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Is Bitcoin economy the real one?

Next week Vancouver, Canada will see world’s first bitcoin ATM which will dispense Canadian dollars in exchange of digital money which is anonymous crypto-currency – bitcoin.

Nobody knows who Satoshi Nakamoto is – whether he is a single person or a group of people operating under that name, but what he created in 2009/10 is being considered disruptive in nature as far as payments and banking industry is concerned – it is called bitcoin.

Bitcoin is digital money for peer-to-peer transactions on completely decentralized payment network which is powered by its users without any centralized controlling authority.  Please refer to http://bitcoin.org/en/faq for more information on bitcoin.

Here are few questions on Bitcoin though:

1. Since it is a completely decentralized P2P payment network without any centralized body (and without even knowing who has created it), how are different Governments and Regulatory bodies looking at it?

2. Though Bank’s can have deposit accounts from different merchants to cash in bitcoins, P2P nature will have some impact on banking transactions. How are the Banks looking at it?

3. Bitcoin price volatility is high. It was $13.30 on Dec 31 and high to $205.50 on October 22. While writing this post, its buying price is $197.15. Pl see following chart for its volatility.

bitcoin

(http://bitcoincharts.com/charts/mtgoxUSD#rg360ztgTzm1g10zm2g25zv)

4. Considering that the algorithm will create only 21Million bitcoins over the period of 140 years, there will be tremendous demand-supply competition. Though the bitcoins will be traded in fractions, the global trading scenarios will be very complex. Even if individuals form pools to operate in groups, the associated complexity may be unmanageable in future.

5. Recently bitcoin was in news due to Silk Road case. Considering the anonymous nature of operations, bitcoin based transactions will be very difficult to track and control.

6. With the bithcoin there are exchanges, banks, trading platforms and trading strategies. Though the technical aspects of bitcoin mining are little difficult to understand, buying and selling them relatively easy. Latest economic situation in Cyprus saw ups and downs of bitcoin prices due to that.

Thousands of merchants around the globe are already carrying out bitcoin based transactions. On one side its gaining popularity but not having clarity from regulatory and Government bodies around the world the question is – will this bitcoin based economy the real one?

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