Digital currencies or Virtual currencies such as Bitcoin are attracting greater attention and scrutiny as more and more interest is getting generated. Bitcoin was launched in 2009 by a person (or group of persons) known by the pseudonym of Satoshi Nakamoto. Bitcoin is a cryptocurrency and a payment system. The system is peer-to-peer and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called the blockchain, which uses bitcoin as its unit of account. Since the system works without a central repository or single administrator, the U.S. Treasury categorizes bitcoin as a decentralized virtual currency. The idea behind the launch of Bitcoin was to have a digital currency that can be used for payments across various e-commerce platforms without the relying on financial intermediaries, and that will not be affected by supply-side problems-which is of printing more and more of such currencies-currently affecting fiat money. In essence, Bitcoin is a decentralized peer to peer payments network and a virtual currency that essentially operates as online cash. Unlike traditional currencies, which are issued by central banks, Bitcoin has no central monetary authority.
The first question which comes to mind while using Bitcoin is why should one use Bitcoin when one can use fiat currencies such as rupee, dollar or euro? Bitcoin is still a new and fluctuating currency that is not accepted by many merchants so the use of Bitcoin may seem mostly experimental. But using Bitcoins has advantages-it is a truly global currency, the transaction costs are lower and it provides liquidity in times of capital controls and high inflation.
Like all digital currencies and platforms that try to keep transactions to be used across the Internet anonymously, Bitcoins, too, have disadvantages such as online theft and hacking, criminal uses and volatility.
Historically, money has two functions-to act as a medium of exchange and a store of value.
After the advent of banking and financial institutions in the medieval period, money added a third function as well-credit creation, i.e., the transfer of money from one who has it to one who needs it. This has been made possible by the evolution and innovations in banking, which includes:
In many countries, the use of debit/credit cards has become so widespread that their volume has overtaken or entirely replaced cheques and, in some instances, cash transactions. The development of debit cards, unlike credit cards and charge cards, has generally been country specific resulting in a number of different systems around the world, which were often incompatible. Since the mid-2000s, a number of initiatives have allowed debit cards issued in one country to be used in other countries and allowed their use for internet and phone purchases.
i) Cashless intra-bank and inter-bank transactions, thus reducing the need for coins and other such resources.
ii) Fractional reserve banking (the policy to hold a fraction of loans as reserves against loss-making provision).
iii) Central bank monopoly on note creation, as this induced faith in the currency in use and imparted stability in the system and thus has made fractional reserve banking possible.
In modern times, credit creation has become a very important aspect of the monetary phenomenon, as is evident from the way Marshallian K is increasing (it is a ratio of monetary base to nominal gross domestic product).
For any virtual currency like Bitcoin to establish itself as an alternative to fiat currencies, all three functions of money are equally important.
Supply growth
Bitcoins per block (approximately every ten minutes) until mid-2020, and then afterward 6.25 bitcoins per block for 4 years until next halving. This halving continues until 2110-40 when 21 million bitcoins will have been issued.
BitcoinTalk Accounts
Bitcointalk accounts are managed and used by Bitcoin traders to participate in Bitcointalk forum and get a higher rank by posting and participating in forum discussions. You can earn through these accounts. Account holders can create a signature and run advertisements. One can purchase or sell bitcointalk accounts using bitcoin or cryptocurrency.
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