Bitcoin is the most famous form of digital currency. The term bitcoin is used to represent a class of digital asset and a payment system invented by Satoshi Nakamoto. Normally BTC is used to represent the coin. The technology adopted for creation, distribution, storage, transaction and accounting is known as block chain. In this method, the bitcoin transactions are recorded in a public distributed ledger. Bitcoin system is peer to peer (P2P) and users transact directly without an intermediary like bank.
Bitcoin was released as an open-software in 2009. Since then, it has emerged as a worldwide digital currency and payment system. Physical currency in each country is released by central bank of the country which acts as the central repository. Bitcoin has no central repository. It is labelled as the first decentralized crypto currency.
This currency is created as an incentive for carrying out payment processing work. Users offer their computing power to verify and record payments into a public ledger. Systems with very high computing power are required for this activity. This process is called mining and the miners are rewarded with newly created bitcoins. Bit coins are presently used for exchanging with other currencies, various products and services.
Bitcoins can be procured by exchanging other currencies at the prevailing exchange rate plus a nominal commission. The exchange rate of bitcoin is a market determined one and undergoes huge fluctuation based on demand –supply position. As of August, 2017, one bitcoin valued approximately USD 3,500 compared to around USD 800 in the beginning of the year. 16.4 million BTCs are outstanding as on date. The smallest unit of bitcoin is named satoshi.
Financial regulators and governments are concerned about the rapid growth in the usage of bitcoins as the currency is widely used for terrorism financing and settling black market and illegal transactions. Compared to transactions in regulated currencies or credit cards, the fee charged for bitcoin based transactions is very nominal. Also an owner can keep the currency in his digital wallet without revealing identity.
Bitcoin is not available in physical form. It is not backed by any government or central bank. However, the digital currency acts as an alternative for physical currency or even commodity like gold. Due to this, it is has high popularity and the total value of bitcoins in circulation is estimated to be above USD 56 billion, in August 2017. Majority of central governments have warned that only those who are ready to absorb speculative risk shall possess the same as the currency is highly volatile. Even then, many countries have neither officially banned nor acknowledged the currency, but are planning to tax the gain arising from holding the digital asset. Digital Currency: Positive and Negative Features