Digital Currencies- Block chain, Cryptocurrencies and Bitcoin
- 1. Digital Currencies -By Sai Mishra
- 2. Introduction • Digital currency is a payment method which exists only in electronic form and is not tangible. Digital currency can be transferred between entities or users with the help of technology like computers, smartphones and the internet. • Digital currencies can be used to purchase goods and services but can also be restricted to certain online communities such as a gaming or social networks. • Digital currency is also known as digital money and cybercash.
- 3. Physical vs Digital Currency • Digital currencies are similar to traditional money. However, they differ in two main ways: • – First, digital currencies have no physical properties. You can, however, hold digital currencies in a virtual wallet. • – Second, they allow for borderless transfer-of-ownership and instantaneous transactions. Techopedia says the following regarding digital currencies: “A payment method which exists only in electronic form and is not tangible.”
- 4. Digital or virtual currency? • A 2015 ECB (European Central Bank) report says that virtual currencies are a digital representation of value. No central bank, e-money institution, or credit institution has issued them. An ECB article titled ‘Virtual Currency Schemes‘ defines virtual currency as a type of unregulated digital money. • The Bank for International Settlements (BIS), on the other hand, defines digital currencies as assets represented in digital form. The BIS also said that digital currencies have some monetary characteristics.
- 5. Why Digital Currency? 1. What is a payment transfer system? 2. What are some problems with traditional transfer systems? 3. How are Blockchain-based transfers better than conventional ones? 4. In other words, how do I benefit?
- 6. Cryptocurrencies • Cryptocurrencies are a type of digital currency or virtual medium of exchange that uses cryptography to verify transactions. • The current generation of cryptocurrency owes its origins to Bitcoin, which emerged in 2009, and uses a technology called the ‘blockchain’ to create a decentralized network in which every node keeps a copy of the transaction ledger. • Cryptocurrencies are secure thanks to cryptography. Cryptocurrency creators use encryption techniques to regulate currency generation and also to verify the transfer of funds.
- 7. How Cryptocurrency works? • Public Ledgers: All confirmed transactions from the start of a cryptocurrency’s creation are stored in a public ledger. • Transactions: A transfer of funds between two digital wallets is called a transaction. That transaction gets submitted to a public ledger and awaits confirmation. • Mining: Mining is the process of confirming transactions and adding them to a public ledger.
- 8. Anatomy of Cryptocurrency • Adaptive Scaling • Cryptographic • Decentralized • Digital • Open Source • Proof-of-work • Pseudonymity • Value
- 10. Bitcoin • Bitcoin is a cryptocurrency, a form of electronic cash. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. • Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. • Each bitcoin is sub divided into 100 million smaller units called satoshis, defined by eight decimal places.
- 14. Storing Digital Currency: Wallets • When digital currencies are mined on their blockchains or transferred between users, they must be stored until their new owner is ready to use them. That’s where digital currency wallets come into play. • Wallets are simply pieces of software capable of housing digital currencies securely for an indefinite period of time. All digital currency wallets have a public key and at least one private key. • Nothing matches the security of a multi-signature wallet, which utilizes multiple private keys stored in separate locations – and requires the signature of two keys for every transaction.
- 15. Pros of Digital Currencies • The introduction of this form of currency could be seen as an opportunity for companies to implement new technologies and therefore, succeed as a business. • The benefits of digital currencies include lower transaction costs and the ability to make payments at any time. • Alongside this, digital currencies may help companies to reduce and eliminate risks by using them as a transport currency and as a way of settling intercompany transactions without paying extortionate fees.
- 16. Cons of Digital Currencies • Some risks that have raised concerns about digital currencies in the marketplace among consumers and businesses are security, payment beneficiary identification and currency volatility. • Corporates should understand that there is a limited user base for this type of currency and “the regulatory framework and tax treatments of digital currencies are still being determined, “says PwC. As well as this, infrastructure is still being developed as digital currencies are not accepted by banks and companies cannot earn interest off their balances.
- 17. Impact of digital currency on the financial industry • Increase in efficiency: The use of digital currency will upsurge the effectiveness of the financial industry by making payments faster, easier, and most prominently more secure. • The effective alternative for unstable economies: Even though digital currency has not been accepted extensively, its use in countries like Venezuela where Bitcoin looked to be more stable than its national currency at the time of high inflation, shows that it can be an effective substitute for hard cash in the future.
- 18. Future of Digital Currencies Blockchain technology has a brighter future than most digital currencies in general and Bitcoin in particular, judging from responses. It’s also clear that a discussion of this subject can reach far beyond the confines of the original question, involving us in a debate about central banking systems. According to statistics, the global blockchain market is expected to be worth $20 billion in the year 2024. Currently, 69 percent of banks are experimenting with blockchain technology to make their services more secure, seamless and transparent.
- 20. Thank you