there is one public account in digital form of all the bitcoin transactions called a ‘ledger’. A copy of this ledger exists on all the systems that are a part of the bitcoin network. Those that run this system are caller ‘miners’. Miners help verify all the transactions. Let’s assume, Adam has to transfer 2 Bitcoins to Ben’s account. Miners will have to confirm whether Adam has 2 Bitcoins in his account or not. To complete the transaction, miners have to solve a complicated mathematical equation.You might have heard about variables back in school. Every Bitcoin transaction has a unique variable and it's quite a complex variable, the job of the miners is to calculate it. All these calculations are carried out on the computers automatically since they are extremely complex and their combinations run in crores. This is why these miners require computers with very complex and high processing power. Once the complex equation is solved by the miners, the other computers within the network confirm it, and then this transaction is added to the chain. A block of transactions gets created and hence, this technology is called ‘block chain’. The miners in return get Bitcoins for doing this work. This system is called ‘Proof of Work’ because the miners have to prove the computation work they do in order to be rewarded Bitcoins in return. If all this explanation went straight above your head, then no need to worry because understanding the philosophy, vision, and future of crypto technology is far more important than understanding the working of crypto technology. It is extremely important to know how to use cryptocurrency and Bitcoins. Because some people use Bitcoins as an investment, while some people use cryptocurrency as an alternate currency.
A lot of people even want to replace it with currency and use Bitcoins in place of rupees and dollars. But the top use of cryptocurrency is like an investment. Where we invest money in cryptocurrency hoping for a higher return in the future and hence get more money in return. Thus, this becomes a “store of value” just like Gold. Just like we don’t use gold in our daily transactions but instead, we buy it and store it in the lockers like a guarantee to get more returns in the future because the price of gold keeps increasing with time. People do the same thing with Bitcoins and this is why Bitcoins are also called “Digital Gold” but just like any other investment, this too entails risk. And those who criticize this as a form of investment say that Bitcoin is a digital currency and has no inherent value of its own unlike gold, houses, and cars which are physically available to you but Bitcoins, on the other hand, is not physical, it’s happening on the computer.
Bitcoins can still be referred to as a “niche product” as it does not have widespread acceptance in society. Cryptocurrency is not yet a medium of exchange i.e you cannot go to nearby shops and buy bread and eggs with Bitcoins but this trend might change with time as more and more restaurants and hotels in western countries have begun to accept Bitcoins as an alternative form of payment. But there is a technical challenge here that makes it difficult to use Bitcoins as a medium for daily transactions because the Bitcoin transactions on the blockchain take time to get confirmed as one block process takes around 10 minutes for the computers to calculate so this makes it impractical to wait for 10 minutes for a transaction to get completed in daily life.
Present-day uses for Bitcoins where they work better than our traditional way:The most relatable example of this is our Foreign Funds transfer, when you have money to transfer from one country to another, the banks deduct a lump sum as transaction fees and they also levy a lot of fees and take a lot of time for the transfer of money from one country to another. Bitcoins are more economical in this case as they do not charge any transfer fees and ten minutes is a much lesser time as compared to the 1 to 2 days that the banks take in order to complete your transaction.A similar thing applies to credit card fees, where cryptocurrency can be more economical than credit card fees. This is the reason why banks, credit card companies, and remittance companies have been against cryptocurrencies and still are today because cryptocurrency can become a rival to their business model. But in the last few months, especially due to the Covid pandemic, situations have changed. While several industries and mutual funds have been struggling, the value of cryptocurrencies like Bitcoins, Coinbase, and Ethereum has been on the rise. The value of Bitcoin had risen more than 120% from the 1st of March until November 30 last year. World’s biggest digital payments company, Paypal has introduced the feature of crypto transactions in November.
