UPSC 2017: Topic of the Day - Bitcoin

Bitcoin

  • Bitcoin is a consensus network that enables a new payment system and a completely digital money.
  • It is the first decentralized peer-to-peer payment network powered by its users without a central authority or middlemen.

Origin of Bitcoin

  • Bitcoin is the maiden implementation of a concept known as “cryptocurrency”. This concept was first described by Wei Dai in the year 1998 on the cypherpunks mailing list wherein he proposed the idea of a new form of money that uses cryptography to control its creation and transactions, rather than with a central authority.
  • Satoshi Nakamoto, about whom nothing much is known, was the first person to give Bitcoin specifications and also provide proof of the concept, which he did in 2009. He provided these in a cryptography mailing list. In 2010, Satoshi quit the project. Since then, the community has multiplied with currently many developers working on Bitcoin.

Who controls bitcoin?

  • The Bitcoin network is owned by nobody quite like how the email technology is not owned by anyone.
  • All Bitcoin users all over the globe control Bitcoin. Developers can improve on the software but they cannot enforce a change in its protocol. This is because all the users have the freedom to opt for the software and version they wish to use.
  • For staying compatible with one another, all users have to use software that complies with the same rules.
  • Because Bitcoin can work accurately only by a complete consensus among all its users, there is a strong motivation among its users to protect this consensus.

Payments by Bitcoin

  • Payments by Bitcoin are simpler to make when compared to a credit or debit card transaction. They can also be received with no merchant account.
  • Payments can be done from a wallet application (on a smartphone or a computer) by entering the address of the recipient, the payment sum, and press the send button.
  • To make it easier to enter a receiver’s address, many wallets can get the address by scanning a QR code or by touching two phones together with NFC technology.
  • Bitcoin can be used like any other money form either online or in a brick-and-mortar store.

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