E Payment System

what is e-payment system

 An e-payment is a way of making transactions or paying for goods and ser
vices through an electronic medium, without the use of checks or cash.
 And the entire network that enables a successful e-payment transaction is
called e - payment system

 It’s
also called an electronic payment system or online payment system.
 The electronic payment system has grown increasingly over the last decad
es due to the growing spread of internet-based banking and shopping.
E-Payment System Methods
 E-payment methods could be classified into two areas

 creditpayment systems
Eg:credit or debit or smart cards and E-wallets
 cash payment systems.

Eg: e-cheque , e-cash , stored value cards

E-cash and Virtual Money

E - cash virtual money

E cash is a monetary value that is  Virtual currency is a type of unregu

stored and transferred electronicall lated digital currency that is only a
y through a variety of means – a m vailable in electronic form.
obile phone, tablet, contactless car  It is stored and transacted only thr
d (or smart cards), computer hard ough designated software, mobile
drive or servers. or computer applications, or throug
h dedicated digital wallets.
 Itis also called as digital currency  the transactions occur over the int
or e- money. ernet through secure, dedicated ne
tworks.
Electronic Data Interchange
 Electronic data interchange (EDI) i
s the electronic transmission of str
uctured data by agreed message s
tandards from one computer syste
m to another without human interv
ention.
 An e-commerce payment system
(or an electronic payment system)
facilitates the acceptance of electr
onic payment for online transaction
s through EDI.
what we can transmit using EDI?
 Following are the few important documents used in EDI −

 Invoices
 Purchase orders
 Shipping Requests
 Acknowledgement
 Business Correspondence letters
 Financial Transactions
Electronic Data Interchange

 EDI refers to a family of standards and does not specify transmission methods
, which are freely agreed upon by the trading partners.

There are four major sets of EDI standards:

The UN/EDIFACT Standard: The only international and UN-recommended

standard
The US Standard ANSI ASC X12 (X12):The predominant standard in North
America
The TRADACOM Standard: The predominant standard in the U.K. retail ind
ustry
The ODETTE Standard: The standard used in the European automobile in
dustry
Steps in EDI
 Following are the steps in an EDI System.

1. A program generates a file that contains the processed document.

2. The document is converted into an agreed standard format.

3. The file containing the document is sent electronically on the network.

4. The trading partner receives the file.

5. An acknowledgement document is generated and sent to the originating organizatio

n.
Types of EDI
 In general, there are two basic types of EDI transmission:

Point-to-point or direct connections:

Two computers or systems connect with no intermediary over the internet, g
enerally with secure protocols.

Value-added network (VAN):

A third-party network manages data transmission, generally with a mail boxi
ng paradigm.
Pros and cons of EDI
 EDIhas been criticized for its high set-up and VAN costs as well as compl
ex standards. However, its benefits include:

 Time: Reduced cycle time and enhanced customer service

 Cost: Enhanced inventory management and minimized paper use and stor
age
 Quality: Improved business relationships and accuracy
 Profit: Reduced costs, increased turnover and increased cash flow
 Efficiency: Increased productivity
E - Payment Modes
 Digital payments can be done in following ways

1. Banking Cards

2. Unstructured Supplementary Service Data(USSD)

3. Aadhaar Enabled Payment System (AEPS)

4. Unified Payments Interface (UPI)

5. Mobile Wallets &Mobile Banking

6. Internet Banking
Banking Cards

 Useof credit/debit cards for digital

payments at pos terminal.
Unstructured Supplementary Service Data(USSD)

 USSD was launched for those sections of India’s population which don’t have
access to proper banking and internet facilities.

 Under USSD, mobile banking transactions are possible without an internet co

nnection by simply dialing *99# on any essential feature phone.

 Thisnumber is operational across all Telecom Service Providers (TSPs) and

allows customers to avail of services including interbank account to account f
und transfer, balance inquiry, and availing mini statements.

 Around 51 leading banks offer USSD service in 12 different languages, includ

ing Hindi & English.
Aadhaar Enabled Payment System (AEPS)
 AEPS is a bank-led model for digital payments that was initiated to leverag
e the presence and reach of Aadhar.

 Under this system, customers can use their Aadhaar-linked accounts to tra
nsfer money between two Aadhaar linked Bank Accounts.

