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 specification and also provide a 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 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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