Bitcoin, Cryptocurrencies and blockchain

Bitcoin – Cryptocurrency:

So recently we all read about the downfall of bitcoin due to the backdrop of Chinese regulators, and when Tesla CEO Elon Musk announced that the electric carmaker Tesla won’t be accepting Bitcoin as payment, Before getting into this why does this happen we need to get some answers like what is Bitcoin and Cryptocurrency. Then we will be able to understand what happened recently.

What is bitcoin?

It’s a digital asset designed to work as a medium of exchange that uses cryptography (The art of writing or solving codes) to control its creation and management, rather than relying on central authorities. Bitcoin is a digital currency where all records of all transactions are in a decentralized system.

Bitcoin is not a Physical coin but is a network of computers that maintains information of all transactions.

But why we need a decentralized system?

The answer is trust. But in 2016, after demonetization, the 500 and 1000 denominations were banned. All the Currencies we are using are Fiat currency. Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.

Features of Bitcoin

• Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously.
• No single institution controls the bitcoin network.
• It’s like an online version of cash. You can use it to buy products and services, but not many shops accept Bitcoin yet.

What is Cryptography:

Cryptography is a method of protecting information and communications through codes so that only those for whom the information is intended can read and process it. The prefix “crypt-“ means “hidden” or “vault” — and the suffix “-graphy” stands for “writing.” Cryptography uses a cryptography system ( AKA encryption) to control the creation of coins and verify transactions.

Bitcoin Public Ledger:

A public ledger derives its name from the old record-keeping system used to record information, such as agricultural commodity prices, news, and analysis. The public ledger was available for general public viewing as well as for verification. 

Cryptocurrency-based blockchain systems emerged, which rely on a similar record-keeping and public verification mechanism; the use of the general ledger gained popularity in the world of Cryptocurrency. 

• A cryptocurrency public ledger is a record-keeping system.
• The log maintains participants’ identities anonymously, their respective cryptocurrency balances, and records of all the genuine transactions executed between network participants.
• All confirmed transactions from the start of Bitcoin’s creation are stored in a public ledger.
• This complete record of transactions is kept in the blockchain,
• a sequence of records called blocks.
• As of late 2016, The Complete Ledger is about 107 GBs of DATA.

History of Bitcoin

Where bitcoin started?

On November 01, 2008, a man named Satoshi Nakamoto (Unkown identity) posted a research paper to an obscure cryptography listserv describing his design for a new digital currency called bitcoin. The idea of digital money-convenient and untraceable, liberated from the oversight of governments and banks had been a hot topic since the birth of the Internet.

• One of the core challenges of designing a digital currency involves something called the double-spending problem.
• Double–spending is the risk that a digital currency can be spent twice. It is a potential problem unique to digital currencies because digital information can be reproduced relatively easily by savvy individuals who understand the blockchain network and the computing power necessary to manipulate it.
• The conventional answer involved using a central clearinghouse to keep a real-time ledger of all transactions-ensuring that if someone spends his last digital dollar, he can’t then spend it again. The ledger prevents fraud, but it also requires a trusted third party to administer it.
• Bitcoin did away with the third party by publicly distributing the ledger, what Nakamoto called the “blockchain.” This made Bitcoin a decentralized currency.
• Users willing to devote CPU power to running a particular piece of software would be called miners and would form a network to maintain the blockchain collectively. In the process, they would also generate new currency.

How to mine bitcoins?

Bitcoin mining is the process by which new bitcoins are entered into circulation, but it is also a critical component of the maintenance and development of the blockchain ledger. It is performed using very sophisticated computers that solve incredibly complex computational math problems.

• By mining, you can earn Cryptocurrency without putting down money for it (Get Money from Money).
• Bitcoin miners receive Bitcoin as a reward for completing “blocks” of verified transactions added to the blockchain.
• Mining rewards are paid to the miner who discovers a solution to a complex hashing puzzle first. The probability that a participant will be the one to find the answer is related to the portion of the total mining power on the network.
• It would help if you had either a GPU (graphics processing unit) or an application-specific integrated circuit (ASIC) to set up a mining.

