With reference to ‘Bitcoins’, sometimes seen in the news, which of the following statements is/are correct?
- Bitcoins are tracked by the Central Banks of the countries.
- Anyone with a Bitcoins address can send and receive Bitcoins from anyone else with a Bitcoins from anyone else with a Bitcoins address.
- Online payments can be sent without either side knowing the identity of the other.
Select the correct answer using the code given below.
- 1 and 2 only
- 2 and 3 only
- 3 only
- 1, 2 and 3
Explanation
Statement 1 is incorrect
- Cryptocurrency (Bitcoins is one of the example of this), sometimes called crypto-currency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions.
- Cryptocurrencies don’t have a central issuing or regulating authority.
- They run on blockchain technology.
- A blockchain is a digital distributed ledger that records every data (transaction) in blocks linked together using cryptography (a technique of securing communication using encryption).
- Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins.
- Bitcoin is the largest cryptocurrency by market capitalisation.
- El Salvador is the first country in the world to adopt Bitcoin as its legal tender.
Statements 2 and 3 are correct
- Anyone with a Bitcoin address can send and receive Bitcoins from others with a Bitcoin address, a fundamental feature of the Bitcoin network.
- Bitcoin transactions allow for pseudonymity, enabling online payments to be sent without either party needing to know the other’s identity; however, transactions are recorded on the blockchain, where only addresses (not real identities) are visible.
