IMPACT OF BITCOIN ON 21st CENTURY.docx

IMPACT OF BITCOIN ON 21st CENTURY.docx

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  IMPACT OF BITCOINON 21st CENTURY Bitcoin is a cryptocurrency. It is a decentralized payment system and kept alive due to the technology called Blockchain. These are peer-to-peer transactions. These transactions are verified by using a cryptography technology bank. Chain technology keeps the record of the distributed ledger. Bitcoins can be earned as a reward through mining. This currency can be convertible into other currencies, products, and services. Bitcoin has been emerging as a famous digitalcurrency and popularity allover for quick transition. Moreover, bitcoin willbe an economic asset because it has profitable results. The purpose of this research study is to explain the complete working of bitcoins technology, applications, and research challenges to be addressed, and the current future international market scope of Bitcoin technology. Bitcoin was proposed by Satoshi Nakamoto on 31st Oct 2008. It is the pseudonym used by an individual or a collective group of people. In January 2009, the First open-source Bitcoin client was released and the bitcoin network came into existence. Satoshi Nakamoto is an inventor of bitcoin, and blockchain technology. All through it’s a false name. This is how he introduced himself to the internet. Unfortunately, many people think that because Satoshi Nakamoto has invented Bitcoin and the Blockchain technology, he is the owner of those too. The reality is that Satoshi Nakamoto has neither control over the Blockchainnor bitcoin. Therefore, itreally doesn’t matter who Satoshi Nakamoto is. Blockchain is a technology, and its first function was on the platform named bitcoin. Bitcoin is Blockchain. However, Bitcoin itself is only a cryptocurrency that is capable of replacing fiduciary currency. Nevertheless, not that many people will like the idea at first. The building block of bitcoin technology of bitcoin is briefly explained in the following subsections. A. BLOCKCHAIN Blockchain is the core technology behind bitcoin in itself. One might say that bitcoin is blockchain. However, the vice-versa is not true. It is the spin of the bitcoin system. Blockchain is the globally accessible database that contains a cryptographic ledger to keep the anonymity of the participating individuals. Blockchain is so complex that still few people understand each part of it completely. In fact, it is complicated that we are finding more and more ideas that this technology can solve every day. We could say Blockchain is a solving problem. Nowadays, more and more organizations are beginning to implement Blockchain Technology for various purposes. Bitcoin crypto currency is the block chain technology, which enabled the existence of digital currency. This emerging technology puts forth new features, replaces the existing client-server core system on top of some distributed systems by with many more features such as tolerance to faults, alteration resistance, high availability and reduction of
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  costs. Moreover, blockchainhas probable applications far beyond bitcoin. Applications-based blockchain is implemented in the market partially independent of the centralized systems. B. BITCOIN It is the first known digital currency that is running on a technology called Blockchain.it is entirely decentralized. No one has control over it. It is alsoknown as electronic money or digital currency. Bitcoin uses a peer-to-peer technology payment system. No central authority or bank is required for transactions. Regards to its value, it does seem to vary. However, it has kept itself steady for a long period, moreover continuously increasing. Back in 2008, it began to compete with the dollar, when one bitcoin was equal to 0.05 dollars. However, in dec 2020, one bitcoin has reached $18213.40, its highest value as of yet. Over the years, bitcoin not only proved that it could reach its highest over and over again, but it has increased its value higher than what we have ever experienced with any other currency Earth.
