Manorama Horizon, the exclusive educational portal from the house of Malayala Monorama, will be conducing a webinar on bitcoin/cryptocurrency on April 30 from 11am to 12pm.
The webinar will be presented by Blockchain & Cryptocurrency enthusiast Arjun Vijay G.
In the following article, Arjun Vijay answers a few questions on the concept of bitcoin and the scope it holds in the present world scenario.
Why is there so much hype about Bitcoin? What superpowers does it have to be compared to the likes of Internet or Personal computer? Is it that revolutionary?
Open source revolution has played a great role in making technology and information affordable to everyone. Open source has not just made Technology and information affordable but also has made it accessible. Take Wikipedia for example. Wikipedia has made access to information across the globe free of cost and it was possible only because it was open source. Linux has created a global network of collaborators who are better at collaborating and creating better standards than a closed group of people working in a corporate office. No wonder 90 per cent of the supercomputers work on Linux Operating systems today. That is the power of Open Source.
Bitcoin should be seen as an open source version of money and has the potential to disrupt the financial world similar to how Internet has changed the world we live in.
What is Bitcoin?
Rather than dwelling too much on the technicalities, let me explain Bitcoin by listing down its features and few key use cases of its adoption
• Bitcoin is like the US Dollar because it is a unit of currency and unit of account. Example: Bitcoin is an accepted form of payment in multiple online platforms like Wikipedia, Expedia, Microsoft.
• Bitcoin is a protocol like HTTP / TCP and rules of the protocol are well defined.
• Bitcoin is a store of value like Gold, whose supply is limited. There can be a total of 21,000,000 Bitcoins only.
• Bitcoin is a payment network like a Visa/Mastercard powering transactions between two entities
• Bitcoin is analogous to Email. Bitcoin enables peer to peer transfer of monetary value without intermediaries like how Email enables direct communication.
• Bitcoin is programmable money as you can use programming scripts to define and how Bitcoins will be spent based on some conditions.
Why do we need Bitcoin?
Just like the Internet, we can have many applications that can be created using Bitcoins. Some of Bitcoin’s advantages may be cited with the help of examples.
1. As a replacement for the US dollar.
Bitcoin promises a return to old times, when the money supply was based on a decentralised commodity called Gold. It would mean benefits are spread across the world and not accrued to one single country like the US. Bitcoin if it can deliver on its promises can become the de-facto global currency. The journey is long and it is too early to say with confidence, but Bitcoin has the right qualities to make the claim in a few years, once it has gained enough mass adoption.
2. As a replacement for Card payment network
Every time we make a transaction through cards, the merchant needs to pay 1.5% – 2% irrespective of the amount. Bitcoin promises an open standard where the payer decides the transaction charge he wants to pay and the benefits are passed to everyone who is a participant in the network rather than a single trusted third party like visa or Mastercard.
3. Replacement for Swift
SWIFT is a vast messaging network used between banks and other financial institutions to quickly, accurately, and securely send and receive information, such as money transfer instructions. However, it is inflexible, slow and prone to cyberattacks.
On the other hand Bitcoins are similar to Email and anyone can transfer a part of his bitcoin holdings across the globe by just being connected to the internet. The entire transaction takes place in less than 10 minutes and the settlement can be confirmed in 1hour. This provides a beautiful alternative to Swift network that takes much longer and is prone to cyber-attacks.
4. Native internet currencies
The biggest problem with digital transactions is that we have taken an existing offline design and tried to force fit to our digital needs. We don’t have a mechanism to make micropayments (less than 1-2rs) without incurring charges more than the transaction amount. Cryptocurrencies promise micropayments which means we will be able to pay charges based on the number of pages read, pay per song, pay per movie(or even pay per seconds of movie watched) by loading our browser wallet with cryptocurrencies.
5. Store of value
Barring a couple of years, Bitcoin has been the best performing asset every year since its launch in 2010. The supply of bitcoin is limited (21million). As the adoption/applications of Bitcoin spreads, there is an increase in demand. Because of the fixed supply, the increase in demand is met by increase in price of the Cryptocurrency.
6. Absence of Central entity/owner
Bitcoin is a trust-less system. It is an open network and we are not dependent on any central entity for maintaining the network. This means there is no single point of failure. Added benefit is that the creator of Bitcoin has always been anonymous. Even if today someone were to claim he is the real Satoshi Nakamoto, he will not be able to go against the community and implement changes in the protocol against community interests
Future and Beyond
Just like the internet, we will be finding newer use-cases as the technology matures. Being a bleeding edge technology, there is no doubt that the investments in Bitcoin are risky. It is a highly volatile asset and is prone to high price drops. So keep your exposure limited based upon your risk appetite. But if Bitcoin succeeds, and achieves at least 10% of the use-cases mentioned above, then what you are betting on the next Internet and the value should skyrocket to say the least.
Here is the link to register for the webinar - https://www.manoramahorizon.com/webinar/
Arjun Vijay is an alumnus of the Indian Institute of Management, Calcutta. Being a Blockchain & Cryptocurrency enthusiast, he followed his passion to create India's leading Cryptocurrency exchange, Giottus. Before Giottus, Arjun is credited with building many strategic partnerships and developing new markets for both Vodafone and Amplus solar respectively while he was working with them.
