The web is part of society and until society is crime free,the web won’t be a crime free zone. So what is a cryptocurrency? It is a decentralized mode of payment in which transactions happen at a cheap cost without any third party getting involved such as banks and financial institutions. It is trust based on peer – to- peer consensus .The payments are pseudo anonymous (not tied to your identity) and sometimes absolutely free. It is very hard to trace the transactions as it not only fast but beyond the national borders. This creates a very exploitative nature to the currency because it is not used legitimately for fast and quick payments.
In the business world it is used for no (or low) transaction fees compared to credit cards. There is also a built in customer base of cryptocurrency enthusiasts .For users it is a way to get rich and make money. Bitcoin is the biggest and the most valuable cryptocurrency that began trading in 2009 followed by litecoin and dogecoin.
Bitcoin is sustainable as interested parties can very easily download the application and start the transactions, worldwide, there are around two million bitcoin users and only a few thousand businesses and service providers which accept bitcoins. 1 bitcoin equals to 21533.01 INRand 325.72 USD as on (22/11/15).
Bitcoin differs from e- money. A user converts flat currency for bitcoins through an online exchange and stores it in bitcoinwallet . The value of a bitcoin fluctuates depending on the demand and supply .The issuer is a community of developers called “miner”, it is mathematically generated by peer network.
Unlike flat money, no group or individual can accelerate or abuse the production of money, instead only a certain amount is produced by the entire virtual currency system at a rate defined and publicly known.
On the other hand the bitcoin market is still very small compared to other payment networks and financial systems the entire network processes about 60,000 transactions per day. there are no derivatives, options or futures markets for bitcoin and other cryptocurrencies. It has malicious implications as many of the laws on the books that apply to the currencies cannot be applied to the bitcoin and due to very limited use of virtual currencies they don’t compete with the banking sector’s payment systems.
There are however, a lot of people buying and mining bitcoins for the purpose of betting. Also the intent of the creator is unknown, nobody knows who they are or how ethical are they? New solutions always create new problems, bitcoin must not allow us to think that it’s not another way of scamming people.
I ,like large number of people, love the concept of bitcoin. Other than being hackable by politically driven attackers (tax collectors, law enforcing bodies, central banks etc.) I believe the internet will redefine the currency. The good news is that bitcoin is not going to disappear anytime soon.
Blog is written by Amy Kaul, Sem III, MBA-FA program, ICoFP Delhi Campus.
