Bitcoin is a digital currency. The charm of bitcoin lies in the following factors:
In India, RBI had restricted banking access to dealers in cryptocurrencies. It was based on the premise that GDP calculations of a country are disturbed, if money circulates in circles not regulated by the Government of India. However, Supreme Court overruled the decision stating that it was beyond their purview to issue such a diktat.
The judgement has eliminated fears about so-called ‘illegality’ of the trade.
Bitcoins are created by a very complex computer program. The creator of bitcoin, Satoshi Nakomoto, has declared that the number of bitcoins in the world will never exceed 21 million.
Think why gold is considered a precious metal, or why have the prices of platinum dipped? It is all about scarcity and availability.
Many a times, both the terms are mentioned in the same breath….
Bitcoin is a computer program, as we have mentioned above and Blockchain is the framework on which it rests.
Blockchain is considered secure, because every transaction is split in three parts.
Blockchain is a technology, which is increasingly being used by business and financial institutions to secure transactions. It is considered to be the ‘internet of the future.”
An introduction to Blockchain is needed to clarify why is it considered so secure, and why are institutions using it to build a strong foundation for the future.
Blockchain operations can be described in short, as follows –
2. A block representing that transaction is created
3. The block is sent to every node in the network
4. Nodes validate the transaction
5. Transaction is complete
6. Update is distributed across the network
7. The block is added to the existing chain
8. Nodes receive a reward for Proof of Work
The secret lies in steps 3 and 4. Since validation is required from all nodes, fraudulent transactions done by manipulating one node are not possible.
The simplest possible definition of Blockchain is
Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.
Is bitcoin the only cryptocurrency in the world?
No. The well-known cryptocurrencies are listed below.
Mining will take several days and hours and deep knowledge of the procedures.
One can buy it from bitcoin dealers or miners. There are cryptocurrency exchanges where currencies are bought and sold, just like shares in the stock market.
Yes. The use of cash or fiat money arises at 3 points in cryptocurrency transactions.
Yes. Income earned on trading cryptocurrencies is taxable, just like income earned from any other source.
Taxable income =
Value received on exchange of cryptocurrency – cost of acquisition of cryptocurrency
Details of taxability are available on the given link
2. Near instantaneous settlements
3. Cross-border payments at high speed
4. Being an international structure superimposed on national economies, the impact of political changes on your wealth is minimised.
I came across an interesting quip, and I reproduce it here.
“You say that you do not believe in paper money or governance systems, and would like to take care of your own money. You are strong enough to bear the risk.”
The least one can say is stock investors too play at a certain level of risk.
A decentralised peer-to-peer network, powered by users and which allows no intervention from state authorities threatens governmental control on money. Hence, the responses have been less than enthusiastic.
However, governments across the world have come to accept the inevitable. Hence, they are using blockchain technology to build a cryptocurrency above it. China has taken the initiative of doing a digital yuan.
Since information available in public domain is limited, further discussion on the subject is not warranted at this point of time.