Bitcoin is one of the most well-known as widely used cryptocurrency in the world. Bitcoin is a global digital currency without the backing of any central bank or regulations of a single administrator.
How do bitcoins work?
- Bitcoins are created as a reward for a process known as mining in which computing power is used to solve mathematical equations which create a bitcoin.
- Like regular currency, a bitcoin can be transacted for other currencies, products, and services.
- However, unlike most other online methods of transactions, a bitcoin can be transacted between users without the use of any intermediaries.
- All bitcoin transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
- In 2017, by one estimate, there were over a minimum of 2.9 to a maximum of 5.8 million users with a cryptocurrency wallet with most of them preferring bitcoins for their transactions.
How Bitcoin gets value?
- In order for a commodity to function as a valuable medium of transaction, there must be a limited amount of it or it would lose all value.
- Hence, the inventors of Bitcoin have planned to release only 21 million bitcoins.
Why is Bitcoin criticized?
- While Bitcoin has been hailed as a technical marvel and a major improvement over the past, it has also been criticized for its possible use in illegal transactions that may be used to fund terror activities and financial fraud.
- The mining of bitcoins also has a high energy consumption and that energy consumption leads to carbon emissions.
- Bitcoins have also suffered from major price volatility and there is a lack of consensus where bitcoins are headed currently.
- Also, while the proponents of Bitcoin has touted it as an investment but several regulatory agencies have warned investors against investing in bitcoins.
Why is it in the news?
The U.K.’s financial services regulatory agency (FCA) has warned any investors against investing in Bitcoins.
The FCA has warned potential investors against investing in bitcoins and other cryptocurrencies as it believes that they have “no intrinsic value,” and it appears that UK may be moving towards a partial or full ban on bitcoins like India.