Bitcoin

Why in news?

• Prices of Bitcoin, the cryptocurrency, has breached the $20,000 mark.

About Bit Coins:

• Bitcoin is a cryptocurrency invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto and started in 2009 when its implementation was released as open-source software.
• It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
• Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
• Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
• Research produced by the University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.

How does it work?

• Bitcoins are generally identified with a Bitcoin address, which comprises 26-35 alphanumeric characters starting with either “1” or “3”. This address, which remains anonymous, represents the destination of a Bitcoin, or a fraction.
• One can acquire a bitcoin by either mining or buying them.
• With mining, a chain of computers is constantly working towards authenticating the transactions by solving complex cryptographic puzzles.
• For solving the puzzles, these systems are rewarded with Bitcoins. This process is called Bitcoin mining.
• Purchases of Bitcoin can be made via exchanges, or over the counter, person-to-person transactions.
• One unique aspect of Bitcoin is that only 21 million units will ever be created.
• However, transactions can be denominated in sub-units of a Bitcoin. A Satoshi is the smallest fraction of a Bitcoin.

Use of bitcoin:

• Originally, the Bitcoin was intended to provide an alternative to fiat money and become a universally accepted medium of exchange directly between two involved parties.
• However, after Bitcoins picked up momentum, some entities started establishing exchanges — on lines of stock exchanges — for people to buy and sell Bitcoins against fiat money such as dollars or euros or pounds.
• Considering the public and open nature of the block chain ledger, proponents of this currency system believe it could help weed out corruption and inefficiencies in the system.
• The rapid rise in prices of bitcoins has also made it an attractive source of investment for many people.
• Bitcoin has been criticized for its use in illegal transactions, the large amount of electricity used by miners, price volatility, and thefts from exchanges.

Prelims Question

Consider the following names:
1.Ripple
2.Ethereum
3.Stellar
4.Thanatos
Which of the above given names are famous cryptocurrencies?
(a)1 and 2 only
(b)2 ,3 and 4 only
(c)1,2 and 3 only
(d)1,2,3 and 4

Answer to prelims question