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  C. Ledger system Theledger system can be correlated to a family tree. But, rather than people’s names, the large ledger system holds information about payment value and addresses. In regard to the amount values, the ledger holds all the records of payments back to the first transaction that was ever made. In regard to the addresses, there are no URLs or location addresses. Instead, these are other cryptocurrency addresses. It holds a series of transactions of all cryptocurrencies. And the current values are continually computed of the previous transfers. One part of the ledger represents the worth that has been assigned, other parts of the ledger represent the date and time of every transaction. This is very almost like any of the present Banking systems. You can’t see who transferred to what account, you can only see the ID numbers and the amount how much was transferred. The ledger has no banker. In addition to banks, even the Police, FBI, or any government official can take any checking account if they find a possible reason for it. When it comes to a bitcoin account within the great ledger, the only person who can access itis the person who has the password to that account. This process uses hashes, to validate each block, and make sure that each citizen receives the same record. D. Miners Back in 2008, Satoshi Nakamoto only created 50,000 bitcoins to start the process. Satoshi Nakamoto started with a moderate amount of bitcoin creation. Yet, as the bitcoin community grows, more and more value would be required for the system to be kept alive. There is a particular process that is needed for the system to be maintained; Satoshi has come up with the solution by creating a role. This solution is not only solving one, but two issues: 1. Permanently validating transactions
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  2. Adding newvalue into the existing system This role is called a miner. Miners can be individuals or any bitcoin citizen. Over time, many large companies have been formed, such as Genesis Mining, where you, as an individual, can join and rent their mining facilities. The miners sealing, are sealing the blocks, which in itself can take an enormous amount of computing power, assuring that they cannot be easily replicated. There are multiple methods that each miner may use for the validating processes. Some of the miners may use different software, even creating their own in-house made software to speed up the authentication process. However, it doesn’t matter what software they use, as all of their work will be verified. It starts when a miner begins to gather transactions that have been broadcasted on the network, and then starts checking those transactions and eventually sealing those collections of transfers and operations into a new block. A miner receives bitcoins as a reward for each block that is added to the Blockchain. Let us see how bitcoin works. WORKING OF BITCOIN A. Basic concept Anyone can useBitcoin- Individual, Business Organisation, Developers and people who are quite new to this concept. According to bitcoin.org website, the new users have to install a wallet on a computer or phone. After installation, we would get an address, which we can share with people we trust, such as our friends, family members for sending or receiving money. We can get over one address whenever needed. This is like providing an email id, with the difference that we can use this address only once. In order to manage and validate transfers, Bitcoin uses public-key encryption, peer-to-peer networking and proof of work. Bitcoins are forwarded (or signed) from one address to the other with each user possessing several addresses. Each exchange for payment is sent to the network such that the included bitcoins are no longer expended two times or more. After an hour or two, the vast volume of computing power that keeps expanding the blockchain locks eachtransaction on time. Bitcoin offers a fast,very secure payment network which can be used by anybody using those techniques. B. Balance According to sources like Investopedia, Blockchain is pretty similar to a database with the difference that here, data is organized in the form of blocks which are then chained together. And as said by bitcoin.org, blockchain is a shared public ledger and the bitcoin network is highly
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  dependent on it.The question arises on why do we need a public ledger? By now, we know that whenever peer-to- peer transactions take place, one of the parties may try to manipulate data or engage in fraudulent transactions. To prevent these during transactions, we use public ledger. We can store different types of information in a blockchain, but it is convenient to use ledger for keeping records of transactions. Once a transaction is confirmed, it is stored in the blockchain. The Bitcoin wallets can compute the balance which can be spent in order to verify if the sender actually owns the transactions. Cryptography, in turn, plays a crucial role in maintaining the integrity and chronological order of blockchain. C. Private Keys In Bitcoin(a type of currency), transactions between two parties take place instantly without requiring the approval or verification of the third party like a financial institution, and information on the transaction is stored in a communal ledger, which is kind of a website, and the records of which can be accessed by anyone & which have the protocols like anyone can add lines to the ledger and all the transactions are settled at the end of a certain time period, say a month or a year, etc. So, a problem arises when anyone can add a line to a ledger and situations might arise in which one of the parties may try to edit sensitive information like amount of transaction, without the sender’s approval. In such cases, one needs a digital signature for every message or transaction. The digital signature is of length 256 bits and from it, one can get 2^256 possible signatures. These digital signatures can’t be forged. In other words, it is simply not possible to copy the equivalent binary representation of a digital signature and use it with some other message as each digital signature has a unique private- public key pair. The private key, also known as a secret key, is something a sender or the one initiating the transaction should usually keep to himself