How long will Bitcoin
last?
Internet proliferation contributes to a
critical part of the 21st century economy and existence, with
various developments aligning to the increase. Among recent developments has
been the growth of cryptocurrency, which is a concept involving use of using
web-based currency. Cyrptocurrency presents a way of transferring currency
through secure code. This paper argues against cryptocurrency based on
identifiable cons including the lack of centralized regulation, possible use
for crime activities, volatility, and customers not being able to reverse any
wrong transactions.
Cryptocurrency refers to a payment
system based on software platforms. Rockefeller explains that cryptocurrency is
“basically digital money” whose aim is to “make financial transactions easier
and more accessible throughout the world” (2). The form differs from other web-based
transactions because of market penetration. For instance, while people can
easily pay for international transactions through PayPal, Western Union, and
other websites, they have to consider support and fiat currency. Goleman
explains fiat money as “any legal, government backed tender, used in banking
system (2). In contrast, a client can use cryptocurrency anywhere and on its
own as an actual currency. Users may choose from various types of
cryptocurrencies. Goodboy identifies
three main types, namely bitcoin, ethereum, and ripple (n. pag.). The bitcoin
represents the most common and original category of transactional cryptocurrency.
One disadvantage noted in adoption of
cryptocurrency is lack of a legal and centralized framework. Cryptocurrency features
high decentralization, which developed from the uncertain history of digital
money. Web-based currency became possible through cryptography, which is an
innovation that also provides for the legitimacy of the money. Antonopoulos
states that “cryptography started becoming more broadly available and
understood in the late 1980s, many researchers began trying to use cryptography
to build digital currencies” (3). Developers tried to centralize the early
currency and backed it with national currency including precious metal,
attributes that made it easier to attack by governments and hackers. As
Antonopoulos notes, these early currencies used a “central clearinghouse to
settle all transactions at regular intervals” an aspect that made it vulnerable
to worried governments and the eventual litigation of its existence (3). The
need for decentralized bit currency came from the initial antagonism by
governments and criminals.
The need for a decentralized currency
however, creates one of the risks associated with cryptocurrency. Bauer,
Buhler, Bick, and Bonorden notes the importance of centralization stating that
for “the future development of bitcoin, an appropriate legal and regulatory framework
is extremely important in order to overcome the existing risks and threats
slowing down the adoption of cryptocurremcy” (68). The legal framework will be
able to address risks such as the possibility of money laundering, trade in
illegal goods, and possibility of tax evasion as well as potential for
terrorism funding.
Cryptocurrency promises users with high
levels of anonymity as a critical advantage, but this raises another concern in
terms of possible exploitation and crime use. Goleman notes that it remains
difficult and impractical to trace cryptocurrency because it is a “fast,
borderless transaction (3). The aspect opens it up for use in online crime, and
payment for such activities. As noted by Bauer et al., people that fall victim
to such criminal activities may not reserve the ensuing transactions even when
they report them to the authorities (68). All transactions involving Bitcoin is
untraceable and no means to reverse the payment. Bauer and collegaues noted
that anonymity of Bitcoin is only necessary for certain target groups such as
online gambling, not for mainstream customers; therefore, its security need to
be within that of using credit cards as the digital currency accounts can also
be hacked (74). Customers do appreciate the anonymity and security guards
associated with cryptocurrency, but such efforts may also be among the factors
that undermine its adoption.
Use of cryptocurrency runs the risk of
volatility. Currently, market volatility seems to have little impact on bitcoin
use; however, BA.net Bitcoin states that due to the total value of bitcoins in
circulation, and the number of businesses using Bitcoin, it remains possible
that “relatively small events, trades, or business activities can significantly
affect the price” (54). Agreeably, as the market for digital currency grows the
possible influence of volatility may decrease. The risk however remains real,
as cryptocurrency is a start-up, facing issues of adoption. The uncertainty
facing cryptocurrency makes user wary, this in turn affects mass adoption. The
ensuring uncertainty also means that large corporations may not want to deal
with digital money, which makes cryptocurrency impractical for daily usage. More
businesses are accepting digital currency but the process has been slow,
considering the invention of Bitcoin is almost a decade old.
Another challenge seen with
cryptocurrency is the ongoing development process in terms of tools and
features. BA.net Bitcoin states, “Bitcoin software is still in beta with many
incomplete features in active development with new tools, features, and serves
are being developed to make Bitcoin more secure and accessible to the masses”
(55). These developments equates to building a network of uses. Patel
nonetheless notes a shortcoming with the development, indicating that the real
value of cyrptocurrency comes from building a strong product with a reliable
network of uses, but this may fail due to uncertainty (n. pag.). If the network
fails to raise enough people, then it remains that it may fail.
The growth of cryptocurrency as part of
usable currency remains valid in today’s economy. However, the possible
sustainability remains questionably due to the uncertainty, possible
volatility, lack of regulation, and the complexity of adopting the
developments. Noted in this analysis of cyrptocurrency is that its pros and
cons seem to interact in a way that each advantage seems to lead to a certain
limitation. For instance, the anonymity of Bitcoin payments opens ups the
possibility for crime, inability to reverse transactions, and being untraceable
means it can pay easily for crimes such as terrorism. For instance, Goleman
reports the case of Silk Road, which “got taken down … and their $1.2 billion
worth of bitcoins, went to pay for” things such as guns and drugs (3). Being
decentralized means that people have little ways of ensuring safeguards of the
currency.
In conclusion, the use of cryptocurerncy
remains valid and has identifiable benefits to the clients compared to fiat
money. Digital currency nonetheless still requires safeguards, among them being
the need for an established legal framework. The possible failure of
cryptocurrency will come from the lack of these safeguards. Arguably,
cryptocurrency remains a highly innovative digital development that provides a
solution to the limitations of fiat currency and other web-based forms of
payments such as PayPal. The lack of an accompany legal framework however
creates a loophole for its use for criminal activities, vulnerability to market
volatility, and uncertainty of customers due to being unable to reverse
transactions or trace them. Therefore, developing a centralized governing
platform will help address some of these issues and promote adoption, while
failure to promote such safeguards will lead to eventual failure of digital
currency.
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Andreas M. Mastering Bitcoin: Unblocking
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February 7, 2018.
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Vault: Safeguard your Bitcoins. BA.net, 2016. Web. February 8, 2018.
Bauer,
Aaron W., Julian Buhler, Markus Bick, and Charlotte S. Bonorden.
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13-15, 2015), 63-80. Web. February 8, 2018.
Goleman,
Travis. Cryptocurrency: Mining, Investing
and Trading in Blockchain for Beginners. How to Buy Cryptocurrencies (Bitcoin,
Ethereum, Ripple, Litecoin or Dash) and What Wallet to Use. Zen Mastery,
2018. Web. February 7, 2018.
Goodboy,
David. “3 Types of Cryptocurrencies You Need to Know.” Nasdaq (January 15, 2018). Web. February 7, 2018.
Patel,
Deep. 4 Pros and Cons of Investing in a New Cryptocurrencies. Entrepreneur (Nov. 1, 2017). Web.
February 8, 2018.
Rockefeller,
James David. Getting Started with
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