UPSC Prelims 2016 · Question 91 of 98
UPSC Prelims 2016 question on Bitcoin Transactions Regulation
- ExamUPSC CSE
- Year2016
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicMoney Market
- DifficultyHard
- TypeStatement
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.
Show answer
Answer: B. 2 and 3 only
Verdict
The answer is 2 and 3 only. Anyone with a Bitcoin address can transact with anyone else and payments can be sent without either side knowing the other's identity, but central banks do not track Bitcoins.
Analysis
Statement 2 is CORRECT. Bitcoin is a peer to peer system in which any address can send to and receive from any other address without an intermediary granting permission. Statement 3 is CORRECT. Addresses are pseudonymous, so payments can be made without either party knowing the other's real identity. Statement 1 is INCORRECT. Bitcoin is a digital currency not tied to any bank or government, created by users who mine it by lending computing power to verify others' transactions, and no central bank tracks it.
Source
The Hindu explainer on Bitcoin.
How to crack it
The defining property of the instrument is decentralisation, and statement 1 asserts exactly the opposite, so it contradicts the concept rather than a detail of it. Statements 2 and 3 are both consequences of that same decentralisation. When a question offers three statements about a technology, ask which single property generates them and check whether any statement denies that property, because the denial is almost always the planted error.