What is Bitcoin?
Bitcoin is a type of virtual currency, created in 2009 by an unknown person named Satoshi Nakamoto. Transactions in this system are made with no middle men, banks or regulator agency. They are a completely decentralized form of money and aren’t backed by any government. People can use this digital currency for all sorts of real transactions.
Bitcoins can be used to buy merchandise anonymously. In addition, international payments are easy and cheap because there is no transaction fee and bitcoins are not tied to any country or subject to regulation. Some people just buy bitcoins as an investment, hoping that they’ll go up in value.
Buy on an Exchange: Several marketplaces called “bitcoin exchanges” allow people to buy or sell bitcoins using different currencies. Mt. Gox is the largest bitcoin exchange.
Transfers: People can send bitcoins to each other using mobile apps or their computers. It’s similar to sending cash digitally.
Mining: People compete to “mine” bitcoins using computers to solve complex mathematical problems. This is how bitcoins are created. Currently, a winner is rewarded with 25 bitcoins roughly every 10 minutes.
Bitcoins are stored in a “digital wallet,” which exists either in the cloud or on a user’s computer. The wallet is a kind of virtual account that allows users to send or receive bitcoins, pay for goods or save their money. Unlike bank accounts, bitcoin wallets are not insured.
Though each bitcoin transaction is recorded in a public log, names of buyers and sellers are never revealed – only their wallet IDs. While that keeps bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them. That’s why it has become the currency of choice for people online buying drugs or other illicit activities.
Future of Bitcoins
Confidence in bitcoins has grown after a US Senate committee considered it as a legitimate financial service at a meeting in October 2013. Within the time span of 5 years the value of bitcoin rose from few cents to 1000 USD.
Still it is too early to say anything about the future of bitcoins. China has banned its banks from handling bitcoin transactions, saying they have no legal status and should not be used as a currency. The European Banking Authority has already warned about the potential risks of using Bitcoins.
Bitcoins in India
Bitcoin is catching the attention of India too. Many investors are considering it as a good investment option compared to a traditional currency because it has a limited supply. Others are downloading the software to “mine” this currency. Across India, some of the retail outlets have expressed their willingness to accept Bitcoins. The Reserve Bank of India is closely watching the growth of bitcoins but is not currently regulating the currency.