Are Bitcoins The Future For GST?

- Prithwis Mukerjee

BITCOIN IS THE rage. With an unbelievable appreciation in prices, many people want to invest in this red-hot cryptocurrency, but whether the current valuation is a bubble that will burst is an open question. What is indisputable, however, is the immense versatility of the blockchain technology that is used in bitcoin — and all cryptocurrencies. The goods and services tax (GST) too is the rage, or rather the cause of rage because of the inefficiency of the software implementation. This article explains how a decentralised blockchain application could solve GST problems.

But, first, what is a bitcoin? A bitcoin is a unit of value, like an equity share of a company, that can be owned and transferred. It resides in an account in a ledger, like a dematerialised share in a demat account with the National Securities Depository Ltd (NSDL). The account number, the public key of the account, is known to all and so anyone can send or deposit demat shares into this account. However, to sell or transfer shares out of this account, the anonymous account holder must use a password, a private key that only he knows, to create and publish an outbound transaction pointing to another account identified by its public key.

In cryptocurrency jargon, an account is called a wallet and the ledger is called the blockchain. A wallet is defined by a public key-private key pair consisting of two very large numbers that have special cryptographic properties. But what is really novel is that the blockchain ledger, the record of all transactions, is not maintained by or at any one institution, like the NSDL for equity shares, but jointly by all participants in the network. Everyone has a copy of the blockchain ledger that has a record of all coin transfers and so everyone can both