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Bitcoin- Everything You Need to Know

Bitcoin- Everything You Need to Know

Bitcoin- Complete Notes For Banking Exams

Introduction of Bitcoin
The Bitcoin is an electronic cash system which can work without any help from the banks or any regulatory authority. It can also be termed as the Crypto-currency or Virtual Currency as it cannot be available as printed forms. The Bitcoin are operated by the Decentralized authority. The availability of the Bitcoins is finite in number and in market there is a supply of approximately 21 million Bitcoins. The Bitcoin is the biggest of its kind on the basis of total market value.
Facts about Bitcoins
  • Bitcoin is the decentralized way to track and assign the economy or wealth.
  • A group of programmers or a programmer named as Satosi Nakamoto invented the Bitcoin.
  • It was first introduced in the year of 2008 and later was released as the Open-Source software in the year of 2009.
  • It uses two types of keys i.e. one public key and another is private key. The public key refers to the username while the private key refers to the password.
  • It is a kind of “Peer to Peer” payment network which is powered by the users without any middleman.
  • The users can earn and acquire the Bitcoin as the payment option for the services and goods, buy it from the Bitcoin Exchange and replace it with some other person.  
  • 1 Bitcoin is equal to 108 Satoshi which is functionally similar as 1 Rupee = 100 Paisa. 1 Bitcoin is approximately equal to 2300 Dollars.
Ways for Earning Bitcoins
  • One can earn the Bitcoin by solving the data blocks.
  • It can be earned by exchanging services and goods.
  • The Bitcoin can also be earned by exchanging flat currency for it and vice versa.

Comparison of Bitcoins with other Online Payment Platforms
  • There is no ceiling in case of fund transfer through the Bitcoins while only Rs. 50000 can be transferred at a time through NEFT (National Electronic Fund Transfer).
  • No processing fees are required for this transaction purpose.
  • Fund can be transferred within only 10 minutes.
  • No Bank account or ID is required to avail this benefit. The users must have the Bitcoin Wallet only.
Advantages of the Bitcoins
  • The transactions are very much secured and completely encrypted. One the transaction is made, it can never be reversed.
  • As there is no influence of any Central or Government Authority, this payment system is free from the charges caused by the middlemen.
  • It can never be stolen.
  • The payment procedure of Bitcoins is very easy. It also provide “payment freedom” to the users.
  • The Bitcoins can be converted into the Dollars easily.
Disadvantages of Bitcoins
  • Not any centralized bank has the authorized Bitcoins. For this reason, there is possibility of illegal transactions.
  • It is completely dependent on technology which sometimes may cause problems. 
  • The Bitcoins can be phished, hacked or be damaged by the attack of malware. In those cases the money would be lost.
  • The legal status of the Bitcoins Exchange is not clear.
  • The People Bank of China and Reserve Bank of India have declared the Bitcoins as the illegal tender. According to RBI, it is a computer program instead of currency.
Risks of Using Bitcoins
  • Market Risk- The value of the Bitcoins is fluctuating. 
  • Risk of Fraud- A private key is used for verifying the owners and registering the transactions. The hacker may sell the false Bitcoins.
  • Tax Risk- No advantage in case of tax is available for the Bitcoin users. It may harm the purpose of investment.
Japan has already passed a law approving the Bitcoins as the legal option for payment within that country. Though in various countries the use of crypto-currencies like Bitcoins are highly encouraged, it fights to achieve the legal status throughout the world.
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