Cryptocurrency and bitcoins: What’s all the frenzy about?
The existence of crypto currency as well as Bit coin has been made possible through the block chain technology which can be defined as a ledger of transactions which means through this medium people can confirm transactions, ultimately eliminating the need for a central clearing authority as this technology is decentralized. In this aspect, crypto currency can be defined as a type of digital asset which serves as a medium of exchange where information of participants is stored in a type of digitized database. This database has several purposes including that it controls the creation of additional coins and verifies transfer of coin possession. The block chain, through which each crypto currency undergoes a distributive ledger, is called the public financial transaction database.
The idea of cryptocurrency can primarily be attributed to American cryptographer David Chaum who birthed the idea of e-cash and he later brought it into practicality through Digi Cash in 1995. After several developments in the time period including publishing of journals and articles by MIT mailing list amongst others, the bitcoin emerged in 2009 by Satoshi Nakamoto. Following this in 2011, Lite coin was also introduced after which following a series of similar introductions.
Jan Lansky, an academician, lay out six conditions upon meeting which a currency can be classified as crypto currency and he asserted that cryptocurrency is a system. These conditions include:
1. It should be controlled by distributed consensus and not with centralized authorities
2. The system must allow transactions in which the ownership of units can be changed.
3. It is through this system that new cryptocurrency units can be created.
4. The proof of ownership of cryptocurrency unit can be made cryptographically.
5. The system is responsible for ensuring an overview of cryptocurrency units and their ownership.
6. The system is also referred to as crypto token and they are usually issued within ‘a small contract running on top of a block chain.’
Bitcoin is a type of cryptocurrency which is used to purchase merchandise with the option of concealed identity. Since bitcoins are not tied to the currency of a particular country, it is feasible to make international payments through it.
The buying and selling of Bitcoins is different from the cash and its exchange. If you are interested to buy cryptocurrencies, all you need initially is a wallet, an online app in helping to hold your currency. First, you create an account on exchange, after that you can transfer your real money to purchase any cryptocurrency for example Bitcoin, Ethereum, or any other.
There are platforms like Coin base where all this can happen i.e. you can create your wallet and buy and sell the bitcoin or any other cryptocurrencies.
Bitcoin has several advantages such as that it does not have any credit card fee which can be useful for small businesses who already have a low startup cost. There is also the factor that sometimes bitcoins are used as investments in hopes that its value will increase over time. Bitcoins can be purchased through channels such as on an exchange such as bitcoin exchanges which allows people to buy or sell bitcoins using different currencies.
The one drawback of such a channel is that they are often times at the risk of getting stolen as has been seen in the examples of Bitfinex. The other way is through transfers where the exchange can take place between two people using mobile applications or computers. Mining is also a possible way where participants mine complex math puzzles on computers which results in the creation of bitcoins.
People can make as many as 11 bitcoins in 10 minutes.
Worried about How to keep your crypto safe? There are many ways to protect such currencies.
· Keep your computer system safe. Like some regular scans, good antivirus, a reliable firewall, and your basic security passwords, authentication etc.
· Do your homework when investing in new ICO (initial coin offering)’s website.
· Be careful and safe with your information.
· Do not leave the deal of cryptocurrency on for too long
· Use offline wallets more frequently than the online ones.
Etc.
The importance of bitcoin primarily lies in the fact that it is considered a safe asset by many. It helps consumers diversify their assets especially given the uncertainty of today’s times. In fact, given the geo-political tensions, many view the bitcoin to be safer in value against the constant fluctuations of gold. The bitcoin is not politically neutral which many would assume it is since it is not tied to any one country’s currency. However, bitcoin is aligned with the ideology of privacy as its origins lie in the Cyberpunk movement. This means that its identification as private online anonymous currency has allowed people to carry out actions without being tracked by organizations or people. This benefits those who are weary or distrust corporations and centralized banking systems.