 AEPS doesn’t require any physical activity like visiting a branch, using deb
it or credit cards or making a signature on a document.

 This bank-led model allows digital payments through AEPS machine which
is similar to pos and a bank mitra agent who maintains AEPS machine.
How AEPS works
 Stage 1: Go to a small bank mitra agent or banking journalist

 Stage 2: Provide Aadhaar number and bank name

 Stage 3: Choose the kind of exchange you need to make

 Stage 4: Provide check through unique mark/iris examine

 Stage 5: Collect your receipt

Unified Payments Interface (UPI)
 UPI is a payment system that coordinates numerous bank accounts into a
single application, allowing the transfer of money easily between any two p
arties.

 Ascompared to NEFT, RTGS, and IMPS, UPI is far more well-defined and
standardized across banks.

 Thebenefit of using UPI is that it allows you to pay directly from your bank
account, without the need to type in the card or bank details.
How a UPI works?
1. After buying something online and reaching the payment gateway to select a payment mode.

2. Here, you or merchant banker selects UPI and enter your virtual address as the identifier (e.g
. xyz@icicibank).

3. Immediately, a notification is received on your smart phone application for the service to whic
h the particular virtual address is linked like your bank account, or Paytm, or other payment w
allets.

4. When this notification is opened, it asks for a security pin called MPIN. On entering the MPIN,
your transaction is completed within seconds.

5. Under this system, the user will have multiple virtual addresses for different bank accounts in
various banks. It enables you to purchase anything without sharing your account details, cred
it or debit card details.
Mobile Wallets & Mobile Banking
 Mobile banking is referred to the process of carrying out financial transactions/banking tran
sactions through a smartphone.

 The scope of mobile banking is only expanding with the introduction of many mobile wallets
, digital payment apps and other services like the UPI.

 A mobile wallet is a type of virtual wallet service that can be used by downloading an app.

 The digital or mobile wallet stores bank account or debit/credit card information or bank acc
ount information in an encoded format to allow secure payments.

 One can also add money to a mobile wallet and use the same to make payments and purc
hase goods and services.

 This eliminated the need to use credit/debit cards or remember the CVV or 4-digit pin.
Internet Banking
 Internet banking refers to the process of carrying out banking transactions
online.
 Banks offer customers all types of banking services through their website
and a customer can log into his/her account by using a username and pas
sword.
 These may include many services such as transferring funds, opening a n
ew fixed or recurring deposit, closing an account, etc.
 Internet banking is usually used to make online fund transfers via NEFT, R
TGS or IMPS.
Types of Internet Banking
 Immediate Payment Service (IMPS)
 National Electronic Funds Transfer (NEFT)
 Real-Time Gross Settlement (RTGS).

Immediate Payment Service (IMPS)

Immediate Payment Service (IMPS) is a real-time electronic fund transfer m
ethod through which money is credited immediately to the payee/beneficiary
account.
IMPS transfers can be done at anytime on a 24/7 basis and on all 365days i
n a year, including on Sundays and other bank holidays.
Types of Internet Banking

 National Electronic Funds Transfer (NEFT)

'National Electronic Funds Transfer' is an online method of transferring funds
from one financial entity to another within India, especially between the ban
k's accounts.
In 2005, RBI made it mandatory for every bank to migrate to NEFT instead o
f using SEFT (stands for 'Special Electronic Funds Transfer System').
This approach helped to manage the bank accounts more securely and digit
ally.
How does NEFT work?
1. Log in to your Net Banking Account
2. Add the beneficiary details of the recipient under ‘Add New Payee’ (Name, Ac
count Number, Account Type, and IFSC code)
3. Choose preferred mode as NEFT
4. Enter the Amount and Done
 As soon as we initiate the transaction from our end, our bank registers the sam
e and all the NEFT requests are processed in hourly batches.
 If we initiate a transaction using NEFT service at 12:30 pm, the transaction is q
ueued instantly in a slot of 12:00 pm to 1:00 pm.
 All the transactions are processed at that particular slot only.
 According to the process, our transaction, which was initiated at 12:30 pm, get
s cleared after 30 minutes, specifically at 1:00 pm.
Real-Time Gross Settlement (RTGS)
 'Real Time Gross Settlement' is a type of fund transfer system where huge
amounts are transferred from one account to another in real-time on a gro
ss basis.
 The term 'Real-time' indicates that the transactions made using RTGS are
not subject to any waiting period.
 It means transactions will be processed on a priority basis and settled as s
oon as the sender has done the processing.
 The primary purpose of RTGS is to enable an electronic cash transfer syst
em for high quantity funds.
 Once the transaction is done, it is treated as final and cannot be canceled
or reverted. Because the transactions are settled on a real-time basis, the
settlement history or records are updated instantly in RBI books.
How does RTGS work?
1. Log in to your Net Banking Account
2. Add the beneficiary details of the recipient (Name, Account Number, Acc
ount Type, and IFSC code)
3. Choose preferred mode as RTGS
4. Enter the Amount and Done

