Bitcoin – the future of Finance
It exists – the digital economy, far away from your banks and finance ministries. The world’s “first decentralized digital currency” promises financial salvation but it has misbehaved in the last few weeks. The value of an individual Bitcoin, which was just $20 at the beginning of February, hit record highs above $250, before falling abruptly to below $150 on April 11th. Bitcoin was a response to the Global Financial Crisis, the fallouts of which we are still witnessing. The banks in Cyprus have confiscated the money of the Cypriots to partially fund their bailout. So, can any government really promise to protect the value of its currency and be taken at its word? And how – other than by hiding gold biscuits under their mattresses (the gold prices have also started declining by the way!) – can the residents of a country in crisis hope to safeguard their wealth? I tell you the (developing) story of Bitcoin now, every bit of it. This is the fascinating story of mathematics marrying finance and then both deciding to reside in computers.
Bitcoin is a distributed digital currency based on strong cryptographic principles. Each coin is assigned to the owner’s public key, and is transferrable via cryptographically signed messages. Born at the start of 2009 in the aftermath of the global financial crisis – courtesy of a mysterious and possibly non-existent Japanese programmer calling himself Satoshi Nakamoto – Bitcoin is a mathematical invention, combining the attributes of a scarce commodity, like gold, with the frictionless trading of an electronic currency. Unlike other virtual monies, it does not have a central clearing house run by a single company or organisation. Nor is it pegged to any real-world currency, which it resembles in that it can be used to purchase real-world goods and services, not just virtual ones. Its generation and distribution is achieved through the ingenious combination of three factors: “mining”, peer-to-peer networking and cryptography.
Mining, P2P Networking, Cryptography??
So, how do we use the bitcoins?
How can you call this money?
Is there a flaw in these coins?
Are people using it? Is it the only one of its kind?
To know the answers to the above questions and read in detail about Bitcoins, continue to this link.
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