Decoding Bitcoins

Did you ever dream of paying cash virtually, without opening an actual bank account? To many of us it may still seem like an impossible task but back in 2009 pseudonymous developer Satoshi Nakamoto made it possible with Bitcoins. Satoshi posted a research paper of an obscure cryptography listserv describing his design for a new digital currency. No one on the list knew who he was, online searches rendered to obsolete results. Apparently he had used a German mail service but his profile said he lived in Japan. Satoshi gave the world something that has been and will be a huge subject of scrutiny until its credibility is established in coming years.

So, what are Bitcoins?

It is a decentralized, peer-to-peer payment system and digital currency that enables instant payments. Bitcoins is a cryptocurrency, simply because it uses cryptography for security.

How does it work?

Bitcoins can be generated all over the internet, you can either buy them using a different currency or just attained for services provided online. They are transferred from person to person and there is no need of mediators like banks. Apart from that there are no pre-requisites and arbitrary limits.

As a user you can get started with Bitcoins once you have downloaded the Bitcoins wallet on your computer or mobile phone. This will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once.

Who uses Bitcoins?

Anyone on the internet can use Bitcoins. They are used for online transactions. Right now, Wordpress, Zynga, Glassup, Private Internet access are using Bitcoins among a lot of other smaller companies and cafes.  

Bitcoin Mining

Anyone using Bitcoins is a small fraction of the community. There is a need to keep the system stable, safe and secure, and that’s what Mining does.  Miners solve math problems for Bitcoin users and they are responsible issuing and approving the currency. This regulates the flow of currency and secures the system. A miner can either operate solitary or be a part of a mining pool. The more the miners the more secure is the system.

Bitcoins In India

Reserve Bank of India has cautioned people using Bitcoins but stated any regulation on it would come only after it understood the subject. Laxmicoin, India’s own version of Bitcoins has sought clarifications from regulatory authorities before its launch that has already been delayed. There are still a lot of speculations on how and when Bitcoins will come to India.

The Bitcoins Alliance India claims there are 30,000 Bitcoin holders in the country, currently in possession of 1 per cent of around 12 million Bitcoins in circulation across the globe.

Will Bitcoins work?

In its nascent stage itself Bitcoin has undergone a steep fall and rise. The highly volatile value of Bitcoin has led to great criticism and doubts are being raised on its use as currency. Few are willing to use a currency with a highly variable value. A lot of people have suggested using Bitcoins instead of national currency in countries facing economic crisis, as it can circumvent inflation. Its tendency to fluctuate has encouraged hoarding and Bitcoins theft has been reported a number of times.

There are many speculations, questions on the use and regulation of the digital currency. The Bitcoin might or might not shimmer in the future but it certainly is the most remarkable contemporary technology.   

Image Courtesy: FluxTrends