Bitcoin – is future of all currencies?
Bitcoin – is future of all currencies? Do you think same? Is it really have the potential to dominate on all other currencies? Okay no more delays to this very big question, let us first understand about bitcoin and the possibility of replacing all currencies by bitcoin in future.In very early days of mankind, there was no money or currency system anywhere. At that time people used to follow the barter system. Barter is an exchange of one good for another one. Suppose, if anyone want a pair of socks and he has 1 kg of rice, then that will be the exchange: 1 kg of rice for a pair of socks. But barter system had many limitations. There was no standard set of exchange. What if I have to buy a house then how much rice I should carry? Carrying and storing goods for exchange was inconvenient.Because of all these limitations gold coins replaced the barter system. Gold was expensive, hard to be forged. So in the middle age each country had gold coin with their king’s face engraved on it as their currency. But again taking a lot of gold coins for trade was inconvenient and unsafe. So, gold coins were replaced by paper currency.
Evolution of Paper Currency before Bitcoin
We are following paper currency in this era. Paper currency is managed by some governmental and economical institutions. Each country has their own form of paper currency managed by their own government and economical institutions. Here no country could print unlimited number of currencies, there is some limit.
If any country’s government provides “x” quantity of gold to the economical institution, then only the institution starts printing “y” value of currency. There is some standard set for that. And also, there should be some balance between the inflow and outflow of cash, otherwise it would lead to drastic change in inflation rate which could also affect the employment rate.
Disadvantages of paper currency
Along with paper currency, plastic currency i.e. credit card, debit card etc also evolved. Since the paper and plastic currencies are managed by government and economical institution, we don’t have any privacy over our transactions.Government or institution or the money app you are using, have all data about our transactions. What amount transferred, to whom, by whom and every detail about the transactions? Also paper currency can be forged easilyFurther, accounts can be hacked and money could be swiped off within a second. And if any human error is introduced during printing or counting or any transaction of the money, our huge money or country’s economy could be at stake. So here comes the bitcoin currency, which is certainly evolving. We could only analyse things or debate over its worldwide acceptance.
Bitcoin evolution – a new cryptocurrency
Bitcoin is a digital currency or we can say concurrency. Now what is cryptocurrency? In layman terms we could say that it is a limited set of records or digital information stored in some database which can be changed with strict specific conditions. But in technical terms, it is an electronic currency as a chain of digital signatures.
It is a peer to peer digital cash system introduced in 2009 by an unknown person Satoshi Nakamoto. And that person is still unknown.
Elimination of Middleman
The main motive was to eliminate the middle man or third party between the transactions. Or in others words the motive was to decentralise the whole cash payment system.
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For example, when we transfer some amount of money to anyone that transaction is recorded in the database of your bank. The bank is aware of all your activities and critical data. Satoshi Nakamoto not only did that but also created a virtual currency Bitcoin and introduced a new robust technology Block-chain.
This system uses the public encryption key. Each owner transfers the coin to the next by using hash code of previous transaction and the public key of next owner by adding these to the end of the coin. The payee verifies the transaction by verifying the signatures and chain of ownership. Block-chain allows the digital informal to be distributed but not to be copied.
Now the question is if there is no third party then how these transactions are controlled and managed?That’s the biggest thing in this technology. User’s Nodes on the network manages this technology. In simple terms, whenever any transaction happens that transaction is broadcast to all the user nodes. But the transaction’s information is not saved immediately but stored in a block of each user’s node mean while. So in this pending mode the transaction can be forged. And that’s the best thing with this technology, only that transaction can be forged but not the whole network. Hence the honest nodes would be able to identify the forgery because the information is stored in the chain of blocks.When the specific user’s node or the miners validates the transaction with some complex calculations, the details are confirmed and saved permanently in the database of all users. For this work miners get rewarded with a bitcoins. Miners play most important role in this network.
What is Miner’s work?
Can anyone become Miner on the cryptographic network? Yes, but there are some rules set to qualify for the role of a miner. Since the network is decentralised and there is no third party then there must be something or somebody doing the validation task and preventing the abuse.
So Satoshi Nakamoto set some rule to qualify for a person to be a Miner. Miners have to dedicate some time on their computers to find a hash (of the new transaction block which have been broadcast to all) which is a code from a cryptographic function that connects a new block with a predecessor. This is called proof of work.
Is it overall Network’s Work?
• Any new transactions done are broadcast to all the nodes or users.
• Each node collects the information about new Transactions in a block.
• Each node tries to find a difficult hash code which is called proof of work from a cryptographic function to be a miner.
• When any node finds the proof of work, then it broadcasts its verified block to all the nodes.
