The Beginning of Digital Currency: Bitcoin
You might have heard a lot about Bitcoin these days, the new digital currency...
Let us put some more light on this new technology and try to demystify a few things around it. Bitcoin is often referred to as crypto-currency having no certified issuing authority and can be circulated till a predetermined amount. It can be used for global payment transactions. It is a peer-to-peer sharing system and can be considered to make a great change in the field of global eCommerce.
Now how it works??
Bitcoin uses wallets stored in your computer having address keys and all transactions are made using these address keys. Users then send payments by digitally signing messages to the network. Miners verify these transactions and record it in block chain, which is a shared public database, and for which they are charged some transaction fee. They are available in exchange of currency, or products.
How the Wallet works?
Bitcoin technology uses public-key cryptography, which generates a pair of cryptographic keys, out of which one will be public and other will be private. A collection of such keys are kept in wallet. During transactions, Bitcoin transfers the ownership of this key to another new address, which is an alphanumeric string through encoding scheme and the private key is used for safeguarding. A valid payment message will include the public key and a digital signature which shows the control on the related private key. So, one has to protect the private keys for security, which remains an on-going fear. Ways has to be found to eliminate problems related to the theft of private keys.
The technique was first found in 2009, and can be purchased for conventional currency through online exchanges and is now getting accepted for payment on some of the eCommerce sites. Currently the law enforcement agencies are studying its potential use and the issues related to money laundering and the illegal purchase.
Recently we have heard a lot about its involvement in several unlawful activities. Due this, it has been banned in China by the Central Bank of China thus affecting its universal effectiveness. The U. S. is the only country currently supporting Bitcoin.
The question is.... Can Bitcoin be used for mass-market requests???
Why should people use it when there are lot many options like cash on delivery, and online payment?
The only reason why eCommerce marketers might start using it is that its transaction fees is less than 2-3% as compared to any other payment modes.
The more people start using Bitcoin, the more the value of each (bit)coin will rise. Bitcoin administrators should focus on expanding their networks to improve their growth rather than introducing more and more new coins.
Once the technology becomes popular amongst the common people, it can improve the amount of its usage and make itself acceptable by the sellers and buyers. Only then will this digital currency start becoming stable, as currently its value keeps on fluctuating. At this point of time retailers are avoiding it just because of the uncertainty in its value. Today its value may be $500 and the next day it might sink to $100, having a devastating impact on the retailers.
The issues related to Bitcoin keeps on coming up again and again... It is high time that it needs to prove its worthiness....
Till then we will have to wait and watch!!
Check out this simple Inforgraphics describing how BitCoin works:
Image source: www.online-accounting-degrees.net
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