With the launch of Bitcoin in 2009, there has been a crypto race ever since to accumulate the maximum amount of Bitcoins by mining. Bitcoins can also be acquired by investing, in exchange for fiat currencies. To know more about investing in Bitcoins, check out the trading bot.
Acquiring Bitcoin by mining can be taxing, since it involves solving a complex algorithm. The miner who solves it the fastest gets the Bitcoin, and is also rewarded with some incentives. The Blockchain Technology employed in the procedure ensures no transaction goes unrecorded. Even though Bitcoin is a decentralized currency, which renders it beyond the reach of any authority, a public ledger is maintained. Everyone involved in the transaction is kept in the loop. This ensures 100% authenticity in the transactions, and deems any transaction invalid if they see fit. The entire blockchain structure is regulated by the people involved in the chain; hence any information is verified before being encoded in the blocks. Once a piece of information is encoded, they cannot be tampered with. Any discrepancy in a single block reflects in the entire chain.
Why does the Government not influence the Crypto Market?
The Government recognized currency is known as the Fiat Currency. Fiat Currency only has value because the Government sanctions it. Without the Government’s approval, the fiat currency would mean nothing. Fiat currencies are paper currencies that may just lose their value any day if the Government chooses to declare so.
Under such circumstances, the fiat currency will lose its purchasing power, no goods or services will be bought with the use of it. The central banks issue the fiat currency, and can choose to destroy them too, upon the Government’s discretion. The Government of the nations exercises full control over the currency of the countries. They introduce monetary policies to dictate the movement of currency in the economy of the nations, as well as of the world. This makes it possible for the Government to trace any illegal transactions happening in and around the country, using the nation’s fiat currency.
The control over the economy, and in turn on people that the Government built day by day, is all lost when a private organization comes up with a new concept of currency. Not being able to exercise control over the currencies would also mean exemption of taxes. By means of the Fiscal Policy of the economy, Government makes few rules to abide by. These rules will ensure the movement of money in the direction most suitable to the central authorities. They will be in charge of the inflation, deflation, boom, and recession. The Government needs to be the authorizing entity to control the flow of money, in and around the nation.
How Does Bitcoin Work?
Bitcoin does not follow the normal banking system that the nations’ currencies abide by. Bitcoins do not need the approval of the nation, or Government. The currency is created virtually, in cyberspace. It is by mining that miners acquire Bitcoins by solving complex mathematical problems. The miners receive the currency in their cyber wallets. The currency is intangible.
Bitcoins were initially used as a medium of exchange. With the peak in Bitcoin value in 2013, investors have started taking this Cryptocurrency very seriously. Hence, the accumulation of Bitcoin as a form of currency began. This currency is stored in a digital wallet, and is exchanged between people already possessing it. It happens in a peer-to-peer manner, which makes the involvement of any intermediate institution redundant.
Thus, neither any financial institution is required to make the transactions happen. Nor do the Governments get involved. However, the lack of involvement of the financial institution in no way suggests that the Cryptocurrency and the transactions involved go unaccounted for. The public ledger keeps transaction records just as good, without the banks getting involved. In fact, during a financial emergency in the country, the Government can claim a portion of the money saved in the banks, but none of the Cryptocurrency. They neither regulate the rise and fall of value of the Cryptocurrency, nor can levy taxes on it. It is as if Bitcoins almost do not exist for the Government.