 In RTGS, all the requests are processed in real-time. That means if we initi
ate the transaction using RTGS mode, the money will be credited into the
beneficiary account instantly.
NEFT vs RTGS

NEFT RTGS

 The settlement of funds is done in b  The settlement of funds is done in r

atches. eal-time.
 It is a comparatively slower method  A real-time settlement is very fast a
of transferring funds between accou nd the best option for transferring fu
nts. nds quickly between accounts.
 On weekdays, the funds can be tra  On weekdays, the funds can be tran
nsferred between 8:00 am to 6:30 p sferred between 8:00 am to 6:30 p
m. m.
 Minimum is ₹ 1 and Maximum there  Minimum is ₹ 2 Lakhs and Maximu
is no limit m there is no limit
E-cash
 Also known as electronic cash, it is a digital money product that provides a
way to pay for products and services without resorting to paper or coin cur
rency.
 Two models emerged for e-cash transactions:
The online form of eCash, which was introduced by the now defunct DigiCash, worked f
or all types of Internet transactions.

The offline form of e-cash involved a digitally encoded card that replaced paper money.

During this process, no currency is actually transferred. Instead, banks take care of cha
nging the amounts in both accounts to reflect the transaction.
History of E-Cash
 Ecash was conceived by David Chaum as an anonymous cryptographic electronic
money or electronic cash system in 1983.

 Automatic teller machine (ATM) cards were introduced to improve payment system
and become the first to allow transaction via electronic.

 After the success of ATM cards, credit cards were introduced as a new payment sch
eme. On each transaction, the issuers will make the payment on behalf of the consu
mers, the consumer then pay back the amount to the card issuers within the given p
eriod or risk being charge with interest

 In Digital era, Electronic payment systems are being used in banking, retail, health c
are, online markets and in government, anywhere money needs to change hands
Major Components in Electronic Cash Payment Systems

 Issuers:

Bank or non bank organizations who pay to the merchant bank

 customers

users who spend e-cash

 merchants

The vendors who receive Ecash

 regulators

Government agencies who provide guidelines, rules and regulations for o

nline transactions
E-Cash Implementation
 It involves at least three parties

Issuer :financial or non financial institution provides E-cash services

Consumer : the end-user who pay merchant/vendor using the E-cash
Merchant : Who accept E-cash in exchange with products or services
E-cash implementation
1. Consumer and Merchant needs to open an account with a bank who wan
ts to participate in E-cash transaction.
2. When consumer decides to purchase, he or she will transfers the E-cash
from his/her bank account to merchant electronic wallet or bank account
.
3. Upon receiving E-cash payment from consumer, merchant will get confir
mation from the bank.
E-cash implementation

 The banks on the other hand will handle both consumer’s and merchant’s
accounts.
 The E-cash can then be transferred to the merchant in exchange with the
merchant’s products or services. Transactions via Internet are normally en
crypted.
 The bank will then authenticate the E-cash transaction. At the same time t
he bank will debit consumer’s account based on the agreed amount. The
merchant will then delivers the products or services and instructs the bank
to deposit the agreed amount to the merchant’s bank account
E - Cash Implementation
E - Cash Implementation
The customer approaches his
issuer(bank’s) site for accessing his
account.
The issuer in return issues the
money in form of a token
which is generally in form of tens and
hundreds or as per specified by the
customer.
E - Cash Implementation

In second phase the customer

will endorse those tokens to the
merchant for acquiring services,
for which the customer will
authenticate the payment
for the trader.
E - Cash Implementation

In third phase the trader will approach the

token issuer(customer’s bank) and after
authenticating the tokens the issuing bank
will convert the tokens into electronic fund
and the same will be transferred into trader’s
account.
E - Cash Implementation

Finally after getting the payment

for the respective services the
trader provides the requested
service or product and also
notifies the customer about the
approval of payment made by
customer in trader’s account
The Benefits of Using eCash
 Security
 Ease
 Secrecy
 Transferability
 Transportability
 Time savings
 User-friendly
 No risk
 Divisibility
Limitations of E-Cash
 Maybe how much secure the e-cash payment system is but still no one is
safe against the online frauds. In this case the trader is referred as fraudul
ent. The trader may take the amount but may not provide the services.

