Bitcoin started in 2009 and was trading at a high of $28 in 2012, today it is worth $3690. But, investors are still wary about it becoming mainstream since a majority of them do not understand it as a medium of exchange.
There are several things that unite mankind, but none have united mankind more than money. Right from guns to gasoline, from cloud credits to cars, everything has been given a value that frees up human beings from deciding the exchange rate while transacting these items. Money is a medium of exchange, a unit of account, and a store of value. However, the exchange of money, provision of credit, and setting up of interest rates is the domain of central banks. Centralised banking is a focal point in the formation of industrial and nationalistic economics. But, in the digital economy, money has taken a new twist and narrative, explains ThroughBit, an exchange for Bitcoins, at TechSparks 2017.
Since there is no active physical currency, new technologies such as blockchain – which is a protocol to trace the origin of transactions in a multi-party system – have given rise to Bitcoin as the panacea to the flaws of the central bank controlled economies. The primary difference lies here; Bitcoin is decentralised currency and is regulated by owners of the currency rather than a central bank. “The premise is that there will be transparency in transactions and no third party deciding the value. The system and user decides the value,” says Abhishek Gopal, Co-founder and CEO, ThroughBit.
The underlying technology, which is blockchain, is like HTTPs protocols on which several services are built. It removes middlemen and there are no clearing agents. It is yet to be understood as a medium of exchange by people used to the narratives of banks, which set the value to all transactions. In the Bitcoin regime, people need not have bank accounts and if it has to take off it would mean society would have to move away from the banking system. As stated earlier, value of transactions is determined by users and an intelligent machine that crunches data of transactions and estimates the value of trade. The question is that the Bitcoin platform, or the technology, becomes the new central bank. Only this time it is not run by people, but by a machine or machines.
Today, Bitcoin is expensive and each coin costs around $3,690 because of it being in short supply.
“It makes sense to invest, but nobody really knows the rate. Supply, demand and inflation need to be understood,” says Anandprabhu Rajendran, Co-founder and COO, ThroughBit.
Bitcoin trading started in 2009 and went all the way up to it dramatically fell to $2 when governments banned the currency. The reason for dropping crypto-currency was that people were using this to finance terrorism. However, in the digital economy, several businesses began to accept payments in Bitcoin and the value of each coin went up. Today, it is expensive in India because it is in supply in the USA, and for anyone to buy it locally they have to pay a premium to any exchange in which they are transacted.
For example, in the USA, the Bitcoin costs Rs 2.60 lakh, in India it costs Rs 3 lakh because the exchange here has to sell it for a premium. ThroughBit like a few other bitcoin companies, like ZebPay and CoinSecure, bring in bitcoin for aspiring investors from the global market and sell it at a premium. The reason bitcoin is expensive in India is because of its short supply, there are very few miners (individuals) in the public domain. A miner is the one who places all transactions in a block and solves computationally the block puzzle, which basically means he verifies that a bunch of transaction is not fraudulent. Once a puzzle is solved, the Bitcoin is mined into the ecosystem. This releases new coins into the ecosystem and the miner keeps these coins. The businesses that accept Bitcoins, all in the USA, as payment are Starbucks and Subway. There are hundreds of companies transacting on Bitcoins as an alternative mode of payment.
This system of transacting is going to be ahead of governments and political parties. “In a matter of a decade you would see governments making this digital currency mainstream for some applications,” says Mohammed Roshan, Co-founder and CTO, ThroughBit. In India, bitcoin is just an investment and is being held until it becomes mainstream currency.
When the future of cars and homes is controlled by software, then why not the way we transact with each other. The future will bring about an unprecedented change in human behaviour, which will give rise to the use of 21st century economy run by Bitcoin.
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