BITCOIN-ENLIGHTENING

DIFFERENT ASPECTS OF
CRYPTOCURRENCY
Student’s Name

DECEMBER 11, 2017

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Contents
Introduction .................................................................................................................................................. 2
Cryptocurrencies what is truth? ............................................................................................................... 3
Literature review:.......................................................................................................................................... 5
What we have concluded: ............................................................................................................................ 6
Findings: ........................................................................................................................................................ 7
Recommendation.......................................................................................................................................... 8
Conclusion: .................................................................................................................................................... 9
1. Globalism .......................................................................................................................................... 9
2. Security ........................................................................................................................................... 10
3. Democracy ...................................................................................................................................... 10
REFERENCES: ............................................................................................................................................... 11
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Bitcoin- Enlightening different aspects of cryptocurrency

Introduction
We live in the age of technology and computer. Cryptocurrency has become well known to many

people but along that many of the people, countries and governments do not value the importance

of cryptocurrencies. It is important to note that cryptocurrencies are not meant for the geek heads

only, but it will soon take the place of money we use. Cryptocurrency is the future of money. It

can be easily predicted that in future people will have a hard time finding a bank, financial accounts

and investment agencies because in no time people will shift onto cryptocurrency. The block chain

method has already been introduced to the world. Soon, everyone will be using this digital money

for all their purchases and sales. Bitcoin is also one of the cryptocurrencies. It holds more

importance because it has been commonly famous.

Many people don’t know that cryptocurrency was not meant to be created as it is today. The

unknown inventor of Bitcoin, which is entitled to Satoshi Nakamoto, also states that he never had

an intention to create this digitized money. He wanted to establish a digital cash system which

would have been decentralized. He was in the view to create a peer-to-peer electronic cash system,

which turned out to be cryptocurrency and bitcoins. This system was being invented since early

90s but all other systems failed to deliver what bitcoin proved to be exact what was needed, a

digital cash system.

This was how the concept of cryptocurrency evolved by Satoshi, it was the time when no one

believed that something like this could happen. No one had a clue that a system like this could be

real and working, until Satoshi made it happen. To learn how this cryptocurrency works, it is no
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big deal. Digital cash is transferred, transactions are made, and payments are done by payment

networks, accounts. Often of the times, these network groups are using a central server to avoid

problems like double-spending. Double spending is a phenomenon in which the same entity spends

same amount for two times. These central servers used in these networks prevent this, by keeping

tracks of balances and accounts. Central servers are used in centralized networks, decentralized

networks do not have servers. In this type of network every entity does its own job in the network.

Every system in the network will have a complete information about each other system present in

the network. In this way, every entity will ensure if the transactions are true or just a fake attempt

of double spending. In this type of networks, if one system or entity goes down the whole system

has a chance to break. They need all time backup, for which a central authority is declared which

keeps the records of correct transactions and manages balance. To meet the requirement of

decentralization this central device is to be removed, but how it will work then? Satoshi worked

on this and made it possible.

Cryptocurrencies what is truth?

If we look into simpler definitions of what cryptocurrency is we will find out that it’s just a

database having limited entries, these entries cannot be changed until some conditions are fulfilled.

This is how any currency works, you specify some conditions and get what you want. You pay for

goods and other things, similarly, to get bitcoins you have to specify and fulfil some conditions.

This system works on simple cryptography concept of sending the public key to other system. The

transaction is broadcasted to network, which means every machine on network will know about

the transaction being made, but no one will have access to private key. After a short amount of

time, it is approved by the network. This approval is the key concept of cryptocurrency as it is one

critical process of all this. Until the transaction is not approved by the network, it is in pending
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state and can be forged. Contrary to that, when a transaction is confirmed, it can never be reversed,

neither it is forgeable. The record is maintained and that cannot be undone. This is why this whole

process of mining cryptocurrency is known as “block-chain“. These transactions are confirmed by

the bitcoin miners, it is their job to monitor transactions, mark them as legit, and pass it on to the

network. Once any node of the network confirms transaction, every other node adds it to the

database they are having, just like any other p2p network. This is also a part of block chain. Miners

also get bitcoins for doing the most crucial task here [8].

Image credits: Block geeks

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Literature review:
Let us dig a little deeper by reviewing a few research studies on the topic. This will help us illustrate

what impact bitcoins are having on us.