 Whilemaking the payment, its very important that the internet connection
and power supply should be active. If the payment is in process and intern
et supply fails in between it can lead to loss of information i.e amount will
be charged but it wont reach to trader and the refund takes very long time
in general the refund time is atleast 3-5 days.

 User should have minimum awareness about how to make e payments

E-cash security
 Security is of extreme importance while handling the online transactions.F
aith in the security of the medium of exchange, whether paper or digital, is
essential for the economy to function.
 E-cash is much secure than other online payment modes because in this c
ase no credential such as card-passwords or anything such is involved. Its
like simply the online fund transfer from customer’s account to trader’s acc
ount.
E-Cash Security
 Four essential security requirements for safe electronic payments are:

1. Authentication: A method to verify the buyer’s identity before payment is authorized.

2. Encryption: A process of making messages unreadable except by those who have

an authorized decryption key.

3. Integrity: Ensuring that information will not be intentionally or unintentionally altered

or destroyed during transmission.

4. No repudiation: Protection against customers’ denying the orders placed and again
st merchants’ denying the payments made.
E-Cash Security
 Depending upon who pays to whom and how much amount the security ch
allenges change. Also the challenge changes depending upon the device
used for the payment.

 There is the privacy challenge with all forms of electronic payments being t
raceable.
 some examples of the various security and Privacy challenges
E-Cash Security

 Scenerio 1:
1) Storage of E-Wallet on the computer or phone.
This is a very complex problem because there are many different risks involv
ed including malware stealing the E-Cash or someone having access to an u
nsecured phone taking advantage of a situation .
Another issue is the likelihood of losing a phone or laptop is high. Adding or r
emoving cash to the E-Wallet has its own risks. Handling such scenarios ha
ve their own security challenges.
Tampering of the E-Wallet (even by the owner) is another risk. So protection
of the E-Wallet is a key problem.
Solution:
Some companies (even Google and Telecom players) have tried to use specializ
ed hardware chips (secure element or SIMs) to store the e-wallet but have had v
ery little real success with the hardware chip approach for various real world reas
ons.

Google these days has moved to HCE (Host-based Card Emulation) model and l
everages the concept of Virtual Cards instead of real cards being stored on the p
hone.

Similarly Apple Arcot Systems introduced the concept of software smart-cards to

store secrets in software without the assistance of hardware.
does not store the real payment card info on the iPhone. Instead Apple uses toke
nized data and cryptograms. Still apple stores the tokenized payment data in a s
pecial chip on the phone.
E-Cash Security
 Scenario 2: E-Wallet stored in the cloud.
These days Google (and even Apple indirectly) and many other vendors have
moved to storing payment info to the cloud. So in some sense the SE (secure el
ement) is now in the cloud.
PayPal pioneered this concept many years ago.
This cloud approach brings new challenges like Trust. Would you trust a cloud s
ervice provider to securely hold your payment data? Would you trust your Telec
om provider? Google? Apple? Microsoft?
What happens if they are breached? Since they are in the middle of every pay
ment transaction what does it mean for privacy?
Many online merchants including Amazon (and many mom-pop stores) provide
the option of storing the card info in their cloud. Would you trust an online merc
hant to store the data securely? What if the online merchant shuts shop? What i
f the online merchant is another country?
E-Cash Security
 Scenario 3: Authentication to the E-Wallet can be another challenge
Most of the vendors use passwords for authentication to the e-wallet. The weak
ness of passwords are well known.
Solution:
Using their fingerprint Touch ID (with fall-back to PIN) to authenticate the payer.
Anonymity of E-cash Transactions
 Anonymity is defined as the condition of being anonymous.
 Regular e-cash systems provide both the anonymity of users and the trans
ferability of coins.
 Anonymity is categorised into 4 levels