or herself. The private key should not be shared with anyone else. On the other hand, the public key is known to both the sender and the receiver, and not to anyone else (like a third party or entity). So, each bitcoin wallet has its own private key, which is nothing but a secret pieceof data. This private key, unique to aspecific bitcoin wallet, is used to generate a digital signature for each transaction, which is essential for proving mathematically that it came from the wallet’s owner. Once the signature has been issued, it is practically impossible to alter the signature or forge it in any way. Within 10-20 minutes, the transaction is broadcasted into the network and status confirmed with the help of a process called mining. D. Mining Mining is a distributed consensus mechanism, used in the blockchain to validate transactions pending. It enforces the sequential order of the blockchain, preserves the neutrality of the network and allows separate computers to decide the system's state. For the confirmation of
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  transactions, it isnecessary to pack them in a block, which would comply with very stringent cryptographic rules, validated through the bitcoin network. These rules prohibit the alteration of the previous blocks in order to prevent the invalidation of future blocks (if the prior blocks are modified). Mining produces an equivalent of a lottery, which would prevent individuals from inserting a new block to the blockchain in a consecutive manner. This ensures that no party of persons can regulate what is usedin the blockchain or replace block chain components to undo their own expenditures. PAYMENT METHODS 1. At Individual level A. Keeping yourself informed Before starting with the bitcoin system, an individual needs to be informed on the basic facts regarding bitcoin like it allows exchange of money in a way quite different from that of normal transactions and prior to a serious transaction, an individual needs to keep his or her bitcoin wallet just like a normal wallet. An individual should keep in mind that the price of bitcoin is highly volatile, that is, it can increase or decrease every single day, depending on the economy and market liquidity. Bitcoin is a high-risk investment, just like stocks and shares & once, bitcoin is received, it can be converted into local currency. A bitcoin payment, once made, cannot be reversed and is refundable only by the fund receiving party. So, precautions and additional safety measures must be taken while doing business with organizations. It is crucial for the sender of a fund to know if the organisations at the receiving end are reputed and trustworthy. Attempts must be made to protect privacy while using the bitcoin system. As the information stored in the bitcoin network is permanent and publicly accessible, there are possibilities that anyone can see transactions in every bitcoin address. However, the identity of people using those addresses remains undisclosed until the transaction takes place, because that is when all the data is revealed. That is the sole reason why each address is supposed to be used only once. B. Choosing a Wallet In the next stage, an individual has to choose a bitcoin wallet. In the bitcoin.org website, one is redirected to the helper section in order to facilitate the choice of the required wallet. One may skip the step if one wishes to. An individual deciding to opt for the helper section is then asked to answer questions regarding the operating system, level of acquaintance to the bitcoin system, important criteria and the features one is looking for. The helper section is designed in such a way that one cannot skip to the next step without answering the previous question. In
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  the operating systemsection, there are three kinds of wallets: Mobile Wallet, Desktop Wallets and Hardware Wallets, each having its own pros and cons. Mobile wallets are compact, convenient and are suitable for face- to-face transactions. They make use of QR codes to transact easily and effortlessly. However, app markets would be able to delete/remove wallets, thereby, making it nearly impossible to obtain future updates. There also may be a loss of funds due to malfunctioning of devices. On the other hand, desktop wallets encourage users to manage the funds in full. Some desktop wallets can support hardware wallets or act as full nodes. However, when making transfers, it is inconvenient to use QR codes. In comparison, desktop wallet packages are particularly vulnerable to bitcoin-robbery malware/spyware/viruses. According to bitcoin.org, hardware wallets are one of the best means for securing wallets, storing funds & large amounts of bitcoin. But it is difficult to make use of such wallets while mobile. These wallets have not been designed for scanning QR codes & can result in loss of funds, lest a system failure should occur. Mobile wallets are supported in Android OS and iPhone, while Desktop wallets support OSs like Mac, Windows and Linux. Once a user has chosen the type of wallet and the Operating System, he or she is asked to answer if he/she is a new or an experienced user. If the former option is chosen, the wallets ideal to them are displayed and if the latter is chosen all the possibilities of wallets present are shown. If the user is a novice, then limited functionalities like control and fees are available. On the other hand, if the user is experienced then he/she gets control, validation, transparency, environment, privacy and fees as options. A new user, in the third step has access to features like Two factor authentication, Bech32(a specialaddress format), Hardware Wallet, Legacy Addresses, Lightning, Multisig and SegWit. An experienced user is provided all the features and in addition to these, he/she gets one more feature, i.e., Full Node. At last, depending on the questions answered, the recommendation system of the website suggests the type of wallet availablefor an operating system. Suppose auser is abeginner, chooses Mac OS, Fees as a criteria and Lightning as a Feature; the resultant wallet shown is Electrum. C. Buying a Bitcoin A user is shown a page to buy bitcoin, either in bitcoin currency or any other currency. There are options to set the default currency and language. After deciding the former, he/she can choose any amount and proceed by clicking on the ‘Buy’ button. Once completed, the details of the same are stored in the Trade history section. The speciality of the website is that an individual has the power to choose the category of cookies and even allow/ disallow them. The categories of cookies provided in the website are: Functional, Marketing and Analytics, Advertising and Essential. Functional cookies are used to track the website performance and improve browsing experience of users.Marketing and analytics cookies, on the other hand, are used to furthermore track the browsing behaviour of users and provide personalized
