Bitcoin, cryptocurrency and the digital money

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 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)

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