A Bit on Bitcoins

What is a bitcoin?
“When I bought a percentage of a bitcoin 13 months ago, a bitcoin was valued at anywhere between 500 to 600 dollars. Today, the same bitcoins have brought back 30 times the return, and are valued at 18,000 dollars (still climbing),” said the speaker.

So what is the method behind the madness’? And isn’t the income tax department going to send a notice to all those who have transacted in a bitcoin? If it takes only a second for Visa to execute 4000 transactions, whereas only 7 bitcoin transactions get cleared in the same amount of time, why would anyone want to accept a bitcoin payment?

To answer these questions and more, the Rotary Club of Bombay was honoured to have Vijay Mukhi, as the speaker at the last Tuesday meeting. He was introduced to the audience by Rtn. Shailesh Haribhakti, who showed much regard for “the prolific writer” and teacher, who, he was sure, would be able to clear all our doubts on the “seedy” new currency.

To demystify the concept of a bitcoin in 20 minutes, the speaker began by asking the audience: “Why is there no global currency?” The answer, quite simply, is because there is a lack of trust. So if there were to be a global currency, how would we get everyone to agree to it? The evidence, in fact, is already in front of us; The first successful attempt at a global currency is the bitcoin, and the reason for its worldwide acceptance is the technology that runs it – blockchain.

“It’s not a physical piece of paper; it is like a credit card transaction.” By downloading a bitcoin code from the internet, and sharing it, along with your Aadhar Card details, to any bitcoin exchange, “after putting some rupees through your bank account,” is the first step to open a bitcoin account. However, one must know that “the only way you can generate a bitcoin is by getting lucky finding a number.” It’s “a mathematical thing” called mining, done by computers. “If you find the lucky number you get 12 bitcoins, which is worth 1.5 crore rupees.”

In framing a conclusion for his speech, the speaker began to paint a picture of the future of the bitcoin. Understandably, this irked a younger member in the audience, who reminded Vijay Mukhi that he might be forced to take back his words, especially since “you can’t use bitcoins as credit card transactions because they are too slow.”

Here the young man referred to a new network, a sister of the one bitcoin runs on, called the lightning network. The talk in the press, online forums, and at social gatherings is that the lightning network would be faster than a Visa transaction and allow bitcoin owners to “make micro-transactions.”

The speaker, in acknowledging the young man’s enthusiasm for the new network, also reminded him that he had officially become a senior citizen ten days ago, and, at his age, he could not believe some of the claims made about bitcoin’s future unless he could see them with his own eyes. So if one were to make an assumption about whether the audience were on the side of the young man or the speaker, it might help to know that a majority of the audience were senior citizens too.