Founded in 2009, Bitcoin is a form of digital currency that facilitates instant transactions to anyone across the globe. Being based on an open-source protocol, it is not regulated by any central authority. Recently making waves in the news, Bitcoin’s value has soared past the $20,000 mark, a significant increase with no definitive explanation behind this sudden surge.
The Origin and Intent Behind Bitcoin
The creator or creators of Bitcoin remains shrouded in mystery with the moniker of Satoshi Nakamoto linked to its inception. This person or group conceived this innovative accounting system following the 2008 financial crisis. The main objective was to offer an alternative to conventional fiat money like US dollars and Indian Rupees, and establish a widely accepted means of transaction between two parties directly involved.
The Blockchain Phenomenon
Behind the functioning of Bitcoin lies the technology known as blockchain. It serves as an open, public ledger containing all transactions ever made using Bitcoin, albeit encrypted and anonymous. A shared, immutable ledger, blockchain makes recording transactions and tracking assets easier in a business network. Assets could be tangible (house, car, cash) or intangible (copyrights, patents). A blockchain network can reduce risks and cut down costs as it can track and trade anything of value. Traditional land records in Andhra Pradesh and Telangana have been recorded using this technology due to its easy traceability feature.
Acquiring Bitcoins
Bitcoin can be acquired through various methods, including mining new bitcoins if one possesses the computing capacity, buying them via exchanges, or acquiring them through over-the-counter transactions. Notably, only 21 million units of Bitcoin will ever be created, and no developer can manipulate the system to increase their profits.
Bitcoin Regulation and the Legal Scene In India
The supply of bitcoins is managed by software, and this system cannot be manipulated by any government or individual. Despite being conceived as a global decentralized currency, several governments worldwide are exploring the development of Central Bank Digital Currencies (CBDCs), which essentially are digital versions of national currencies.
In India, cryptocurrencies were declared not legal tender during the 2018-2019 budget speech. The Reserve Bank of India also issued a notification advising against dealing in virtual currencies. However, the Supreme Court lifted the ban on trading virtual currencies, stating that they should be considered commodities.
Reasons for the Recent Value Rise in Bitcoin
Multiple factors contribute to the recent surge in Bitcoin’s value. The COVID-19 pandemic has led to an increased acceptance of Bitcoin. Furthermore, endorsements from large players like PayPal, State Bank of India, ICICI Bank, HDFC Bank, and Yes Bank have legitimized its use. In addition, certain pension and insurance funds have started investing in Bitcoin, pushing up its demand and thereby its value.