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Bitcoin Crosses $20,000 Mark What’s Next – Free PDF Download

 

What has happened?

  • Bitcoin, the cryptocurrency, has breached an important psychological barrier against the US dollar — the $20,000 mark — after having fallen just short during its 2017 rally.
  • As of Thursday, Bitcoin was trading above $23,000.
  • The rally to these levels, which has sustained over the last four months, has also seen various stakeholders taking steps towards legitimising the cryptocurrency.

How does a Bitcoin work?

  • The origin of Bitcoin is unclear, as is who founded it.
  • A person, or a group of people, who went by the identity of Satoshi Nakamoto are said to have conceptualised an accounting system after the 2008 financial crisis.
  • Nakamoto published a white paper about a peer-to-peer electronic cash system, which would “allow online payments to be sent directly from one party to another without going through a financial institution”.
  • Bitcoins are generally identified with a Bitcoin address, which comprises 26-35 alphanumeric characters starting with either “1” or “3”.
  • This address, which remains anonymous, represents the destination of a Bitcoin.
  • Originally, the Bitcoin was intended to provide an alternative to fiat money and become a universally accepted medium of exchange directly between two involved parties.
  • However, after Bitcoins picked up momentum, some entities started establishing exchanges
  • on lines of stock exchanges
  • For people to buy and sell Bitcoins against fiat money such as dollars or euros or pounds.

Are records of Bitcoin transactions maintained?

  • Nakamoto mooted an idea for a publicly available, open ledger that would contain all the transactions ever made, albeit in an anonymous and an encrypted form.
  • This ledger is called blockchain.
  • Considering the public and open nature of the ledger, proponents of this currency system believe it could help weed out corruption and inefficiencies in the system.

Who authenticate these bitcoins?

  • With Bitcoin, a chain of computers is constantly working towards authenticating the transactions by solving complex cryptographic puzzles.
  • For solving the puzzles, these systems are rewarded with Bitcoins.
  • This process is called Bitcoin mining.

How does one acquire a Bitcoin?

  • One can either mine a new Bitcoin if they have the computing capacity, purchase them via exchanges.
  • Depending on the demand and supply, the price of a Bitcoin keeps fluctuating.
  • One unique aspect of Bitcoin is that only 21 million units will ever be created.
  • A Satoshi is the smallest fraction of a Bitcoin.

What has led to the rise in Bitcoin prices?

  • The prices have been driven by various factors, including increased acceptance during the pandemic.
  • Globally, large players like payments firm PayPal, and Indian lenders like State Bank of India, ICICI Bank, HDFC Bank and Yes Bank, have given legitimacy to cryptocurrency through some of their decisions.
  • For example, these Indian banks reportedly have allowed their customers to use their bank accounts to fund cryptocurrency trading.

  • In India, accounts of several exchanges were frozen by financial institutions back in 2018 following a fiat from the Reserve Bank of India that barred banks from using their systems for cryptocurrency-related transactions.
  • However, the Supreme Court ruled against this order in March this year.
  • The biggest factor (in the recent rise of Bitcoin prices) has been the fact that,
  • Some pension funds and insurance funds took permission to park a small part of their portfolio in Bitcoins.
  • Once that happened, the availability is an issue leading to the spike in prices.

conclusion

  • It is important to note that the price of Bitcoin fell sharply from over $18,000 in December 2017 to around $3200 in December 2018.
  • It then went up to over $10,000 in July 2019, then fell to around $5,500 in March 2020.
  • Market participants say the huge volatility in the price without any major fundamental reason should make retail investors cautious.

Q) Bitcoin uses which network technology for transaction & mining?

  1. Distributed network
  2. Wide area network
  3. Intranet network
  4. Peer to Peer network

 

 

 

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