By: Mayank Kapadia
Five years since the introduction of the first cryptocurrency, the jury is still out on bitcoin’s success. The bitcoin, in effect used as an internet currency, offers an alternative method of payment and money transfer. The creation and transaction of bitcoins is regulated by cryptography, eliminating the need for a central authority, while the use of independently developed bitcoin management software, aptly termed “wallets”, does away with middlemen like bankers, which facilitates its use.
These differences with existing currencies serve as its strength and weakness. Attracted by this decentralized currency, users have increased their demand for bitcoins with daily transactions exceeding a million dollars. Acceptance of bitcoin as a payment method expanded from private users to retailers, eateries, hotels and other such businesses in Europe, USA, and China. The pinnacle of its prominence was achieved recently, when Lamborghini Newport Beach dealership sold an electric car worth USD 103,000 accepting payment in bitcoins.
However, bitcoin’s meteoric rise has become an albatross around the currency’s neck. World central authorities have come down strongly against the deregulated nature of the bitcoin. China’s largest bitcoin exchange, BTC China, has ceased operations in the face of controversy, while the Indian central bank announced that it doesn’t understand the bitcoin system and has issued warnings against its use, citing allegations of money laundering and cyber security risks. Since these developments, the value of bitcoins has nearly halved.
As its validity is being questioned, the new year might decide whether the bitcoin will be rendered void or if these events are just a slight hiccup in the rise of a new, digital currency.