1.weak anonymity(WA)
2.Strong anonymity(SA)
3.Full anonymity(FA)
4.Perfect anonymity(PA)
Anonymity of E-cash Transactions

 weak anonymity(WA)
The anonymity level is said weak since the spenders identities are protected but i
t is possible to link several spends of the same user.
Strong anonymity(SA)
The anonymity level of this scheme is said strong since the spender identities are
protected and it is not possible to link several spends of the same user.
Full anonymity(FA)
meaning that the intruder A is not able to recognize a coin he has already observ
ed during a spending between honest users.
Perfect anonymity(PA)
meaning that intruder A is not able to decide whether or not he has already owne
d a coin he is receiving.
Untraceability of E-Cash
 untraceable - incapable of being traced or tracked down
 Chaum has introduced unconditionally untraceable electronic money using
The RSA digital signature scheme.
 This helps to make e-cash transactions with more security
Virtual Currency
 Virtual currency is a type of unregulated digital currency.

 Issued and usually controlled by its developers and used and accepted among the member
s of a specific virtual community.

 It is not issued or controlled by a central bank.

 Examples of virtual currencies include Bitcoin, Litecoin, and XRP.

 Digital
currencies are stored in and transacted through designated software, applications, a
nd networks in digital form.

 Virtual
currencies are typically issued by private issuers and used among specific virtual co
mmunities.
Virtual Currency

 The term virtual currency is defined as "a digital representation of value th

at is neither issued by a central bank or a public authority, nor necessarily
attached to a fiat currency, but is accepted by natural or legal persons as a
means of payment and can be transferred, stored or traded electronically".
-------------European Banking Authority
Virtual Currency

 The term "virtual currency" appears to have been coined around 2009, parallelin
g the development of digital currencies and social gaming.

 The IRS decided in March 2014, to treat bitcoin and other virtual currencies as p
roperty for tax purposes, not as currency.

 Virtualcurrencies have been called "closed" or "fictional currency" when they ha

ve no official connection to the real economy

 A virtual
currency that can be bought with and sold back is called a “convertible
currency”.
History of Virtual Currency
 “Satoshi Nakamoto” (which may be a pseudonym for a group of people) p
ublished a paper in 2008 revealing a peer-to-peer electronic currency syst
em that used software code to authenticate and protect transactions.
 The idea was to remain anonymous from any centralized bank or governm
ent authority.
 The first crypto currency BITCOIN is created in 2009.

 On 22nd May 2010 programmer “Laszlo Hanyecz” announced on the Bitco

in Talk forum that he would pay 10,000 BTC for two Papa John’s pizzas. At
the time, this amount of Bitcoin was worth $25.
 A fellow
forum user accepted the challenge and the pizzas were delivered
to Hanyecz.
Virtual Currency
 Types of Virtual Currency
There are two major types of virtual currencies –

1. centralized virtual currency

2. decentralized virtual currency

Virtual Currency
Centralized
In the term "centralized cryptocurrency exchange," the idea of centralization
refers to the use of a middle man or third party to help conduct transactions.
Buyers and sellers alike trust this middle man to handle their assets.
This is common in a bank setup, where a customer trusts the bank to hold hi
s or her money.
XRP is an example of centralized virtual currency.
Virtual Currency
Decentralized
 Conversely, a decentralized currency does not have a third-party central adminis
trator or repository.
 Instead, a distributed system will authenticate the transactions of a decentralized
virtual currency.
 Many decentralized currencies are based on blockchain networks such as Bitcoi
n, Litecoin, and Ethereum.
 A blockchain network links a list of records, which is known as blocks, with crypt
ography.
 When a transaction is requested, the request is broadcasted in the network cons
isting of many computers (nodes).
 After the transaction is verified by the network, a permanent and unchangeable
block that contains the transaction information is added to the existing blockchai
n. The transaction is completed and recorded accordingly.
pro’s and cons of virtual currency

pro’s cons
 Values Anonymity  Accessibilityis a Problem
 Easy Payments  The Volatile Nature of Digital Curre
 Ease in Using virtual Currency ncy
 Protectionfrom Fraud  Easy for Hackers to Target You

 Purchasing Digital Currency at Your  Decentralized Currency

Own Leisure  Highly misused
 Gradual Acceptence of Digital Curre
ncy as a Means of Purchase
 Very Low Fees
Bitcoin
• Bitcoin is a digital currency created in January 20
09.
• Launched in 2009, bitcoin is the world's largest a
nd first cryptocurrency .
• Unlike fiat currency, bitcoin is created, distributed,
traded, and stored with the use of a decentralized
ledger system, known as a blockchain.
• Bitcoin has inspired a host of other cryptocurrenci
es
Bitcoin
 Bitcoinis a decentralized virtual currency, without a central bank or single
administrator, that can be sent from user to user on the peer-to-peer bitcoi
n network without the need for intermediaries.

