20 Apr 2013
Hindustan Times (Kolkata)
Gagandeep Singh Sapra
[email protected]Ready to trade in Bitcoins?
CRYPTO CASH New digital currency mixes elements of hawala trade and old-world barter
NEW DELHI: Something manufactured out of thin air suddenly becoming as ubiquitous as the US dollar? It might seem strange, but the idea of a digital currency is, well, gathering currency.
The Wall Street Journal reported on Friday that Western Union and MoneyGram, two of the world's largest movers of remittances, are studying ways their customers could use their services to transfer money denominated in Bitcoin — though there are no immediate plans.
Two years ago, no one seemed to have heard of that, but the toddler is now hot after a speculative rush. The site Coinbase.com describes the Bitcoin as “a decentralised, digital currency that is changing the world of payments.”
Let's get the first thing straight. No government is yet backing Bitcoin, which for Indians may sound as familiar and strange as hawala. Though hawala refers to an illegal transfer of money used to deal in obscure funds, Bitcoin is a different animal.
It helps people pay each other from virtual accounts linked to websites and mobile payments.
WHAT IS IT?
Bitcoin is a currency generated on peer-to-peer computer networks using software. Each user has a Bitcoin Address, which is like a unique identity Bitcoins basically exist in computers and mobile handsets - as bits and bytes. They are traded in the market and exchanged for or against real money.
Bitcoin is one of the first implementations of a concept called crypto-currency, which was first described in 1998. Its origin is still a mystery. It is designed around the idea of a new form of money that uses cryptography to control its creation and transactions, rather than relying on central authorities. There’s a Bitcoin Foundation to standardise it.
WHAT IS ITS WORTH?
From the time that Bitcoins came on the market around the start of 2009 to now some 21 million bitcoins have been generated and on April 9, it traded at $190 per (around R10,000) Bitcoin and zoomed to $266 the next day and resumed its fall later. In simple words, it is volatile.
IS THIS A BUBBLE?
In theory, all money is virtual as they only represent underlying information. But they need acceptability. Bitcoins are accepted by some ecommerce vendors and some experts. By and large, acceptability is in question.
So one has to wait and watch. The key point is that unlike real world currencies that are backed by gold and other economic assets like oil reserves — or by government assurances, there is none here.
IS THIS ILLEGAL?
It seems not but there is no government recognition and hence Bitcoin certainly does not enjoy legal protection. There have been reports of people downloading Bitcoin mining software from unknown websites and expos-
ing themselves to virus attacks.
HOW DO I GET BITCOINS?
You have to choose between an Android mobile or a desktop platform (Windows, Mac and Linux). There is a dedicated software called Bitcoin Wallet (from
www.bitcoin.org). Bitcoin-Qt is an app (application) you can download for Windows, Mac and Linux, while Bitcoin Wallet for Android runs on your phone or tablet.
The Bitcoin address works like a bank account. You can also go for Web wallets but that requires some extra work.