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
C
3 only
D
1, 2 and 3
Correct Answer: Option B
Explanation
1. Statement 1 is incorrect. Bitcoins operate on a decentralized ledger technology (blockchain) and are not typically issued or tracked by Central Banks in the same way traditional currencies are. Transactions are recorded on a public ledger, but the control is distributed across the network, not centralized.
2. Statement 2 is correct. Bitcoin operates on a peer-to-peer network. Anyone possessing a Bitcoin address (a public key) can send Bitcoins to and receive Bitcoins from anyone else who also has a Bitcoin address.
3. Statement 3 is correct. Bitcoin transactions are pseudonymous. While transactions are recorded publicly on the blockchain, the Bitcoin addresses involved are not inherently linked to the real-world identity of the users. Therefore, online payments can be sent without either side necessarily knowing the identity of the other directly through the transaction protocol, although external factors might allow for identification.