Bitcoins: The next big thing?

The hardest thing in the world is to understand income tax, or coming to think of it, money. We started off with the barter system, didn’t take us long to realize we need a standard of comparison for the various genre of products being exchanged. A commodity was picked, given a value and thus, became the means of trade. Money came into existence first as shells, then gold and silver; it saw itself taking the form of copper coins, then metal and final paper, well, something that looks similar to that. Man has always taken pride in his sense of reason and worked to take a step further. In the light of that aim came the first decentralized virtual currency “bitcoin”.

That’s a lot of new terms thrown at your face, I agree. You go into the shopping mall with literally nothing in your pockets but virtually, thousands. One click, a few details entered and done. Money is transferred into the other party’s virtual wallet. The money is time stamped and also has your signature over it. How is it any different from Net Banking? It does not acknowledge the presence of any centralized bank to facilitate this transfer. Its “Peer to Peer” or the P2P network unlike the conventional system of money which works center to people.

The concept of being decentralized is slightly more interesting than it seems. Every person who wants bitcoins has to “dig” them and this is called bitcoin mining. Programming geeks just created a string of code and let if function on its own creating a public network. This network is not handled by any third party and you can go, create yourself “an account” by loaning some of your computing power and storage space. You loan more space and write more code to sustain the network, the more you are paid in bitcoin.

Each miner solves something similar to a math problem and is paid back in bit coins. The more the number of miners, the more people approving of bitcoins the safer it is. Depending upon how easily the problems are solved its complexity keeps increasing. Graphics card, miners realized, was a more useful tool than normal programmer and later on, special chips (asic-Application Specific Integrated Circuit chips) began to come into production for the sake of bitcoin mining. Pool mining began because collective thoughts give more than a single mind.  Of course there is a certain limit of the amount of bitcoin that can be mined and just like all the money in the world adds up to a constant, the final amount of bitcoin will be less that 21 million.

The value of the bitcoin is variable depending upon the availability, import export, use in trade and other reason like the conventional fiat currency except for its more volatile nature. The value of bitcoin can change upto $200 in a single day. For example, China banned the usage of bitcoin and its value fell drastically. On the other hand, with a lot of media publicity about the bitcoins people began to invest again and its value escalated.

There are no charge backs or fees, it is free and thus freelancers, specially, take less time to get recognized. The bitcoin is doing what the internet did to the publishing industry. Allowing access to everyone.

It is more convenient, a bigger technology and the next big step in the history of the coins which have finally reached the 0’s and 1’s (bits) and has probably come to stay. Every new innovation comes with its set of side effects. In this case, the same old using it for the wrong purposes, easy way for fraud etc. But, not taking steps like these would mean stagnating the world of creativity. History and human ability has proved that its positive side pays back way more.

 

 

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