Bitcoin - Virtual Currency Becoming A Reality!

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For long, I have been struggling to find out the basic concept behind Bitcoins. I did understand that it was digital currency, but how it fitted the description of ‘money’ interested me. So I started my chase for articles on Bitcoins, watched a couple of shows and decided to write down something which was far away from technical terms.This article is meant for people who have avoided the topic of Bitcoin for long ‘simply’ because they got too tied up in the complex jargons. Well, since Bitcoin and Ven will be something that could be a threat to traditional money markets, we might as well start understanding and using the terms more often.

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Bitcoin - Virtual Currency Becoming A Reality!

  1. 1. Bitcoin - Virtual Currency Becoming A Reality! 'Money'by definition is a good that acts as a medium of exchange in transactions. Classically, it is said that money acts as a unit of account, a store of value, and a medium of exchange and in the past, a standard of deferred payments. Now, any object that fulfills this definition and has the mentioned functions can be termed as money. Money has evolved over a period of time from commodity money to fiat money. With IT gaining momentum and rapidly technological driven economies, digital currency was introduced in 2000 albeit with little success. Recently, Bitcoin and Ven have been the talk of the electronic money markets. As people got to know more and more about the currency and its conveniences, they also started doubting its security and value in foreign markets. Digital currency is a step beyond wire transfer or Electronic Funds Transfer (ETF). Bitcoin is designed specifically as a free and independent currency of established power, allowing direct transactions between the holders out of any legislation, tax or supervision. The Bitcoins are an electronic code that can be converted to any other currency in the approved platforms. Bitcoin was introduced in 2008 by a developer or group of developers named Satoshi Nakamoto. Every day, the "mining" of Bitcoin create new Bitcoins using ever-faster computers to solve complex mathematical problems. Bitcoin, as a form of payment for products and services, has seen growth and merchants have an incentive to accept the currency because transaction fees are lower than the 2–3% typically imposed by credit card processors.2013 saw
  2. 2. the popularity of Bitcoin since the virtual currency saw a major increase. Bitcoin has time and again been criticized and Bloomberg published it as a means of payment rather than real currency. The Bank of Finland said that Bitcoin does not meet the official definition of money, and the Internal Revenue Service of the United States has just pointed out that studying the subject without offering any official indication. But Bitcoin is making small strides. So why exactly is Bitcoin becoming famous? Well, first is its ease of transactions and low transaction costs. Second, is the fact that it is not subject to fluctuations in foreign exchange market. With a few advantages, Bitcoin is slowly making its mark. In November 2013, Richard Branson announced that Virgin Galactic would allow payments in Bitcoins. Bitcoins has been received with mixed reactions. In many cases, it has not been very receptive with many countries. At present Bitcoins are highly volatile leading to speculation. After jumping into the media spotlight, the price of Bitcoin has soared over $ 900, compared with $ 60 worth a year ago. However, this volatility is also owing to its limited supply. The European Banking Authority has even warned that the risks of engaging in such speculation go beyond the possibility that the value of Bitcoin drops. Others too have been critical. Economists Paul Krugman and Brad DeLong have found fault with Bitcoin for
  3. 3. numerous reasons, including that Bitcoins are not a reliable store of value, and that there is no floor on the value of Bitcoins to prevent deflation. China has recently urged people to refrain from trading with coin banks and even prohibited transactions 'online' made in giant Alibaba.Norway has directly said that it is not real money. Bitcoin is a coin of high volatility and that is exactly one of its weaknesses. If ever, Bitcoins replace the official currencies, global markets could get affected. Having said that Bitcoin is slowly making its mark in the money market. Historically, money has evolved and every transition has faced criticisms. Digital currencies like Ven and Bitcoin will definitely be a shift from the traditional methods of trading and a big leap in the foreign exchange markets. It will be worth to watch as to how economies react to this progress, which will be recorded in yet another major development of money. © 2014 Deena Zaidi. All rights reserved

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