Over time Bitcoin’s value is on boom which can be attributed to factors such as social sentiment, ideology and optimism. This means that the bitcoin was designed in such a way that it was meant to have its value rise. This follows the rules set out by Nakamoto in its software code. However, the maximalists, advocates, defend such an argument. This means that bitcoin is a bull market which means that it is a market which rises over time with stabilizations in the economy.
The key defendants of bitcoin present the argument of economic freedom which means that the members of society are actively participating in the workings of an economy. This depends the accessibility of starting a new business, laws and legislations of an economy, property rights and regulations. This prospect of economic freedom is important because it ensures consumer satisfaction, higher incomes and a bridged social divide.
Therefore, many believe that the bitcoin is one step forward in the direction of economic freedom in a number of ways. This is because it has made starting a business much easier now as the friction of accepting payments is now lessened due to bitcoin which helps to expand. It also ensures property rights and digital currency such as the bitcoin helps in minimizing such dissonance as it stores the wealth safely and allow consumers to be in charge of their own money.
In fact, many also believe that although the cryptocurrency is currently volatile, its volatility is reducing every year and research has shown that with the coming years, bitcoin will be more stable than more than 100 countries’ currencies.
Bitcoin data is stored in a public database but the name of the purchaser remains anonymous as well as that of the seller. The only piece of information revealed is Wallet ID and so these transactions are kept private. However, there has been a looming debate that with this comes a disadvantage which is the fact that the bitcoins are now increasingly being used as a currency of choice for several illicit activities online such as the purchase of drugs.
A type of cryptocurrency is called altcoins and are those types of digital assets that cannot be classified as bitcoin. Such coins differ in some way or the other from the Bitcoin. These include:
· Litecoin,
· Ripple and
· Mintchip.
Litecoin is the leading rival of bitcoin as of today especially given its efficiency in processing and transferring smaller payments. The coins of Litecoins can in fact even be mined by a normal desktop computer compared to those of bitcoin. Ripple has been launched by Open Coin and is considered a currency as well as a means of making payments. In return of transfer of funds, coins are awarded. The Mint chip, however, has features unlike the rest as it is a sort of government institution and a smart card feature which carries electronic value allowing it to be transferred later. It also has a physical currency alternative in the form of the Canadian Dollar.
The future of the cryptocurrency lies looming ahead of us. Analysis shows that changes can be predicted as well given the introduction of institutional money into the market. There is also significant research which shows that with the introduction ETF (verified exchange traded fund) it would be much easier for people to invest in bitcoin. This proves that cryptocurrency and bitcoin have significant influence and immense potential which is attempting to be unleashed by researchers and economists.
In Pakistan, specifically, the relevance of cryptocurrency cannot be undermined as it is believed that due to economic recessions and downward sloping demand in its economy, the necessity of an alternative financial system is paramount.
This has led to the KP Assembly in Pakistan to legalize cryptocurrency and mining. This happened when K-P Assembly passed the resolution presented by Dr.Sumera Shams(Member of the Provincial assembly), about legalizing crypto currency and cryptomining.
She tweeted “Indeed Pakistan progressing towards digitalization to compete the World”.
As mentioned in a tweet by Zia Ullah Khan Bangash, the advisor to the Chief Minister of KP in science and technology, Pakistan must the resolution which has legalized this in order for it to stay in the race of technological development which other countries are at the top of. With this, undoubtedly, there is a need by the government to introduce a set system of regulations to regulate cryptocurrency in KP in order to avoid malpractice. Economists have argued that this is a key step towards development and will greatly benefit the digital economy of the country as more and more people adopt it as a legitimate and valid medium of transactions and payments.
Economic views: There has been mixed reviews on bitcoin from those at the top of their field. For example many view Bitcoin as an extension of Milton Friedman’s vision to halt the growing monopoly of nation states through the banking system such as central banks on the distributive control of money. This is also argued again in the form of giving it the name of a ‘Liberation dream’ which is a means reducing government control on the economic functioning of a state.