• Nodes accept that block only if all the transactions are valid and not already spent i.e. double spending is not allowed in this system.
Now what is double spending? Suppose ram has 500 in his account and he transfers that money to Mohan. And by forging or hacking he tries to spend that 500 again to shop. This is called double spending.Nodes express their acceptance of the block by creating new block in the chain by using the hash of the accepted block and public key of next block.
Paper currency vs Bitcoin
1. Paper currency is diverse in different countries while Bitcoin is world-wide same.
2. Paper currency is not secure. It can forged to double-spend or your account can be hacked easily. But Bitcoin is the most secure system with the advance encryption techniques. It can’t be forged or hacked.
3. Paper currency is based on trust. Trust which comes with a sign of Economical institution. While bitcoin is based on standard and hard to crack codes and calculations.
4. Paper currency have high tendency of human error and can cause huge loss of economy. While bitcoin is all about robust algorithms and encryption techniques which removes the chances of human error.
5. Paper currency is widely accepted over the globe but Bitcoin is just evolving.
6. Paper currency is a centralised system which an authority. But Bitcoin is a decentralised system and can’t be controlled by any single authority.
7. Paper currency introduced the third party over the transactions by compromising our sensitive data.
While bitcoin’s main motive is to eliminate this third party system. It is a peer-to-peer system, so transaction details remain between sender and receiver only. Bitcoin ensures more privacy to our information about transactions, credentials, data etc.
Is Bitcoin future of all currencies?
Bitcoin’s uplifting value is fascinating everybody. In the early days, it was being considered as a fraud. Since the inventor Satoshi Nakamoto was unknown and is still unknown.
Many people claim that may be Satoshi Nakamoto is not a single person but a group of persons who developed this cryptocurrency. Despite of its past, bitcoin is strongly evolving. In the recent two years it has came under the lime light and under the media coverage. The biggest reason is the attacks made on the stock market and individual online properties. For example, the recent ransomware “WannaCry” seriously let most of the people cry. To avoid such attacks, at present bitcoin or cryptocurrency is the best option.
Usage of Bitcoin – Can it be used everywhere ?
Yes that’s correct, it is being used almost everywhere. It can be used to shop, travel etc. But most of the people are taking this as a trade or investment. At present the value of one bitcoin in Indian currency is about four lacks. Most of the professionals are accepting it as a evolving business opportunities. Especially the block-chain technology has opened many doors for the new investments and businesses. Many highly ranked companies like Microsoft, Paypal, Dish Network etc. are accepting this crytocurrency as future currency and also using it. Not only only companies but also few countries like US, Canada, Australia etc. have accepted this cryptocurrency and working on its developments.While most of the countries like China, Russia, Vietnam etc. still calls this a fraud.
Why Bitcoin to be used?
There are very strong reasons to use bitcoin
• Bitcoin keeps our transactions private and anonymous due to its decentralised nature.
• Provides us the payment freedom. We can transfer money to anybody and anywhere. There is no boundary, holiday or strike of bank, intermediate system or any payment limit.
• Payments or transactions through bitcoin have very low transaction charges and sometimes there is no charge at all. If a person has to transfer money immediately, he may have to pay some charges. But, in comparison to other payment systems, bitcoin’s transaction charge is negligible.
• Bitcoin is secure and irreversible with end to end encryption. It can’t be forged.
• Bitcoin is fast in comparison to any bank’s or wallet system.
• Government can’t monetise or demonetise this currency, as recently done with the 1000 Rs and 500 Rs note in India.
• People can’t hack your money or critical data.
• In the bitcoin system, users can even create money by doing the crucial job of miners.
• This currency is non-inflationary since there is a fix no of bitcoins in the system, which is the advantage of a stable economy. Perhaps, this is the reason bitcoin is called the future of all currencies.
Why bitcoin is still not acceptable?
• It is not widely acceptable. Most of the people are not aware of its fundamentals and working, since it is associated with a lot of technology complexity.
• This currency is volatile, since its rate varies at very high pace. So a genuine buyer would never want to endure that risk.
• For black market, bitcoin is the best option. Since there is no authority to track your illegal transactions. Best way to increase corruption without any fear of loss of privacy.
• Bitcoin is still in its development stage and many of its features are not complete. And most important, the inventor is still unknown.
• Since Bitcoin is interference free but still any country’s government can ban it anytime.
That was all about bitcoin’s basics, technology used, working and future. But, with a lot of pros and cons, thought of ‘Bitcoin – is future of all currencies?’ is still sceptical. Many companies and countries have accepted it with open arms and many have banned it by calling it a fraud. So, let’s just wait and watch, weather bitcoin or any cryptocurrency will be the future currency or we will be still relying on the centralised and vulnerable economical institutions.
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