Bitcoin, cryptocurrency and the digital money

 Bitcoin is a new holy-grail and anyone who had it few years back would have made fortunes. Bitcoin surfaced the internet back in 2011 when its value was just $0.93. In 2013 it touched a value of $900 and before April 2022 it was valued at $47,000. Bitcoin came into being in the year 2008 when a pseudonymous person Satoshi Nakamoto published a paper on this new currency and worked on it with a team. Mysteriously, he never met any member of the team and usually communicated over emails. Soon after the bitcoin was launched and was gaining popularity among the tech communities, the founder Satoshi Nakamoto suddenly disappeared and no one knows who he was and where did he go with the 2 million bitcoins he possess. 

Bitcoin is a cryptocurrency based on blockchain technology and was created to act as decentralised currency where the banks and government had no control over it and the users could hide their identities while making exchange over the internet. Bitcoin is not the only cryptocurrency that exists today but there are many of them like Ethereum, Doge-Coin, Solana etc. A person can use bitcoin through an e-wallet and can send or receive fractions of bitcoin in their e-wallet.

Blockchain technology is a shared, immutable ledger that facilitates the process of recording transactions in the business network. The transactions recorded are immutable thus making them free from alteration in future. Every transaction on the blockchain is stored in a block and as such remains there on the network forever thus making the system reliable and secure. Blockchain also finds its use in creation of smart-contracts that is expected to be a game changer in the real-estate ownership, supply chain management, storage of immutable records like, medical records, educational records, property records etc.

Bitcoin has failed so far to act as currency, the Governments across nations are concerned with its decentralised concept and lack of regulations thus is vulnerable to act as a source to fund terror attacks, cyber-crimes, drug dealings, human trafficking and much more. Bitcoin also fails to hold the attributes of normal currency that is to act as a medium of exchange, store of value and unit of account. Instead of being used as a currency the bitcoin is now being used as an asset class for a hedge against the growing inflation. After the recent Cryptocurrency crash in April this year, trillions of dollars were lost which was an indication that such currency is very much volatile to be used a normal currency for every day-to-day transaction. Other reasons that prevents bitcoin to become mainstream is its lack of awareness among masses, large computing power it requires for mining, energy consumption for creation of nodes to complete the transactions. Its volatility, its un-regulation and decentralisation. In future, cryptocurrencies might be used as normal currencies but the question still remains debateable.

Cryptocurrencies are often confused with blockchain technology rather blockchain is a big domain on which cryptocurrencies are build. Blockchain is also being used to create NFT’s (Non-Fungible Tokens), Smart Contracts used in De-Fi(Decentralised Finance), Immutable records and much more. Blockchain is the backbone of Web 3.0 which is the future of Internet after Web 2.0. Blockchain is also being used in the tokenisation of physical as well as virtual assets, which in future may give us chance to own a fraction of NFT, Real Estates or anything of significant value.

Digital currency on the other hand is centralised currency which replaces the paper currency printed by the Governments. The digital currency has a central controlling authority to launch their digital currency and is thus controlled by an organisation whereas cryptocurrencies are decentralised currencies where the control does not lie with any individual or organisation.

Investors are adding bitcoin and other cryptocurrencies to their portfolios owing to the inflation that is making fait currencies lose their values. Fiat currency is the currency printed by the Government which is not backed by Gold or Silver and when such huge quantities of currencies are pumped into the economy, it results in the inflation and sometimes hyperinflation. Experts are of the opinion that bitcoin can act as a hedge against the inflation like Gold and Silver.

Digital currencies on the other hand are digital variants of the fiat currencies. Digital currencies are regulated and have a central authority like Government or Central Banks and are not based on the cryptographic hashes like cryptocurrencies. RBI recently announced to launch its own digital currency. Also, Government of India recently taxed the cryptocurrencies assets @30%. Digital currencies are considered stable in comparison to the cryptocurrencies.

(Author is a tech writer and crypto-Web 3.0 developer. Email: aamirmir001@gmail.com)