Tuesday, January 23, 2018
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In Focus

Posted at: Dec 18, 2017, 12:23 AM; last updated: Dec 18, 2017, 12:23 AM (IST)

BIT by bit

BIT by bit
Bitcoin is successful only because of its potential for circumvention … it seems to me it ought to be outlawed. Joseph Stiglitz, Nobel Laureate
The origin

  • Bitcoin is the most popular cryptocurrency that was created by a mysterious person or a group of persons known as Satoshi Nakamoto. 
  • In 2008, he had circulated the original software in a white paper through a mailing list and thus created a consensus network that enabled the bitcoin payment system.
  • Bitcoin is the first decentralised peer-to-peer payment network that is powered by its users with no central authority, bank or intermediaries. 
Satoshi Nakamoto 

  • Apparently, Satoshi Nakamoto mined the first coins in 2009. It is estimated that his account contains about 980,000 bitcoins, worth about $15.2 billion.
  • Satoshi left the project in late 2010, never to be found again.
Who owns it

  • Bitcoin is an open source technology and no one owns the technology or the system.
How it works

  • Works like an app where one opens an account and pays money in fiat currency to purchase bitcoins, which can be kept in a password-protected digital wallet. 
  • The bitcoin network, however, records ever transaction in a public ledger called the 'blockchain'.
  • Bitcoin is not anonymous and taxmen can trace transactions with the help of technical experts.
Who can mine bitcoins

  • A technologically proficient and mathematical genius can mine bitcoins with the help of sophisticated computers. 
  • Miners use special software and hardware to solve mathematical problems and are issued some bitcoins in lieu of their services.
  • Miners thus help in keeping the cryptocurrency network or blockchains stable and secure. They are paid in bitcoins to maintain the system. 
Legitimacy 

  • Bitcoin has not been accepted as a legal tender by any country and it is largely unregulated. 
  • Some countries such as the US, Canada and Japan are having a softer approach. India has not taken any stand on it.
  • Countries like South Korea, Bolivia, Ecuador, Kyrgyzstan and Bangladesh have banned bitcoins.
  • Bitcoins, seized in anti-corruption operations in Bulgaria, are worth $3.6 billion; enough to retire a fifth of the country's $16.5 billion debt.
  • Ecommerce portals like Reddit, Wordpress, Overstock and Amazon accept bitcoins.
  • Traded at specific exchanges like Bitstamp, Coinbase, Bitfinex and Cryptsy.
  • ATMs exchanging bitcoins for dollars are located in cities like San Diego and Vancouver.

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