Is Bitcoin the most appropriate currency of the digital age we are living in? It is believed that cryptocurrency has revolutionized transactions by making them faster and more efficient. It is, for this reason, several multinational corporations around the world and financial institutions have recently made investments in cryptocurrency. Cryptocurrencies are not only a good store of value. They can also help you to protect your assets against the inflationary rate of the market.
However, there is a prevent skepticism around the existing crypto market. The ledger system which most cryptocurrencies use is a decentralized ledger. Bitcoin uses a decentralized public ledger system that is accessible to all the networks of the Bitcoin blockchain that are functioning all over the world. Because the ledger system of currencies like Bitcoin and not regulated by an authoritative body, the crypto market faces a lot of criticism. To understand where the criticism stems from, we need to understand the mechanism behind cryptocurrencies- the blockchain.
Cryptocurrency and blockchain
There is a common misconception that all the cryptocurrencies that are in existence use blockchain technology. While it is true that most of the cryptocurrencies, including Bitcoin, use different sorts of blockchain technology, there are new currencies like IOTA that use a directed acyclic graph (also known as DAG) technology where the data is stored in relational networks instead of consecutive blocks.
So what’s the difference between blockchain and the traditional ledger system used in the banking system?
Traditional ledger- banks and most other financial institutions use a ledger system supervised and regulated by an authoritative body. This means every transaction in the institution has to be approved by the body in which the power to regulate is vested upon. Which system creates transaction backlog when money is being transferred overseas. While making cross-border withdrawals or deposits, the bank has to receive the transaction order and process it, which is later communicated to the responsible institution on the other side of the border, then cross-checks the transaction and approves it. This process normally has a wait time of 2 to 3 days.
Blockchain and decentralized ledger- in the blockchain network, the ledger is decentralized. This means the ledger is accessible to multiple networks across the world simultaneously. For this reason, transactions that usually take 2 to 3 days in a traditional banking system, using the blockchain technology search transactions can be carried out in a few minutes. Anyone with a crypto wallet can approve of their transaction by using the private key. There is a body of miners who have access to the transaction records from all over the world, audit and approve of the transaction in 10 minutes. It is for this reason cryptocurrencies have a natural advantage over the circulation process of banks, etc.
Countries that have banned BitcoinPhoto by Andrea Piacquadio from Pexels
Bolivia- in 2014 the central bank in this country declared the use of any currency that the government and government-controlled institutions do not regulate as illegitimate. The government does not regulate Bitcoin and most other cryptocurrencies; they are illegal tender.
China– In the year 2013, China’s Bank of China banned Bitcoin because it was used extensively in buying illegitimate drugs and contraband armaments from the online black market. Later they also banned all the other cryptocurrencies. According to the existing regulation, no financial institutions can make transactions with cryptos. They cannot even hold assets in cryptocurrencies. China has also banned several platforms and applications that facilitated crypto trading.
Saudi Arabia- the Saudi Arabian Monetary Authority (SAMA) has declared Bitcoin illegal due to their anonymous nature of the transaction. Financial institutions in Saudi Arabia cannot hold assets or make transactions using Bitcoin or any other cryptocurrencies.
India- in 2018 the Reserve Bank of India banned transactions using Bitcoin. However, in the year 2020, the supreme court of this country lifted the ban citing the ban was against the laws that promoted professional freedom. However, in 2021 the government has once again issued a notice stating prohibitions on crypto transactions. This decision is still under debate.
Conclusion- Despite all the skepticism surrounding Bitcoin, it has to be acknowledged that this new digital transaction mode is in trend now. You can visit the official website to know more about crypto trading and the features of a crypto wallet. A general overview of the crypto market is useful for anyone interested in crypto trading.
Featured Image by nali_wike from Pixabay