Why are Bitcoins valuable?

There are lots of things other than money which we consider valuable like gold and diamonds. The Aztecs used cocoa beans as money! Bitcoins are helpful because people are willing to exchange them for authentic goods and services, and even cash.

Bitcoin prices rose by 60% over a month in the year 2017:

Bitcoin value rises over $1 billion as Japan, Russia moves to legitimize Cryptocurrency. Japan passed a law to accept bitcoin as a legal payment method. Russia is reportedly looking into ways to regulate bitcoin. Japan is the largest bitcoin market in the world.

Advantages of Bitcoins:

• With Bitcoin, it is possible to send and get money anywhere in the world at any given time.
• You are in control of your money with Bitcoin. There is no central authority figure in the Bitcoin network.
• With the blockchain, all finalized transactions are available for everyone to see. However, personal information is hidden.

Disadvantages of Bitcoins:

• The fact is many people are still unaware of digital currencies and Bitcoin
• Bitcoin has volatility mainly since there is a limited amount of coins, and the demand for them increases with each passing day (21 million Bitcoin by the year 2140).
• Bitcoin is still at its infancy stage with incomplete features that are in development.

What is India’s stand over Cryptocurrency?

After the year 2016 Demonetization, Indian citizens started taking Bitcoin very seriously. They needed a source of currency exchange where no middle-man is no hand of governmental institutions. But with this, many frauds started happening in India related to Bitcoins. After RBI came to know about these frauds, RBI noticed that no bank would offer services to cryptocurrency exchanges.

But this case was taken to the Supreme court of India and on March 04, 2020, and gave a verdict that struck down RBI’s crypto ban by calling it unconstitutional. Article 19(1)(g) says everyone has a right to conduct trade or business. The apex court said the freedom to create something that doesn’t violate any existing rule is an unsaid fundamental law.

Hence, citizens have the right to create a new industry of cryptocurrencies and exchanges along with the fundamental right to trade, it said. The bench also said that the central bank hadn’t demonstrated that trading in such currencies was damaging to its regulated entities.
At the same time, the Apex court has said that banking is also involved in this system so that RBI can regulate cryptocurrency exchanges.

Major issue from Bitcoin exchange

• Cryptocurrency is highly uncertain, and Cryptocurrency can go up and crash without any warning Bitcoin crash 65% between January and February and 2018, and recently in 2021 in the starting of May 2021 crashing as much as 30% within 24 hours.
• As any government does not back Cryptocurrency, so Cryptocurrency is used for criminal activities. On December 19, 2020, a boy age eight was kidnapped for Rs 10 Crore, and the kidnappers said the mode of the transaction should be bitcoin. Cryptocurrency is anonymous so tracking it is difficult.
• Also, the main reason people invest in crypto to evade taxes and hide black money.

Why did the cryptocurrency market crash?

The cryptocurrency market saw a significant correction with prices of major currencies, including Bitcoin, Ethereum, BNB, and others, crashing as much as 30% within 24 hours. This came in the backdrop of Chinese regulators and when Tesla CEO Elon Musk announced that the electric carmaker wouldn’t accept Bitcoin as payment.

What has China announced about cryptocurrency?

China has barred financial institutions and payment companies from providing any services related to cryptocurrency transactions. This means that banks and online payment channels must not offer clients any service involving cryptocurrencies, such as registration, trading, clearing, and settlement.

What happened in the cryptocurrency markets?

According to crypto-trading platform Binance, as of 7 pm IST May 19, 2021, Bitcoin, the most well-known Cryptocurrency, was trading nearly 21% lower than its price 24 hours earlier at $34,693.1.

Another popular cryptocurrency Ethereum was down 25% at $2,453.15, while Binance Coin was down almost 31% at $353.12.