On the other hand, however, the introduction of bitcoin and cryptocurrency is seen as a medium of achieving greater social justice by undermining the inherently oligopolistic framework of an economy which is considered to favor economic and income inequalities. In either ways, economists believe, that through the digital currency we have a solution to governing without the structure of a government present.
Pakistan has also taken significant steps towards such an advancement. The Securities and Exchange Commissions of Pakistan (SCEP) has published a paper on the platforms which allow cryptocurrency trading. The paper defines the different concepts and terms associated within such a context and those which are essential to understanding the workings of a digital economy. It also highlights the different approaches and regulations which are in place globally including those of the FATF (Financial Action Task Force). With this, the paper also proposes regulatory measures to be put in place in Pakistan for the effective implementation of cryptocurrency. The paper particularly focuses on non-government actors and non central banks issued crypto assets. In specific the paper mentions two approaches for regulating cryptocurrency such as either availing previous regulations and restrictions or using the approach of ‘let-things-happen’ as described by Commodity Futures Trading Commission (CFTC) in which the need to innovate and implement dynamic research is strongly emphasized upon.
Regarding the speculations about banning cryptocurrency in Pakistan, the State Bank of Pakistan has clarified that the cryptocurrency is not banned in Pakistan. This is despite that the Sindh High Court has issued several warnings about dealing with cryptocurrency but has not outright banned them.
In Pakistan, there is a deep seated mistrust in cryptocurrency from certain factions and segment in society. For example, Pakistan’s central bank advised financial institutions to avoid processing, transferring, holding promoting and investing in virtual currencies.
Waqar Zaka’s efforts:
This has been responded to by Waqar Zaka, a television personality, who said that FIA (Federal Investigation Authority) has been ‘falsely been arresting people for possessing bitcoin’.
Zaka has been a vocal activist in protesting against any and all sorts of banning on the cryptocurrency and digital assets. In Pakistan, currently, no law exists which sets a ban on digital assets and bitcoin. Zaka’s steps also include that he has filed a petition in the Sindh High Court asking to end the ban on bitcoin and cryptocurrency. He has also said that his initiative of developing a currency for institutions like the State Bank of Pakistan will reduce the need for others such as PayPal as it will enable fast transactions and processing.
He highlighted the need for legalizing initially in Pakistan from the scratch and brought everyone’s attention towards practical use of this form of currency.
Waqar Zaka’s initiative also entails free services of cryptocurrency to assist businessmen and entrepreneurs to invest in a blockchain system through cryptocurrency. His team is currently doing so through a team called ‘Ten Up’. Such steps are appreciated in an economy which is already struggling with economic decline, inflated prices and on top of all given the country’s unstable political structure.
Zaka believes that the onus of responsibility lies now with the government as it has the duty of ensuring that the currency is implemented in the country whilst urging banks and government to support such gestures for the development of technology in the country.
There are reports that the court and especially Justice Muhammad Iqbal Kalhoro criticized the State Bank of Pakistan for restricting the use of cryptocurrency in today’s advanced and modern times and era. His support for this cause primarily stems from his own personal like for bitcoin which he has been using since 2012. He has also negated any criticism asserting that this is not a form of money laundering but rather a means of stabilization and encouragement of business and trade in the country.
Cryptocurrency is being adopted all over the World as it serves as the next step in the financial industry which aids in removal of restrictions of the borders and in creating a free flowing currency. In this global age, cryptocurrency will eventually become an essential part of finance industry. And for our country Pakistan, adopting this would help in order to keep up with the world.
This a great step for Pakistan as it will promote digital currencies within the country and it will boost the digital economy especially as Pakistan aims to make itself the “IT hub of Asia”. There are many countries around the world who have already adopted crypto currencies as a valid method of making everyday transactions. Pakistan is still progressing and more work is being done in the process to adopt this form of currency as well as to address people in investing in such type of currency.
