{"id":1447,"date":"2024-02-18T13:07:49","date_gmt":"2024-02-18T07:37:49","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1447"},"modified":"2024-04-03T07:09:46","modified_gmt":"2024-04-03T01:39:46","slug":"q-with-reference-to-bitcoins-sometimes-seen-in-the-news-which-of-the-following-statements-is-are-correct","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-with-reference-to-bitcoins-sometimes-seen-in-the-news-which-of-the-following-statements-is-are-correct","title":{"rendered":"Q.\u00a0With reference to \u2018Bitcoins\u2019, sometimes seen in the news, which of the following statement(s) is\/are correct?"},"content":{"rendered":"\n
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  1. Bitcoins are tracked by <\/strong>the Central Banks of the countries.<\/li>\n\n\n\n
  2. Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.<\/li>\n\n\n\n
  3. Online payments can be sent without either side knowing the identity of the other.<\/li>\n<\/ol>\n\n\n\n

    Select the correct answer using the codes given below.<\/p>\n\n\n\n

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    • 1 and 2 only<\/li>\n\n\n\n
    • 2 and 3 only<\/li>\n\n\n\n
    • 3 only<\/li>\n\n\n\n
    • 1, 2 and 3<\/li>\n<\/ul>\n\n\n\n
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      Answer: (b) 2 and 3 only<\/strong><\/p>\n<\/blockquote>\n\n\n\n

      Bitcoin<\/h5>\n\n\n\n
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      • Bitcoin is a type of digital currency<\/strong> that enables instant payments to anyone. Bitcoin was introduced in 2009.<\/strong> Bitcoin is based on an open-source protocol and is not issued by any central authority.<\/strong><\/li>\n\n\n\n
      • Use:<\/strong>\n
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        • Originally, Bitcoin was intended to provide an alternative to fiat money<\/strong> and become a universally accepted medium of exchange directly between two involved parties.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n
        • Record of Bitcoins (Blockchain):<\/strong>\n
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          • All the transactions ever made are contained in a publicly available, open ledger,<\/strong> although in an anonymous and an encrypted form called a blockchain.<\/strong>\n
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            • Transactions can be denominated in sub-units of a Bitcoin.<\/strong>\n
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              • Satoshi<\/strong> is the smallest fraction of a Bitcoin.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n
              • Acquiring Bitcoins:<\/strong>\n
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                • One can either mine a new Bitcoin<\/strong> if they have the computing capacity, purchase them via exchanges,<\/strong> or acquire them in over-the-counter, person-to-person transactions.<\/strong><\/li>\n\n\n\n
                • Miners<\/strong> are the people who validate a Bitcoin transaction and secure the network with their hardware.\n
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                  • The Bitcoin protocol is designed in such a way that new Bitcoins are created at a fixed rate.<\/li>\n\n\n\n
                  • No developer has the power to manipulate the system to increase their profits.<\/li>\n\n\n\n
                  • One unique aspect of Bitcoin is that only 21 million units<\/strong> will ever be created.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                  • A Bitcoin exchange<\/strong> functions like a bank where a person buys and sells Bitcoins with traditional currency.<\/strong> Depending on the demand and supply, the price of a Bitcoin keeps fluctuating.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n
                  • Bitcoin Regulation:<\/strong>\n
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                    • The supply of bitcoins is regulated by software and the agreement of users of the system<\/strong> and cannot be manipulated by any government, bank, organisation or individual.<\/strong><\/li>\n\n\n\n
                    • Bitcoin was intended to come across as a global decentralised currency,<\/strong> any central authority regulating it would effectively defeat that purpose.<\/li>\n\n\n\n
                    • It needs to be noted that multiple governments across the world are investing in developing Central Bank Digital Currencies (CBDCs),<\/strong> which are digital versions of national currencies.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n
                      Cryptocurrency<\/h6>\n\n\n\n
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                      • A cryptocurrency<\/strong> is a digital or virtual currency<\/strong> that uses cryptography for security.<\/strong><\/li>\n\n\n\n
                      • It is a decentralized currency<\/strong>, meaning it is not controlled by any government or institution.<\/strong><\/li>\n\n\n\n
                      • Some examples of cryptocurrencies include Bitcoin<\/strong>, Ethereum<\/strong>, and Litecoin.<\/strong><\/li>\n\n\n\n
                      • Transactions with cryptocurrency<\/strong> are recorded on a public digital ledger<\/strong> called blockchain.<\/strong>\n
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                        • This ledger is maintained by a network of computers around the world, and each new transaction is verified and added to the blockchain<\/strong> by these computers.<\/li>\n\n\n\n
                        • This decentralization<\/strong> and use of cryptography<\/strong> make it difficult for anyone to manipulate the currency<\/strong> or the transactions recorded on the blockchain.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                        • To use cryptocurrency<\/strong>, individuals or businesses must first acquire a digital wallet,<\/strong> which is a software program<\/strong> that stores the user\u2019s public and private keys.<\/strong>\n
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                          • These keys are used to send and receive cryptocurrency,<\/strong> and they are also used to verify transactions on the blockchain.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                          • Users can acquire cryptocurrency through a process called \u201cmining\u201d<\/strong> which involves using computer power to solve complex mathematical equations<\/strong>, which validate and record transactions on the blockchain,<\/strong> in return for a certain amount of cryptocurrency.<\/strong><\/li>\n<\/ul>\n\n\n\n
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