All about Bitcoin - How it works, Security, Abuse, Legal, Pros, Cons.

What is Bitcoin

Bitcoin is a cryptocurrency and a payment system. It is the first decentralized digital currency with no banks or admin. The transactions takes place between the users directly by the rules and regulations of cryptography.

History

Bitcoin was invented by an unknown person under the name of Satoshi Nakamoto in 2009. The first bitcoin transaction was done between a developer and a cryptography activist in 2009. It is an open source software.

Bitcoin Mining

Like the internet, anyone can help to verify and record payments into the block chain. This process is called as Mining.

In this Mining, the users offer their computing power. Miners are rewarded with newly created bitcoins and transaction fees. Currently Miners receive 12.5 bitcoins every 10 minutes.

How it works

Firstly install the bitcoin wallet in your computer or mobile which generates the first bitcoin address and you can create more as whenever you need. Then disclose your address with your friends for the payment process.

Block Chain

Block chain is the shared public ledger where the entire bitcoin network relies.  All the transaction will be included in the block chain. The Bitcoin wallet calculates and verifies the balance owned by the spender. The integrity of the block chain is enforced with cryptography.

Transactions

Transfer of values between the bitcoin wallets is called as the transactions that gets included in the block chain. Bitcoin wallets has a secret data called private key or seed which is used to sign transactions for an acknowledgement that it have come from owner of the wallet. The transactions between the users will be confirmed by the network within 10 minutes.

Processing / Mining

Mining is a process that is used to confirm the waiting transactions in the block chain. To be confirmed, the transaction must be packed in a block that must follow the cryptographic rules and verified by the network.  No one can control the parts in the block to rollback.

Bitcoin in India

Interests in bitcoin is growing in India despite of a series of warnings by the government of India on risks. Bitcoin is more than tripled in price which in turn draws a millions of investors.

The Indian government is trying to push Indians to move towards digital transactions to reduce the country’s heavy dependence on cash - which is hard to track and can facilitate black money flows - it has not yet thrown its weight behind virtual currencies such as bitcoin.

Indian Government did not recognize virtual currencies as ”legal tender” and there are no regulations governing these currencies.

Reserve Bank of India warning people on risks associated with investing in bitcoin and other virtual currencies.

How to own a bitcoin ?

You can buy bitcoins from either exchanges, or directly from other people via marketplaces.

Firstly get a bitcoin wallet.

Some of the best apps to buy bitcoins : 

Coinbase

Coinbase is one of the world's largest Bitcoin exchanges. Users in the United States, Canada, most of Europe, and Singapore can buy bitcoins with a connected bank account or SEPA transfer.

Indacoin

Indacoin is a global platform enabling the quickest bitcoin purchases in more than 200 countires with a credit or debit card and no registration.

Kraken

Kraken is one of the world's largest Bitcoin exchanges. Residents of Europe and the UK can deposit and purchase bitcoins with same day SEPA transfer.

Best Mobile Bitcoin Wallets

•         Copay
•         AirBitz
•         Breadwallet

The people involved in the process of bitcoin, must be up-to-date with the rules and regulations policy.

Is bitcoin legal ?

Majority of the countries do not make the usage of bitcoins itself illegal. Some of the countries have explicitly allowed its use and trade. Various countries, government sectors, courts have classified bitcoin differently.

Bitcoin Legalized Countries / Territories

Bitcoin is legal and regulated in USA since 2013.

European Union ruled that exchanging bitcoin should be exempt from value added tax in the same way as a traditional money.

Japan has officially recognized bitcoin and digital currencies as money since April 2017.  Japan passed a law to accept bitcoin as a legal payment method.

Singapore has issued tax guidelines for bitcoins.

Phillipines issued a statement on risks associated with bitcoin trading and usage. It also legalizes virtual currencies and cryptocurrency exchanges.

Africa – Algeria, Nigeria, South Africa, Zimbabwe, Namibia.

America – US, Canada, Mexico, Nicaragua, Argentina, Brazil, Chile, Colombia

Jamaica, Trinidad & Tobago

Asia – Cyprus, Israel, Saudi Arabia, Jordan, Lebanon, India, China, Hong Kong, Japan, South Korea, Taiwan, Indonesia, Malaysia, Phillipines, Singapore, Thailand, Vietnam.

Europe – Croatia, Czech Republic, Germany, Poland, Romania, Slovakia, Slovenia, Switzerland, Denmark, Estonia, Finland, Iceland, Lithuania, Norway, Russia, Sweden, Bosnia and Herzegovina, Bulgaria Greece, Italy, Malta, Portugal, Spain, Turkey, Belgium, France, Ireland, Luxemburg, Netherlands, United Kingdom.

Oceania

Australia, New Zealand

Bitcoin Security

The bitcoin wallet can be stored in online or offline. The offline method is hacker resistant and absolutely recommended for anyone who holds more than one bitcoin. There is an important .dat file that is updated every time you receive or send bitcoins, so this .dat file should be copied and stored as a duplicate backup every day you do bitcoin transactions.

Bitcoin ATM

The bitcoin ATM's are growing in number. Insert your cash and either scan your mobile wallet QR code or receive a paper receipt with the codes necessary to load the bitcoins onto your wallet.

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Abuse of Bitcoin

Technical weakness

Since bitcoin is a peer to peer process which takes several seconds for a transaction to complete. During these few seconds, a dishonest person who employs fast clicking can submit a second payment of the same bitcoins to a different recipient.

Human dishonesty
Bitcoin mining is best achieved through pooling (joining a group of thousands of other miners), the organizers of each pool get the privilege of choosing how to divide up any bitcoins that are discovered. Bitcoin mining pool organizers can dishonestly take more bitcoin mining shares for themselves.  

Human mismanagement

People running unregulated online exchanges that trade cash for bitcoins can be dishonest or incompetent. The only difference is that conventional banking losses are partially insured for the bank users, while bitcoin exchanges have no insurance coverage for users.          

Pros

Bitcoin can be stored offline on a person’s local hardware. This process is called as storage that prevents the country from being taken by others.

Cons

If a person loses access to the hardware that contains the bitcoins, the currency is simple gone forever. It is estimated that nearly $30 Million in bitcoins have been misplaced or lost by the miners and investors.

Conclusion

Buying bitcoins is not always as easy as newcomers expect. The good news is the number of options is increasing, and it is getting easier all the time.

Some may not even necessarily require a wallet or Internet access. Other ideas have included bitcoin debit cards, physical bitcoin with a wallet value pre-loaded, and stored-value cards.