Bitcoin is a peer to peer currency that is not governed by any government or central authority. As nobody looks after it, no one to manipulate it or print it or to control it. Many people consider Bitcoin as digital gold, which is an astonishing feat to achieve considering it was invented only in 2009.
With the rise in internet penetration, the world is connected & most of the business is happening online. Almost all the industries have ramped up their tactics to deliver products fast & in a reliable manner. However, the finance industry is still using age-old practices to transfer money. Bitcoin is made entirely for the internet, a global currency that can not be manipulated by any superpower. India is a massive country, yet its knowledge of this new technology is limited to only a few thousand.
People are confused about this & rightly so, as there are not enough posts that explain the technology & other aspects in simple language. So, this post is my effort to make them understand this technology, why this is important & why it is probably the future. I am no expert in this field, however, I am trying my level best to get you introduced to this technology & why it is important for you. Also, there is one surprise at the end, so read this post completely.
India has a lot of unorganized sectors & when more than 50% of the population is below the poverty line, not everyone is connected with the banks & there is still a basic problem of transactions. Some people don’t get the desired amount & some are not all connected & even if connected the process of transferring money takes ages to reach the recipients. Hence a robust banking system is the need of an hour. Not only in the finance but land revenue records, census, food chain & logistic. Blockchain can be a valuable aspect that India is looking for. Bitcoin is proved to be a successful blockchain application that only solves financial markets. However, soon every industry will use blockchain in some form or the other.
India a country with more than 50% of the population is below the poverty line & uneducated as well. Bitcoin to succeed will take time it might take decades. However, India has adopted fast to new technology & if they will find it useful, the adoption time might reduce substantially. But, it is for sure India won’t be the earliest country to adopt to cryptocurrency & blockchain. So, before India sees a massive adoption it needs to educate about this & let them decide. If they want a decentralized trustless system or a central system that can dictate how they should live.
What Is Bitcoin?
Bitcoin is a network that allows one to transact with the other in a trustless fashion & recording the transaction on the open ledger known as Blockchain. (b)itcoin is the reward for making transactions in the (B)itcoin protocol.
So, simply, Bitcoin with capital B is a railway network, bitcoin with small b is a fee that you get to use to the network & coaches that are connected together is the blockchain, an open ledger book (keeps incoming & outgoing records) that can be viewed by anyone who has downloaded Bitcoin protocol.
Bitcoin protocol was developed by Satoshi Nakamoto (the real identity is still unknown). Bitcoin was developed after the financial crisis of 2008; when the world melts down due to recession because of a failed banking system. A robust financial system was very much required & bitcoin was invented to solve this void. People lost faith in governance & its ability to deal with economic meltdown due to greedy bankers. Since bitcoin inception, people laughed it out as a Ponzi scheme. But, a decade later some views have shifted to the other side & they will a trustless decentralized system worked better than the existing financial system. Thus, it is gaining popularity among the crowd.
Why bitcoin is currency?
Currency is the value that one believes in. In simple words, you accept 10 Rs note because you believe that the value of that paper is 10 Rs & government backs the assumption. Similarly, bitcoin derives its value because people believe it is worth something. Till 1971 fiat currency was backed by Gold. However, in the same year, Nixon ended gold backing of US dollars & because the US dollar was the most stable & power currency during that time, the rest of the countries pegged their currency to the dollar. What if the US dollar is not a sustainable currency? If the US dollar fails than most of the world currency will collapse. Gold is one of the alternates. Gold has many properties that made it the most valuable asset for the transaction & thus countries hoard Gold in their reserves for rainy days. The following are some of the properties because of which Gold is the most valuable asset in the world & how bitcoin in its short timespan is competing with it & maybe beating it.
The scarce the asset, the valuable it is. Gold’s total supply is yet to be known. On the other hand, bitcoin has limited supply for 21 million & the last bitcoin will be mined around 2140.
Store of value:
Gold has a store of value as it is recognized by all & as its value is determined by the available supply. Although bitcoin is yet to be recognized by all. It is in the process of the same & with mass adoption, this will also change very rapidly.
As gold is malleable it can be divided into smaller units & each unit will hold its value. Similarly, bitcoin can be divided into smaller units & the smallest unit is known as a satoshi. Thus, the smallest unit is 0.00,00,001
Money can be carried out from one place to another. Physical gold is not satisfying this property as of now. However, bitcoin can be taken to any place you wish without any restriction, you just need a device to hold your transactions.
So, because of the above-mentioned properties, bitcoin is considered as digital gold. Considering the ecosystem is being shifted to the internet & a global currency with some intrinsic value attached to it & is limited in availability, bitcoin holds a higher position than gold.
How bitcoin is generated?
bitcoin is generated through the process of mining. Just like one has to mine earth to find gold, in Bitcoin protocol many people compete with each other to solve a cryptographic problem. The process of solving a problem & in return getting a reward is known as mining. The fastest computer to solve the problem is rewarded with bitcoins. For solving a block miner receives 6.25 bitcoin (as of now). This reward will automatically be reduced to half every 4 years & this process of halving reward is known as bitcoin halving. This is an important concept, as this makes it a deflationary asset rather than an inflationary asset which is in the case of fiat currency or paper currency.