In Tim Swanson’s [6] paper the past, present and future is discussed for bitcoins. He has debated

that bitcoins do provide a hidden economy, an infrastructure providing a source to have your own

private money, on which state is not lawful to you. He also states that all time when bitcoins are

fetched this money is not safe, a minor percentage of the bitcoins approximately 30% is lost, stolen

or somehow distorted from its legal owner. The block chain process has its own risks. The paper

also discusses about how this de centralized block chain method can be monitored for scams and

some reserve procedures in this process are evolved for better transfer and transactions. Just like

in the case of true money, the bank provides some incentive to overcome such challenges.

David [3] discusses if Bitcoins should be given a status of money or not? He has done some

extensive work by discussing the history and background of Bitcoins, how they were initiated and

work? He has described that bitcoin should not be given status of money because it definitely lacks

the characters that are considered crucial for money or traditional currencies. It can never be

deposited into a bank account, instead digital wallets are used for this purpose. There is no

insurance for bitcoins contrary to paper money which makes it more risky. Bitcoins cannot be used

for paying taxes, mortgages and other financial credits. The absence of these factors make this

vulnerable to risk and questions. At the end he has concluded, that it might take a long time to

prove bitcoin itself as a bona fide form of currency. Till the time when it can be used as a

commercial unit in the markets. No common person can mine bitcoins due to the extensive

information of computer and networking required for this. Bitcoins are likely to suffer from the
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legality by other countries as well just like America and China, the reason behind this is that most

of the currencies are transferred through banks, which by pass the layers of security and have a

complete surveillance but Bitcoins do not have such requirements and are more vulnerable to

frauds and risks. People holding views in the favor of Bitcoin currency do have an argument that

it is by passes through a layer of security to reach to its customers. The paper has been concluded

by saying that the number of bitcoins in the form of units is limited which is thought to be 21

million units. Only this number of units can be issued without the possibility of expansion in this,

this number of units might end by the year 2140. But if by any chance, bitcoins are made as legal

economic currency it would take a lot of effort for the government to make it successful

replacement of traditional money.

What we have concluded:

By comparing all these details that are being covered in different researches, I have concluded that

the following points:

 Bitcoins are not legal, yet.

Bitcoins are completely p2p system which use virtual money transactions and transfer,

using some good skills of cryptography. All the transactions are done in a complete

anonymous state that is why it is not being monitored by any surveillance of money

management. It can never be legalized by state due to many facts discussed in literature

review.

 Bitcoins can also be Risky.

Bit coins are not safe with transactions, they do not substitute the other money, and

traditional money is supervised by security layers at different levels. Bitcoins are not
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supervised, hence they have a much larger chance to get risks and fraudulent activities.

Any hacker with good skills, van hack the system and might steal your bitcoins.

 Bitcoins can effect economy in many ways.

Bitcoins if replaced by traditional money will affect the state economy very adversely. No

supervision of money will be there. There will be more problems in tracking the hackers

who might be involved in threatening activities.

 Bitcoin mining is no easy task.

To know bitcoin mining, one need to have good computer skills, skilled level of computer

networking and knowing how to get rewards, the process of bitcoin mining. But all this is

not enough, because it takes to have a huge hardware setup which never goes down and

has great backup. And to operate the system is also skills that are required for mining.

 Bitcoin vs Traditional Money.

Bitcoin can never replace traditional money, it has limited units which might end up by

2040 and also, bitcoin has no similar properties that might make a chance for bitcoins to

replace the traditional money. It is a virtual form of money which will never exist in its

hard form.

 Digital Wallets are used:

Digital wallets are used to store cryptocurrency and they work similar to bit pay. All the

transactions are made online, they are made secure by security layers. But all the time they

are not much secure and can be breached.

Findings:
By deep analysis done on Bitcoins we can say that we have come up with some solid findings

which include the following points:

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1. Bitcoin network is not controlled by a single admin or owner. It’s a system developed

with peer to peer technology just like the email works. Developers are working to improve

the system, as they cannot force changes to protocols. All users and developer have a strong

connection with each other.