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  recommendations. Advertising cookiesare used to customize and calculate the efficiency of website advertising of bitcoin.org and other sites. D. Spending a bitcoin In this option, an individual can find the required merchants and products accepting bitcoin as a mode of payment. He/she can pay them, rate his/her experience to increase visibility. Search engines like Spend a bit can be used to purchase products and pay in the form of bitcoins. Individuals, companies and business organisations accepting cryptocurrencies like bitcoin can be found from a worldwide, decentralised, free, open source called BitcoinWide.com. Furthermore, online directories have alsobeen created for navigating businesses.CoinMap.org is one of the sources which enable users to find local businesses like hotels, cafes across the globe, which accept bitcoin or another other crypto currency as a payment method. CoinMap.org provides facilities like buying or exchanging a crypto currency. 2. At Merchant level A. Informing oneself In order to know about the payment method as a merchant, we have to understand the methods of accepting bitcoin. Just like a novice user, a merchant has to inform himself/ herself amply in order to get started. The basic facts like keeping wallet secure, volatility of bitcoin prices, irreversible payment in bitcoin, anonymity of bitcoin remain the same for everyone. B. Processing payments 1. Accepting bitcoin as a mode of payment The merchants can handle payments and invoices by themselves or use the services provided or deposit money in bitcoins or local currency. In most distribution agencies, consumers can pay through their mobile phones or tablets. A dealer must first consider Bitcoin for purchases. The easiest way to embrace Bitcoin in a small business is by making the accounting simple. It is different based on the sort of organisation a merchant runs. 2. Starting with a signature: A merchant will only start by placing a sign or message, "We Accept Bitcoin" if he/she expects the number of people interested in using Bitcoin to be limited, and ask people
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  to contact him/herfor payment directly. While no one uses Bitcoin as a payment tool, in two ways he/she supports Bitcoin: one, raising visibility, and two, making the clients more likely to use Bitcoin for purchases in the future because they already realise that they can spend it anywhere. 3. Smartphone/ Tablet A merchant may use a specific application or web app to produce a QR code, including the amount, on the fly. Many wallets allow direct payment scanning of QR codes. 4. Accounting and taxes Merchants deposit and displaylocalcurrency rates.In other instances,Bitcoin functions in a foreign exchange in the same manner. A merchant should only grant a refund on a customer's account if he/she makes a purchase. The merchant should enter it in the manner to suggest receiving a payment. If on the other hand, the merchant offers Bitcoins "discounts" but exchanges Bitcoins for money, he/she takes them as sales; as a result, his/her income is sufficient. Consulting an accountant is necessary for smooth functioning during transactions. Moreover, traders may contact a competent accountant to receive sufficient tax enforcement advice within their own jurisdiction. 5. Gaining Visibility and getting noticed There are more and more people looking for opportunities to use their bitcoins. The merchants can submit their businesses in online directories to increase the chances of their visibility. They can even display their Bitcoin logo on their website or brick or mortar company. ADVANTAGES & DISADVANTAGES A. Advantages  Payment freedom: Paying through bitcoins provides the freedom to send and receive any amount of money to any person instantly anywhere at any time. No need for intermediaries in between, No payment limits.it allows users to be in full control of their money.  Minimal fees:
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  Bitcoin payments havevery low and sometimes no transaction fees at all. It depends on the priority of the person. If a person wishes that their transactions get processed fast, he has to pay transaction fees which is very low as compared to any digital wallets.  Fewer risks for merchants: Bitcoin payments are secure, irreversible, and do not contain any customers' sensitive or personal information. These payments protect merchants from losses caused by fraud or fraudulent chargebacks.  Security and control: Users are in full control of their transactions. Merchants cannot force unwanted or unnoticed charges as can happen with other payment methods. Bitcoin payments can do without personal information tied to the transaction. This offers strong protection against identity theft. These users can also protect their money with backup and encryption.  Transparent and neutral: Bitcoin money supply itself is readily for anybody, and to verify and use in real-time. No individual can manipulate the Bitcoin protocol because it is cryptographically secure. so, it is trusted for being neutral, transparent and predictable. Disadvantages  Degree of acceptance: Many people are stillunaware of Bitcoin. Every day, more business organizations accept bitcoins because they want the advantages of doing so, but the list remains small and still needs to grow in order to benefit from network effects.  Volatility: The total value of bitcoins in use and the no. of businesses using Bitcoin are still small compared to what they could be. Relatively small events, trades, business activities can affect the price. This volatility will decrease as Bitcoin markets and the technology increases. Stockholders wish to take advantage of it, but genuine investors think of it as too risky, therefore all the investors do not invest in Bitcoins.
