16 Mar 2014 / Times of India – For a moment, imagine Arnab Goswami (the news anchor of Times Now) going ballistic about bitcoins! Picture him hollering, “India wants to know” , “the nation wants to know” , “investors want to know” , followed by his AK47 lethal volley of questions to rip apart anyone representing bitcoins on his programme!
I thank the stars that no ‘scam’ has emerged linking bitcoins to our illustrious political parties in India (so far). The day that happens, even God will switch on Times Now and stay riveted to see what will explode on the TV screen! While Goswami may be busy playing Sherlock Holmes for the upcoming elections, let me conduct my own investigation into this really arcane, complicated and surreal bitcoin business and dig up some facts for you…
What are bitcoins?
It is an invisible (virtual) currency that lets people do business with each other. Let’s assume that you want to motivate me into doing a sting operation on a political party that claims to have eliminated corruption but honestly has done nothing in the matter. I am well equipped to carry out the mission, but do not want to be traced to this sensitive operation at all. You obviously want to remain anonymous. What we both want is a secretly shot video that we will finally leak on YouTube .com.
How do we do business? Using bitcoins!
You offer to pay me for my services via bitcoins and I accept the same. Why bitcoins? Because bitcoins are anonymous and are not traceable by anyone. They are the perfect way for people to do business with each other without revealing identities. They don’t leave any digital footprints like credit card records, bank transactions, etc.
So let’s say that we agree to a ‘deal’ and you agree to send me bitcoins in advance to pay me for my job. I set the price at 3 bitcoins for my work. While writing this article, the current rate is about 38,000 per bitcoin. So, you are paying me about 1.15 lakh for this covert operation.
Fact:
Bitcoin is a real currency that fluctuates in price and which can be exchanged to conduct real business.
So how does it work?
The genius of bitcoin is in the way it works. To verify that you actually own these 3 bitcoins you’ve promised to give me, we both need to trigger the bitcoin system to undergo an elaborate ‘verification’ process. This involves the entire community of bitcoiners (also known as miners) who will go through complex coded algorithms and programmes to check that the 3 bitcoins you possess really exist and that they can be transferred to me. The miners will be paid a fee for their service and will also earn bitcoins as a reward for executing these complex calculations! This earning of bitcoins is what creates new bitcoins in the system and introduces more currency into circulation. The process of verification is programmed to get harder and harder every passing day and that is how the ‘supply of new bitcoins’ into the general pool is limited.
Now, don’t think these ‘miners’ are sitting in some controversial coalmines of the coalgate scam dishing out free coal! These miners are supercool geeks who have stacked up computers in far flung locations (remote parts of Finland) with cheap electricity and cool weather to perform these calculations!
Fact:
The business of transacting bitcoins and earning bitcoins in return is really the nerve centre of this esoteric currency, and this is what makes it unique…… Read more