JP Morgan Bank used to be the biggest enemy of Bitcoins and was totally against it. When Bitcoin was on a bull run in 2017 i.e when its price was rising exponentially, the CEO of JP Morgan had said that it was a fraud and now just a year ago JP Morgan had opened corporate accounts for famous crypto exchanges like Coinbase and Gemini Trust. So here it is clearly visible how the doors that had earlier been shut for cryptocurrency have now been opening up. Open-mindedness is being observed concerning cryptocurrency in the general public and the financial industry.
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Cryptocurrency (Bitcoin)
Cryptocurrency, Bitcoins and Others like it
Can you imagine a thing whose value was zero around 10 years back and today its value has almost touched 15 lakhs. Yes, you guessed right, we are talking about Bitcoin that has recently touched its alltime peak price point due to which it is being talked about in the market and the media again. So what exactly is Bitcoin and how did it start? Almost 13 years ago, on 31st October, 2008, a Japanese man called Satoshi Nakamoto issued a paper on the Internet. Satoshi’s main motive was evident from the first line of the paper. A sort of electronic cash system that would permit payments to be sent directly from one party to another party without going through the hassle of a financial organization.
Cryptocurrency is a digital asset over which financial organizations or banks have no control or ruling. For instance, the US dollar is administered by the US central bank. The Indian Rupee is administered by the RBI. But on the other hand, there is no central bank or any main financial institution involved that regulates or controls bitcoins or any cryptocurrency for that matter. But back then, cryptocurrency was just an idea in Satoshi’s mind. But now, there is trading worth millions on its platform of crypto exchange. and just like shares are traded on the normal stock markets, cryptocurrency has its own called the crypto exchange. To get an understanding of what Satoshi proposed we will have to have some idea of our economic history. The financial systems that we a part of are based on trust. The only reason that the currency notes and coins have any value in our country is because they are guaranteed by the central bank and the government. If you have a look at any note in your wallet. For instance, a 200 rupee note. It reads- “I promise to pay the bearer a sum of 200 rupees.” This is a promise made and signed by the Governor of the Central Bank, that is, the Reserve Bank. Your note holds no value without this guarantee and will be reduced to an ordinary paper if it does not have this signature. It shows you how powerful the government and the banks are as far as monetary policy is concerned.
The fact is that when you deposit your money in a bank, you give the bank permission to play with it. The banks make use of your deposits and give loans to companies and individuals which is how you also earn returns on your deposits also called interest. We have also seen in today's time how irresponsibly the banks handle our money by giving loans to big industrialists without performing adequate checks and then these loans become bad debts and depositors like us become the victims. In the last 3 years, three deposit-taking institutions have been failed namely- Yes Bank, PMC Bank, and Laxmi Vilas Bank. This is how banks can play a part in monetary policy. But even the decisions of the government can put the common man in a financial problem. Decisions like Demonetization which in one stroke terminated the 500 and 1000 rupee notes. Those in favor of bitcoins and cryptocurrencies are so because they do not want the government or central banks to have so much control over their money or currency.This was the original vision of why Satoshi proposed his idea. He imagined Bitcoin as an alternative financial system that would be based on software technology and would be outside the control of third parties You might be able to recall the Global Economic Meltdown of 2008 in which mega-investment bankers like Lehman Brothers had become bankrupt and cryptocurrencies were born after a situation like this. Bitcoin was the first to arrive. Later on, many other cryptocurrencies came up like Ethereum, Coinbase, Litecoin, Ripple, and CoinSwitch. In fact, at the beginning of last year, more than 2000 cryptocurrencies were available on the internet. Knowing what cryptocurrencies are is important but how crypto-technology works can be tricky. If truth be told, to understand this, one needs to know advanced mathematics and computer science which many of us don’t have but if you want to start investment or trading, then basic knowledge would suffice you.
