Is Bitcoin safe enough to buy you something real? Here’s everything you need to know about cryptocurrency

Digital currencies seem like an intriguing concept. With the recent boom, they are becoming the “modus operandi” for the investors. Here, the question is, will they be able to move further from being an “asset” to “currency”?

The dubious commodity called bitcoin is going through various facets of hits and trials. Meanwhile, it is giving rise to the scopes of economic advancement and modernity in the current financial world. Undoubtedly, the arrival of crypto currencies compelled us to rethink about the current mode of exchange.

Is it too soon to take a leap over the ongoing mode of exchange? If we do so, it will be like changing the thousands of years old exchange system, which has been the bedrock of all the major revolutions of the modern world. The question may remain unattended till we figure out, how safe is bitcoin?

The safety of the bitcoin is a relative term which compels us to ponder over two aspects:

• Security
• Regulatory

Some of the characteristics of the bitcoins are:

• Since, we are dealing with the digital currencies, using strong passwords is quite important. We may face the same threats which we deal with any of our web applications.
• Fiat currencies are regulated by the government bodies. The most prominent issue they face is, “trust”. If the bitcoins are able to become a reliable source of trust, they may last for a longer time.
• Also, cryptocurrencies are appearing as fresh means of exchange and give birth to the chances of low cost online transactions.

Though I sincerely favour the cryptocurrency agenda but some of the aspects put me into skepticism about adopting it for a longer period.

The bitcoin theory boils down to the interest of one core group of stakeholders which is “users”. To understand the theory behind digital currencies, we must sail over the surfaces of financial history.

The term “money” derived when a common means of exchange came into existence. Money was adopted as a common medium of exchange to deal with the trade of goods and services. Today’s financial system is the outcome of an original idea which replaced the convoluted methodology of the barter system”.

• Why the barter system had to be replaced?
• Need of the Store of the Value
• A common Unit of Measure and Assessment was Required
• A consortium of wants and interests was required.

On contrary, “money” fuelled all the essentials of an ideal system of exchange. With the below characteristics, money has been able to rule over the exchange system:

• Durability
• Uniformity
• Accessibility
• Divisibility

Unlike money, bitcoin runs on the cryptography and is a software based exchange system. Satoshi Nakamoto’s paper clearly states that, bitcoin is based on math or cryptography instead of “trust”.

To eliminate any kind of problems, the virtual currencies have been connected with the “blockchains”. The blockchain acts as a ledger which accommodates all the bitcoin related transactions.

How Can We Acquire A Bitcoin?

Bitcoins can be acquired in three primary ways:

• Mining
• Purchasing on exchange
• An exchange with the goods and services

Bitcoins are “issued” by the software, but are “mined” by the individuals. In the peer-to-peer network of bitcoin, “mining” is a riveting structure.

With the growing awareness, bit coins are gaining a wider acceptance in the financial system. But, they have a big question mark on their legality and safety. Surely, cryptocurrencies are not mainstream but it will be futile to avoid them on the basis of this.

Virtual currencies have volatile pricing. Also, the bitcoin transactions are irrevocable.

Can it be hacked?

If we think theoretically, yes, the bitcoin network can be hacked. On contrary, it is impossible in terms of practicality. It needs considerable computing power to hack a bitcoin network.

What is better, gold or bitcoin?

If we compare the possibilities of gold and bitcoin, both of these seem to complement each other. Gold is a considerable assessor of value and bitcoin provides the convenience of divided electronic transactions. An amalgamation of both the concepts can actually make the idea work.

Acquiring bitcoins is like obtaining any other currency. The benefit of technology is giving it a wider approach and scope of the advancement of economies. However, it is yet to be decided, if the cryptocurrencies can actually be an empirical means of exchange or not?

(The article is authored by Mridul Kabra, a TEDx speaker on Cryptocurrency. He is the digital marketing head at The Nine Hertz)