The whole process of solving a problem is automatic & done through the computing power of the CPU. So, when one a miner solves the problem & shares the solution, other miners validate the same & if found appropriate the transaction is captured in the blockchain. The whole process usually takes 10 min on average & the whole process is automated. So, no one can deny anyone a reward as there are enough nodes to verify the transaction.
How is bitcoin useful?
1) Connecting the unbanked:
bitcoin is the best performing use case for poor, helpless people. Maybe not so much for people who are banked but for those who are unbanked. Most of the unbanked people are not considered by the banks as they are not profitable enough. bitcoin solves this problem massively. You don’t need a KYC, credit history, or any other document but a mobile phone to download the protocol & you are connected to the bitcoin universe. It is as simple as sending an email.
International remittance is a huge business & it takes 5% to 30% as a fee to send money from one country to another depending on the receiving country & service provider. Don’t calculate time to receive the payment that is around 5 to 14 days, bitcoin transaction happens in 10 min & the fee is few cents. So, this is one of the reasons why many banks are opposing this technology as this is eating their business.
The transaction made on Bitcoin is from one address to another & any transaction made by the address will be reflected in the account & it is open to anyone who downloads the protocol can check the transactions made to date. An open ledger that can be accessed by anyone in the world.
4) Double spending:
Banks spend people saving money without their knowledge that creates a liquidity issue. Recently, India has seen many banks not allowing people to take out their savings & capped the withdrawals. Spending money that is not there or spending it again is the core of double-spending. Blockchain solves this problem, as it doesn’t allow you to keep money with yourself once you made a transaction. That means once you made a transaction, the same amount will be deducted from your account & will be reflected in other accounts & you can spend what is not there.
The only reliable asset is gold in today’s world. When the world’s finance function is fragile & because of inflation currencies are losing their worth, bitcoin provides to be a perfect solution as it is an appreciating asset maybe not in the short term but definitely in the longer term. bitcoin traded at 0.06 USD in 2009 & now it is trading at 9,000 USD. You can do the math here.
How to buy bitcoin?
bitcoin can be bought either by exchanges or can be earned through mining. Mining bitcoin is costly nowdays as it required a powerful computing system & a lot of electricity. The best way to buy a bitcoin is through traders. Several traders allow you to buy bitcoin at the market price. India is one of the biggest markets in the world that is still untapped. You can buy bitcoin from the following platforms. For India, you can refer to how to buy bitcoin in India?
One of the best apps available to buy Bitcoin in India. Led by a wonderful team of young people this startup found an innovative solution of P2P money transfer to buy Bitcoin throughout the ban. An easy to enroll process & great customer support make this a good bet. You can download the WazirX app from the google play store & AppStore. Only start-up in India to be funded by Binance. Because of high regard from global leaders in this field. Wazirx is one of the best places to buy bitcoin in India.
One of the best exchanges in the world. However, lately, they have come under a lot of criticism for helping SEC to get data on US citizens that are dealing in cryptocurrency & also for the crashing of the website when the price of Bitcoin hit 10,000 USD. Still, it is one of the safest options available & also exchange has some of the lesser-known coins that can be traded. However, the transaction fee is one thing that you should have a close eye on to.
Binance is one exchange that is gaining ground for altcoins. People are jumping to Binance to buy different cryptocurrencies with USD, EUR, etc. Recently Binance started staking platforms for some cryptos which means you will get some annual return for keeping those coins on the platform, a real passive income possibility.
Is it safe?
In simple words, bitcoin is very safe no one can take it from you until & unless they hack your private key. Most of the people get lenient here. After generating a bitcoin wallet, you will be allotted a random public key & private key. If you wish you can generate it by yourself. The public key is your address with which you receive bitcoin, it is visible to all; just like your email id & private key is through which you make transactions, treat it like a password. You can’t send bitcoin from your wallet without a private key. Also, note that exchanges through which you buy & sell are just holding with only access to the public key. The best way to keep your bitcoin safe is by keeping it in the cold storage (a device that is not connected to the internet) in some safe place. As there is no physical representation of the bitcoin, you don’t need to worry about owning a store or safe space. As everything can be held up in a small device as small as your pen drive.
Why you should own some bitcoin?
There will be many questions in the mind of a buyer. Why should anyone buy it? How different it is from the existing system & it is difficult to understand. All such questions are valid.
It is hailed as the greatest innovation since the internet, whereas the internet-connected the world & bitcoin will connect the world financially. It is giving power back to the people in the most trustless & efficient fashion.
But, imagine 1990 when computers have just arrived & sending an email was as tough as giving exams, yet years later everyone is comfortable with it & use it in daily activities. It might seem difficult to use but once you get hold of it things will be smooth. Another important point is in the digital age when everything is online it is a need to have a digital currency that can be transferred on the internet.
When the currency is having an inflationary effect on the economy having a deflationary asset is a must. It can be a safeguard against falling fiat currency.
The price of bitcoin is based on demand & supply. The order book of people willing to sell at a given price & people willing to buy at that particular price determines the price. In 2009 the price of 1 bitcoin was 6 cents & 10 years later it is around 9,000 USD a gain of whopping 10,000%.
The point that most of you are reading this post, the price appreciation if bitcoin reaches the high it is supposed to then the most pessimistic price predicted is 1,00,000 USD & at present, the value of bitcoin is hovering around 10,000 USD. Still a gain of 10x is on the cards in the coming years.
You can read about the bitcoin in Hindi here.