2. Bit coin is being used by a large community. These communities include restaurants,

apartments, law firms, and many others. Bit coins are changing their values from 1200

dollars to 1500 dollars at different times. It has been growing very swiftly, this year by the

end of April, the total estimated value of bitcoins exceeded 20 Billion US Dollars, whereas

the net amount of bitcoins exchanged daily reaches to millions.

3. Bitcoin payment is much easier as compared to traditional debit or credit cards, and

one does not require to have a merchant account for this process. Digital Wallet is used for

payments, it can be used on a computer or a smart phone by entering credentials, of

recipient the amount it can be sent. A QR code is obtained which is used for transfer and

transaction. Other than this, NFC is also used for this purpose.

4. Bitcoin has reached so many people around the world. Bitcoin wallets are doubled since

they were in 2014. Right now the number of digital bitcoin wallets is 12,768,681. ATM

number is also increased. Furthermore, bitcoin transaction rate has been increased by fairly

50% on average daily basis.

Recommendation
There is about 2000 to 2400 dollars profit amount if investing in Bitcoins. The bitcoin price

continues to vary. People may think that it is the time to invest in the cryptocurrency but it might

not be useful if considered as a long term plan. Recently, the prices of Bitcoins were dropped to

very low, but it soon managed to overcome the low tide and rose again. According to economists,
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it is considered that it is good time to invest in Bitcoin but in near future, it will lose its worth and

it will be no use if one is planning to invest in Bitcoins for a longer period of time.

Conclusion:
Since its inception from 2009, bitcoin has been highly debatable topic for if bitcoins can be used

as future of money or not. Despite of all the facts that it can never replace the traditional

mainstream money forms, till date this topic has it both view. Having different positive and

negative aspects make this decision more difficult to decide between if these Bitcoins can take

over money or not. Bit coins have proved to be helpful for people. People use it to transfer between

countries internationally, and also it is used to convert currencies also. The block chain method is

made in such a way that it ensures that right person receives right money. People dealing in bitcoins

do not have to pay anything extra or tax for the system and a lot of help and support is available.

In the past, number of people using bitcoins has only been increased, and if this goes on with the

same rate, all of us might be using Bitcoins for our daily use. Thus it could surely replace our

traditional currency. Obviously, it is a new technology it needs time to get mature thus it can cause

problems and can be a bit difficult to understand for a lay man. Even a person with less computer

knowledge may have a hard time in knowing and learning about Bitcoins. The lack of supervision

and legalities has made Bitcoin a fast and cheaper way to transfer and transact money all over the

world. It disables the government to generate revenue over money being transferred by generating

taxes on it.

The concept of bock chain and Bitcoin if becomes known to common people, it will make the

following concepts more useful:

1. Globalism:
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The world will get more closer if they are dealing in Bitcoins, and block chain process is

used by the common people same as they use credit or debit cards. This platform will allow

them to communicate swiftly and more often. It will also facilitate Economy and make

financial activities easier worldwide.

2. Security:

The technology of block chain addresses different levels of security, in which it is made

sure that right amount reaches right person and minimum people breach into the system to

hack it or steal the money. The data is validated to ensure the transaction safety. This

process takes place in block chain ledger.

3. Democracy:

Democracy states that it the rule of people by people for people same is the law used here,

Bitcoin is a currency developed by people for people. If it is legalized in countries it will

reshape the duties of government levels, organizations and other cooperative departments

which hold a commercial influence. The block chain process has ability to ensure voting

also which will make this process effective as well.

The basic conclusion to all the debate is Bitcoins are very much common these days and people

are learning how to mine them and use them. Having a few bitcoins might make you a millionaire

in a few days depending upon the change rate of the BTC and USD. But apart from all this, if

longer run is considered it might take a high risk to invest in BTC. Expert opinions must be taken

before investing your assets in BTC.

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[3]. Yermack, D. (2017). Is Bitcoin a Real Currency? An economic appraisal. [online] NBER. Available at:
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content/uploads/2014/04/Learning-from-Bitcoins-past.pdf

[7]. 1btcxe.com. (2017). A Short Introduction To Bitcoin. [online] Available at: https://1btcxe.com/what-
are-bitcoins.php

[8]. Blockgeeks. (2017). What is Cryptocurrency: Everything You Need To Know [Ultimate Guide].
[online] Available at: https://blockgeeks.com/guides/what-is-cryptocurrency/