When almost every task is shifting to the digitized world, from commerce to production (3d printing), it was the turn of money to change its status from being a central bank regulated paper currency to being an unregulated cryptocurrency that is almost set to revolutionize the way we transact.
Back in 2009, this digital currency came into existence, the exact inventor, however, remains unknown till date. Satoshi Nakamoto is said to be the programmer but is that a single being or a group of tech enthusiasts is still a mystery. Bitcoin is based on the blockchain technology where transactions are recorded in a public ledger which guarantees immutable character of the data stored.
Also read : Quietly Seeping Into Financial Infrastructure – The Blockchain
For a layman, Bitcoin is money that is not issued by any central bank of any country, and that can be used in transactions over the internet. But how new bitcoins come into being is a question that seeks an answer.
A new bitcoin is added when any computer programmer ‘mines’ it. This implies solving some complex codes, and the level of this difficulty can be imagined from the fact that one would need a specialized computer and exceptional programming skills to mine a single bitcoin. In initial days, this was relatively simpler, which helped the generation of bitcoins available today.
Now the next curiosity can be on how to own a bitcoin. One can either go for the above ‘mining’ process or can purchase a share in Bitcoin by paying for the same in legal tender of the country one is residing in. Websites have been offering this facility and the craze for bitcoin ownership has reached such unprecedented levels that the value of 1 bitcoin is more than 2000 USD today. In case somebody invested 100$ (INR 4,500) in bitcoin in 2011, it will be worth 200,000$ (INR 1,28,92,000) today.
Does this mean that owning a bitcoin will be a wise bet? Or is it a house of cards? With no legal status and no backing from any sovereign government or any central bank around the world, the risk that accompanies the ownership of a bitcoin is serious.
Investment Pundits, someone as great as Warren Buffett, have termed bitcoin a mirage, something to stay away from. At the same time, other economists have even predicted that bitcoins are only a speculative bubble that is being fueled by the obsession of netizens. While others have compared it with Ponzi schemes that initially produce unbelievable returns but then wipe off the entire wealth since they aren’t backed by any lawful business activity.
While bitcoins promise faster, cheaper transactions by removing any fee charged by providers like Visa and MasterCard, they have also made transactions anonymous, hence likely to be used by terrorists and hackers. One such case was the recent dem and in bitcoins by hackers involved in Ransomware attack.
One who wants to be a part of this ride needs to weigh these pros and cons astutely. Although risks are involved in all speculations, measured risk must be the preferred bet.
Also read: How to maintain your CIBIL score
