Bitcoin has no central bank keeping tabs on it. That’s exactly the point, and exactly what one 2016 UPSC question got wrong.
🏛️ Must Know
Two of Three Bitcoin Claims Are Correct
- Not Tracked by Central Banks Bitcoins are not tracked by the Central Banks of countries. Transactions instead sit on a decentralised public ledger, the blockchain.
- Address-to-Address Transfers Anyone with a Bitcoin address genuinely can send and receive Bitcoins from anyone else with a Bitcoin address.
- Pseudonymous Payments Online payments genuinely can be sent without either side knowing the other’s real identity, only their Bitcoin address.
Good to Know
📘 Good to Know
How Bitcoin Actually Works Without a Central Authority
- The Blockchain Ledger Every Bitcoin transaction is permanently recorded on the blockchain, a public ledger maintained across thousands of computers.
- Pseudonymous, Not Fully Anonymous Transactions are traceable to a Bitcoin address, but that address doesn’t automatically reveal the real-world identity behind it.
- Mining Verifies Transactions A decentralised network of “miners” verifies transactions and adds them to the blockchain, rather than a single central authority.
📝 Previous Year Questions
UPSC CSP 2016 — Which Bitcoin Claims Actually Hold Up
- UPSC 2016 Anyone with a Bitcoin address can transact with any other, and payments can be pseudonymous. Bitcoins are not tracked by central banks. See UPSC CSP 2016 GS Paper I, Q66. View this question.
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Great to Know
🌟 Great to Know
Why Governments Have Struggled to Regulate Bitcoin
- No Single Point of Control Because no central bank or government issues or tracks Bitcoin, regulating it requires entirely different tools than regulating regular currency.
- India’s Own Cautious Stance India has not banned cryptocurrency outright, but taxes crypto gains and has repeatedly flagged regulatory concerns.
- Connects to Other PYQ Facts This same decentralisation theme also underlies UPSC questions on blockchain technology and its uses beyond currency.
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