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   Black Market: Initially,bitcoins were used for concealing and people operating in black markets, which did not want to reveal their personal information and get payment secured. In money laundering, Middlemen would collect money from one source and transfer it to another source through Bitcoins.  Ongoing development: Bitcoin software is still with many incomplete features in active development. New tools, features, and services are developing to make Bitcoin more secureand accessible to the masses. Some are still not ready for everyone. Most of the bitcoin businesses are new and still offer no insurance. APPLICATIONS As more and more retailers around the world accept crypto currencies like bitcoin, bitcoin at present, is used to purchase products and services to a greater extent. Bitcoin transactions offer a personalised degree of confidentiality and tracing their route is relatively difficult. So it is easy to transact anonymously using bitcoins. It is highly convenient to make payments at an international level as it is unrelated to countries and government legislations. An added advantage is that it does not require the permission or approval of any authority. Online transactions in this form of payment are highly secure as they make use of cryptographic functions. No credit card fees are required for payment. If bitcoin value increases in future, then the investment can provide good returns. Online sites like SatoshiDice, Peerbet, Bitzino, Royal Bitcoin use bitcoins for gambling purposes. FUTURE SCOPE Sending money is not the primary goal of Bitcoin. The community is still exploring numerous possibilities. At present, there has been development of other technologies and soon several ideas may be turned into reality. Perhaps, the most interesting applications of bitcoin are yet to be identified. Fraud Control Bitcoin facilitates an unparalleled security and privacy level. The network gives consumers protection from the most common forms of theft, such as remittances or unauthorized charges and has provisions for wallet backup or protection. Hardware wallets make stealing or losing
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  money very complicated.Bitcoin is implemented to ensure its users to monitor their money fully. Global Accessibility All the worldwide transactions will be completely interoperable with Bitcoin. Any bank, organisation or person can make and receive payments anonymously anywhere, with or without a bank account. Bitcoin is accessible to many countries that remain out of reach for many payment schemes due to certain drawback. Automated Services Electronics service canhandle the cost and drawbacks of cashor credit card transfers. It includes allmanner of distribution equipment, from train tickets to soda. Bitcoinis idealfor useto reduce the running costs of the modern age of digital services. Just imagine a cab or shop where one can pay for shopping without standing in line. There are plenty of suggestions. Cost Efficiency A user can make secure payments without cumbersome and expensive intermediaries by using cryptography. A Bitcoin exchange is significantly cheaper than its options and accomplished quickly. It means that Bitcoin has the possibility of being a standard form of transfer soon. By eliminating high transaction costs on the incomes of workers, Bitcoin could also play a role in reducing poverty in many countries. Micro Payments One can imagine listening to internet radio payable by the second, browsing at the websites with a little tip or renting a bandwidth per kilobyte from a WiFi hotspot. Bitcoin is sufficiently powerful to allow all of this. CONCLUSION It can be concluded that bitcoin is better than cashin aspects likeit is availableata global level, impossible to be counterfeited, diluted and functions without the involvement of a third party like a financial institution. The only limitation holding it back is its economy is in an early stage, so it is currently a high-risk asset and can’t be used as a mode of investment. Caution should be exercised while investing in the form of bitcoins. So, for avoiding loss, it is prudent to use bitcoin as an exchange mode as of now.