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Cryptoworld: Coining a new currency bit by bit

THE ASIAN AGE. | SANJAY MEHTA
Published : Dec 25, 2017, 6:14 am IST
Updated : Dec 25, 2017, 6:19 am IST

The Bitcoin is digital cash available on the Internet with no intermediary.

The price of a bitcoin can unpredictably increase or decrease.
 The price of a bitcoin can unpredictably increase or decrease.

Bitcoin is digital cash available on the internet. It uses peer-to-peer payment technology with no trusted intermediary, like a bank or any central authority to manage transactions. It is open-source, its design is public, nobody owns or controls it and everyone can take part. The network manages its transactions collectively and because of the monetary autonomy it brings to its users, it is more valuable than legacy systems. For instance, Zimbabwe’s ongoing political, financial and monetary woes due to hyper-inflation have rendered their currency worthless. Citizens and investors flocked to bitcoin as “store of value”. It’s like having a Swiss bank account in your pocket as it is easy to protect, hide and doesn't entail any storage cost. Despite being digital, it can’t be duplicated or counterfeited and so is extremely valuable. All transactions are secured by military grade cryptography.

All bitcoin wallets are compatible as they use the same open technology. The bitcoin network never sleeps, even on holidays! Sending bitcoins across borders is as easy as sending them across the street. There are no banks to make you wait three business days, no extra fees for making an international transfer, and no special limitations on the minimum or maximum amount you can send. It is an emerging market of new customers who are searching for ways to spend their bitcoins.

Accepting a new payment method has often proved to be a clever practice for online businesses. EY Switzerland, formerly Ernst & Young, is the first advisory firm that allows its customers to settle their bills with bitcoins. Time Inc., publisher of People, Sports Illustrated, InStyle and Time, now accepts bitcoin as payment.

Bitcoin also includes a multi-signature feature, which allows it to be spent only if a subset of a group of people authorise the transaction. This can be used by a board of directors to prevent any member from making expenditures without enough consent from other members, as well as to track which members allowed each payment.

Many businesses are required to produce accounting documents about their activity. Using bitcoins allows them to offer the highest level of transparency as that can provide information to verify balances and transactions. Non-profit organisations can also allow the public to see how much they receive in donations.

The price of a bitcoin can unpredictably increase or decrease, hence keeping one’s savings with bitcoin is not recommended at this point. It should be seen like a high-risk asset, and one should never store money that one cannot afford to lose with it. If one receives business payments with bitcoins, one can convert them to rupees for better safety. All transactions are stored permanently on the distributed public ledger network, which means anyone can see the balance and transactions of any bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances.

Bitcoin is an experimental new currency that is in active development. Each improvement makes it more appealing but also reveals new challenges. The Reserve Bank of India says that it has not given any licence or authorisation to any entity or company to operate crypto schemes or deal with bitcoin or any virtual currency. But it does not say it’s illegal. Bitcoin transactions in India are treated as investment in unlisted security or shares. The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed their use and trade, others have banned or restricted it. Likewise, various government agencies, departments and courts have classified bitcoins differently. Japan officially recognises bitcoin and digital currencies as a “means of payment that is not a legal currency”. In the US, bitcoin is taxed as a property, while Australia has officially confirmed it will treat bitcoin “just like money” on July 1, 2017.

The market of cryptocurrencies is fast and wild with new cryptocurrencies emerging every day. Every cryptocurrency comes with a promise but few survive the first few months. Most are dumped by speculators and live on as zombie coins until the last bagholder loses hope of ever seeing a return on his investment.  The revolution is already happening. Institutional investors are starting to buy cryptocurrencies. Banks and governments realise that this invention has the potential to draw their control away. Cryptocurrencies are changing the world, step by step. You can either stand aside or observe, or you can become a part of history in the making.

Cache for cash

  • Bitcoin is digital cash available on the internet with no trusted intermediary like a bank or any central authority to manage transactions.
  • It is open-source and its design is public.
  • Nobody owns or controls it and everyone can take part.
  • It’s like having a Swiss bank account in your pocket as it is easy to protect and hide with no storage cost.
  • Despite being digital, it can’t be duplicated or counterfeited and so is extremely valuable. All transactions are secured by military grade cryptography.
  • Bitcoin allows businesses to offer the highest level of transparency as they can provide information to verify balances and transactions.
  • Non-profit organisations can also allow the public to see how much they receive in donations.

(The author is an entrepreneur-turned-angel investor, who has backed around 70 start-ups)

Tags: bitcoin, swiss bank