With reference to ‘Bitcoins’, sometimes seen in the news, which of the following statements is/are correct? 1. Bitcoins are tracked by the Central Banks of the countries. 2. Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address. 3. Online payments can be sent without either side knowing the identity of the other. Select the correct answer using the code given below.
- (a) 1 and 2 only
- (b) 2 and 3 only ✓ UPSC's answer
- (c) 3 only
- (d) 1, 2 and 3
Why the answer is (b)
• Bitcoin is a decentralised cryptocurrency running on a public blockchain maintained by a peer-to-peer network, with no central bank or authority tracking or controlling it — statement 1 is wrong.
• Statement 2 is correct: anyone with a Bitcoin address (wallet) can send and receive bitcoins from any other address worldwide.
• Statement 3 is correct: transactions are pseudonymous — addresses, not identities, are recorded — so parties need not know each other.
• Hence 2 and 3 only, option (b).
Why the other options are wrong
- (a) 1 and 2 only
- Statement 1 is wrong: no central bank tracks Bitcoin.
- (c) 3 only
- Statement 2 is also correct: any address can transact with any other.
- (d) 1, 2 and 3
- Statement 1 is wrong.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2016, held on 7 August 2016. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.