Let us take the example of Bitcoins, there is one public account in digital form of all the bitcoin transactions called a ‘ledger’. A copy of this ledger exists on all the systems that are a part of the bitcoin network. Those that run this system are caller ‘miners’. Miners help verify all the transactions. Let’s assume, Adam has to transfer 2 Bitcoins to Ben’s account. Miners will have to confirm whether Adam has 2 Bitcoins in his account or not. To complete the transaction, miners have to solve a complicated mathematical equation.You might have heard about variables back in school. Every Bitcoin transaction has a unique variable and it's quite a complex variable, the job of the miners is to calculate it. All these calculations are carried out on the computers automatically since they are extremely complex and their combinations run in crores. This is why these miners require computers with very complex and high processing power. Once the complex equation is solved by the miners, the other computers within the network confirm it, and then this transaction is added to the chain. A block of transactions gets created and hence, this technology is called ‘block chain’. The miners in return get Bitcoins for doing this work. This system is called ‘Proof of Work’ because the miners have to prove the computation work they do in order to be rewarded Bitcoins in return. If all this explanation went straight above your head, then no need to worry because understanding the philosophy, vision, and future of crypto technology is far more important than understanding the working of crypto technology. It is extremely important to know how to use cryptocurrency and Bitcoins. Because some people use Bitcoins as an investment, while some people use cryptocurrency as an alternate currency.
A lot of people even want to replace it with currency and use Bitcoins in place of rupees and dollars. But the top use of cryptocurrency is like an investment. Where we invest money in cryptocurrency hoping for a higher return in the future and hence get more money in return. Thus, this becomes a “store of value” just like Gold. Just like we don’t use gold in our daily transactions but instead, we buy it and store it in the lockers like a guarantee to get more returns in the future because the price of gold keeps increasing with time. People do the same thing with Bitcoins and this is why Bitcoins are also called “Digital Gold” but just like any other investment, this too entails risk. And those who criticize this as a form of investment say that Bitcoin is a digital currency and has no inherent value of its own unlike gold, houses, and cars which are physically available to you but Bitcoins, on the other hand, is not physical, it’s happening on the computer.
Bitcoins can still be referred to as a “niche product” as it does not have widespread acceptance in society. Cryptocurrency is not yet a medium of exchange i.e you cannot go to nearby shops and buy bread and eggs with Bitcoins but this trend might change with time as more and more restaurants and hotels in western countries have begun to accept Bitcoins as an alternative form of payment. But there is a technical challenge here that makes it difficult to use Bitcoins as a medium for daily transactions because the Bitcoin transactions on the blockchain take time to get confirmed as one block process takes around 10 minutes for the computers to calculate so this makes it impractical to wait for 10 minutes for a transaction to get completed in daily life.
Present-day uses for Bitcoins where they work better than our traditional way:The most relatable example of this is our Foreign Funds transfer, when you have money to transfer from one country to another, the banks deduct a lump sum as transaction fees and they also levy a lot of fees and take a lot of time for the transfer of money from one country to another. Bitcoins are more economical in this case as they do not charge any transfer fees and ten minutes is a much lesser time as compared to the 1 to 2 days that the banks take in order to complete your transaction.A similar thing applies to credit card fees, where cryptocurrency can be more economical than credit card fees. This is the reason why banks, credit card companies, and remittance companies have been against cryptocurrencies and still are today because cryptocurrency can become a rival to their business model. But in the last few months, especially due to the Covid pandemic, situations have changed. While several industries and mutual funds have been struggling, the value of cryptocurrencies like Bitcoins, Coinbase, and Ethereum has been on the rise. The value of Bitcoin had risen more than 120% from the 1st of March until November 30 last year. World’s biggest digital payments company, Paypal has introduced the feature of crypto transactions in November.
JP Morgan Bank used to be the biggest enemy of Bitcoins and was totally against it. When Bitcoin was on a bull run in 2017 i.e when its price was rising exponentially, the CEO of JP Morgan had said that it was a fraud and now just a year ago JP Morgan had opened corporate accounts for famous crypto exchanges like Coinbase and Gemini Trust. So here it is clearly visible how the doors that had earlier been shut for cryptocurrency have now been opening up. Open-mindedness is being observed concerning cryptocurrency in the general public and the financial industry.