The Universal Digital Currency, Bitcoin (created in 2009) is the first-ever & widely acceptable cryptocurrency globally (1Bitcoin is priced today at around $ 61,000). It is also the first decentralized cryptocurrency that facilitated transactions using its blockchain technology. it is not issued or regulated by any government or authority. With the name and various images, it may be understood as a coin but it is software with a set of protocols (commonly known as Blockchain) and processes. 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 or regulators.
Trading with Bitcoin
Being a Digital Currency, a Bitcoin can’t be opted traditionally from financial institutions such as Banks as of now (in the future there could be other possibilities too). So, you have to go through a Cryptocurrency Trading Platform / Trading Exchange & exchange physical currency against the same. There are hundreds of cryptocurrency exchanges you can use to buy crypto online, but a few of the more popular ones are Coinbase, Gemini, and Kraken. These exchanges are online platforms where you can buy and sell cryptocurrencies (source NextAdvisor). Once you chose the trading platform, you also need your civil identification documents for KYC and payment method which can be your bank account or Debit/Credit card, optionally you can have your payment wallet (externally) as well. This process is almost similar to setting up a brokerage account.
Many progressive financial institutions that want to follow new trends and assist their customers with cryptocurrency transactions are offering these services to their customers, also global ATM vendors like NCR are widely offering Bitcoin at specialized ATMs. Alternately, you can also now buy Bitcoin through some digital payment platforms such as PayPal.
Bitcoin Keys come in pairs consisting of a private (secret) key and a public key. A private key is a number, usually picked at random. These digital keys are very rarely seen by the users of bitcoin. For the most part, they are stored inside the wallet file and managed by the bitcoin wallet software. These keys generate a valid signature during the transaction for authentication. Therefore, anyone with a copy of those keys has control of the bitcoin in that account. In this sense, you can relate the public key as your account details and the private key as OTP for completing the transaction. During the payment transaction via. Bitcoin, the public key of the recipient (the same way as the beneficiary name) is used. The bitcoin address is the only representation of the keys that users will routinely see because this is the part they need to share with the world.
Every transaction is simultaneously recorded in a shared ledger. “Blockchain” serves as a distributed ledger and eliminates the need for any central authority to maintain such records.
Is Bitcoin secured?
While the inherent concept of Bitcoin is highly secured, the leak/theft of the private key stored on an individual device can create a risk for the entire scenario. To avoid such theft, Bitcoin owners stores the private keys offline, often called Cold Wallets.
The hacking of the exchange platforms itself is a big risk. If hackers succeed when targeting those exchanges, they can access thousands of accounts and digital wallets and transfer them to different accounts. In 2014, the bitcoin exchange Mt. Gox in Japan was forced to close down after hackers gained access and stole millions of dollar’s worth of bitcoin.
While the transactions are irrevocable and “no insurance applicable”, most precautions need to be observed during the executions.
Bitcoins has multiple benefits too
Traditional online transactions are exposed to financial risks and users do not have any control over the same. Whereas cryptocurrency Bitcoin extends potential benefits to the users who take ordinary precautions.
- Grants Ownership to User
Bitcoin extends full control and ownership of their money to the user, unlike the traditional scenario where the routine transactions do have corresponding restrictions and risks. Especially in pandemic situations like we faced recently, where the financial institutes had challenges, the Bitcoin way has many benefits as experienced by the users.
- User identity is hidden
Bitcoin transactions do not disclose the owner’s identity. The only identifier is a blockchain address. An individual can have multiple addresses, just as they can have multiple usernames and passwords for a single account. Internet Protocol (IP) addresses or other identifying information are not required to conduct the transaction.
- Peer-to-Peer Instant Process
There is no intermittent entity in any form to validate the transaction in the case of a Bitcoin transaction. The sender and receiver across the globe do communicate directly without any 3rd party intervention every time. There are no rules related to time/amount/mode whatsoever as it is directly executed with the recipient peer.
- Low Transaction Fees
Bitcoin transactions across the countries are executed at a very minimal charge compared to significant traditional transaction charges per transaction. This can be a major advantage for travellers. Additionally, transfer in bitcoins is fast, eliminating the inconvenience of typical authorization requirements and wait periods.
Banks should embrace Cryptocurrency through Blockchain technology
Digital currency is the future. Banks & Financial Institutes have a concern about the risk associated but should shift from thinking of crypto as a competitor to that of a partner. Banks can play a significant role in the crypto industry. Banks with respective regulators can ensure the missing dots such as assurance and security to the largely unregulated environment. The adoption of cryptocurrency can further enhance global operations and satisfy overseas customers as well. Blockchain technology can empower many existing processes and nullify the delays for transaction processing specifically the clearinghouses.
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