 Transactions are verified by network nodes through cryptography and reco

rded in a public distributed ledger called a blockchain.

 The currency began use in 2009 when its implementation was released as
open-source software.
Understanding Bitcoin

 The bitcoin system is a collection o

f computers (also referred to as "n
odes" or "miners") that all run bitco
in's code and store its “blockchain”
.
Understanding Bitcoin
 The creator of Bitcoin made three main concepts for Bitcoin that are essen
tial in understanding the principles of Bitcoin:

1. Cryptography
2. Supply and Demand
3. Decentralized Networks
Understanding Bitcoin

 Cryptography

Cryptography was a technique which

is used to converted messages into
code that nobody could read. To rea
d it, you would need to convert back
to the original message. To do that, y
ou needed a key. It was possible thr
ough mathematical formulas.

Bitcoin uses cryptography to convert

transaction data. That is why Bitcoin
is called a cryptocurrency.
Understanding Bitcoin
 Supply and Demand
when something is limited, it has more value. The more people that want it, t
he more the price of it will go up.
Bitcoin uses this same concept. The supply of Bitcoin is limited. Bitcoin is pr
oduced at a fixed rate, which will decrease over time — it halves every four
years.
Bitcoin has a limit of 21 million coins; once there are 21 million Bitcoins, no
more coins can be created.
Understanding Bitcoin

 Decentralized Networks
In a decentralized network, the data i
s everywhere.
Understanding Bitcoin
Bitcoin uses the blockchain technology. Bit
coin’s creator invented the blockchain tech
nology.
Blockchain
 “Blockchain technology is a distributed, l
edger system that promotes decentraliz
ation, transparency, and data integrity.”
 Here a successful transaction is called a
s “BLOCK”.
 After a succesful transaction(BLOCK) , t
he transaction is updated to distributed l
edger system(BLOCK CHAIN).
 That is a block is added to block chain
How Bitcoin works???
 Bitcoin is one of the first digital currencies to use peer-to-peer technology t
o facilitate instant payments.
 The independent individuals and companies who own the governing comp
uting power and participate in the bitcoin network.
 Bitcoin "miners"—are in charge of processing the transactions on the bloc
kchain and are motivated by rewards (the release of new bitcoin) and tran
saction fees paid in bitcoin.
 These miners can be thought of as the decentralized authority rule the reli
ability of the bitcoin network.
How Bitcoin Works
 How Do Transactions Happen?
To send Bitcoin to someone, you need to digitally sign a message that says,
“I am sending 50 Bitcoins to XYZ”.
The message would be then broadcasted to all the computers in the network
.
And the transaction is processed by the miners.
After the successful transaction they store your message on the database/le
dger..
And a new block is added to block chain.
How Bitcoin works???
How Bitcoin Works
 When you create a Bitcoin wallet (to store your Bitcoin), you receive a publ
ic key and a private key.
 Public keys and private keys are a set of long numbers and letters.
 Tthey are like your username and password. Both are very important for tr
uly understanding how does Bitcoin work.
 People need your public key if they want to send money to you.
 As for your private key, you should never let anyone see it.
 On the blockchain, your private key is your identity. You use your private k
ey to access your Bitcoin. If someone sees it, they can steal all your Bitcoi
n.
Bitcoin mining
 Bitcoin mining is nothing but verifying the Bitcoin transactions while keepin
g a record in the public blockchain ledger.
 To verify those transactions miners have to solve a highly complex comput
ational puzzle in 10 minutes.
 In the process of veryfying transactions new bitcoins are generated and th
ey are credited to miners accounts as a reward(block reward).
 Hence Bitcoin mining is the process of creating new bitcoin by solving a co
mputational puzzle.
 The duty of miners is to make sure that those transactions are accurate i.e
bitcoin miners make sure that bitcoin is not being duplicated or double spe
nding etc.
Bitcoin Mining Difficulty
 Mining includes solving highly complex puzzles which cannot be solved by
everyone.
 Mining cannot be done with a normal desktop or laptop.
 It needs a large setup to mine the bitcoins.
 The complexity of puzzles increases as the bitcoin transactions increase.
 The equipment used for mining generates heat.
 maintaining the mining equipment is not easy.
Pros and cons of bitcoin
Pros :
 Bitcoin is anonymous, but not completely. While the way Bitcoin works is d
esigned to keep your identity secret, anyone can check the public ledger a
nd see your Bitcoin address. However, your identity is not linked to your ad
dress, so it is difficult to trace you.
 Bitcoin transactions are irreversible. Once you send Bitcoin to someone el
se, it cannot be reversed. This is by design, and it protects the currency fro
m fraud.
 Bitcoin is fast. When you send Bitcoin to someone else, you can expect to
see it in your wallet within minutes. This is a lot faster than traditional bank
transfers, which can take days or even weeks.
Pros and cons of bitcoin
Pros
 The fees for a Bitcoin transaction are far lower than those charged by cred
it card processors.
 Bitcoin or any other crypto currency is a better option for investments
 Bitcoin’s value is based on supply and demand instead of political interfere
nce.
 Bitcoin prevents other people or institutions from controlling your money.
Pros and cons of bitcoin

cons
 Bitcoin is volatile. The price of Bitcoin has been known to fluctuate dramatically. This
kind of volatility makes it difficult to use Bitcoin for everyday purchases, such as buyin
g groceries etc..

 Bitcoin is not universally accepted. Although it can be used to buy things online, it is n
ot widely accepted in brick-and-mortar stores. Most merchants that accept Bitcoin use
a third-party service to process the transactions, which adds to the price of the items.

 Bitcoin transactions are irreversible. This is both a pro and a con. Unlike credit cards, t
here is no way to dispute a Bitcoin transaction. If you send Bitcoin to the wrong addre
ss by mistake, you cannot get it back.
Pros and cons of bitcoin

cons :
 Bitcoin is not backed by any government or central bank. This means that i
t is not insured or protected. If the currency collapses, your wealth will disa
ppear along with it.
 Bitcoin disrupts monopoly by offering alternative to people who distrust the
government,institutions etc...
 There is still a general lack of understanding about how to use Bitcoin.
 Mining processes for Bitcoin require a high-quality rig and processor.
 Bitcoin doesn’t provide you with 100% anonymity.
 You cannot recover Bitcoin if it gets lost.
 Bitcoin is not widely accepted as a currency right now.
Legality/acceptance of bitcoin
 The legal status of bitcoin varies substantially from state to state and is still
undefined or changing in many of them. Whereas the majority of countries
do not make the usage of bitcoin itself illegal, its status as money (or a co
mmodity) varies, with differing regulatory implications.
 While some states have explicitly allowed its use and trade, others have b
anned or restricted it.
 The European Union has passed no specific legislation relative to the stat
us of bitcoin as a currency, but has stated that VAT/GST is not applicable t
o the conversion between traditional (fiat) currency and bitcoin.

 VAT/GST and other taxes (such as income tax) still apply to transactions
made using bitcoins for goods and services.
Legality/acceptance of bitcoin
 Countries like Egypt,Algeria etc prohibited virtual currency.
 Reserve Bank of South Africa issued a position paper on virtual currencies whereby it
declared that virtual currency had ‘no legal status or regulatory framework’. The South
African Revenue Service classified bitcoin as an intangible asset.
 Few countries like mexico canada made bitcoin transactions legal following a banking
ban on them.
 In 2018, the RBI, banned cryptocurrencies in India.And said was that “The Governme
nt does not consider Cryptocurrencies “as Legal Tender or Coin” and will take all mea
sures to eliminate the use of these Crypto Assets in Financing “Illegitimate Activities”
or a Part of the Payment System.”
 In March 2020, the Supreme Court of India retracted the RBI’s 2018 cryptocurrency b
an and said Bitcoins and cryptocurrencies is not illegal in India.
 RBI stated any other banking institution would not be responsible if there is a fraud of
some kind related to it and taxability of bitcoins is still pending