Bitcoin Usher in Digital Currency Age Essay

Cryptocurrency is a digital asset that serves as a medium of exchange with no central authority and was created to prevent the issue of double spending. This problem is solved with the use of blockchains where miners confirm transactions on a public ledger. As of today, there are over 1,000 different types of cryptocurrencies, and at least 600 of these have listed market caps of over $100,000. Bitcoin, Ethereum and Litecoin are top cryptocurrencies trading today with their combined market cap topping $331B. Bitcoin, created in 2009, is the biggest cryptocurrency and has recently reached a net value of over $270 billion, with much of its growth being in the last few months. This has led to much

The policy of cryptocurrencies tends to be different across the world where the government can support or resist the implementation of cryptocurrencies (DeVries, 2016). For instance, the US government is likely to support cryptocurrencies by allowing those digital currencies to be used as local currencies (Hillard Heintze, 2014). In the UK, however, the government opposes by withdraw research grants in Bitcoin because of the stockpiling bitcoin (Chan et al., 2017). Although China is considered as the best place to mine bitcoin because of its cost efficiency, in 2013,

Bitcoin is a fully decentralized virtual currency system. This fascinating new model of commerce has recently spawned a lively public debate regarding the inherent risks and merits of the system. It is the position of this paper that Bitcoin is favourable to fiat currencies for cashless payments due to Bitcoin’s numerous socioeconomic benefits. It is globally accessible; allowing any business or individual to securely send and receive payments anywhere, at any time, with or without a bank account. As no government or individual has full ownership or control, the cryptocurrency is free of transaction fees, it’s low-risk, and most importantly it’s private. Regardless, many critics of Bitcoin denounce the currency as dangerously unsanctioned and criminal; SOMTHING. Other critics disregard Bitcoin as unintuitive, overly-complex, or simply too new to be trusted. This paper will demonstrate however, that these concerns of criminal use and unintuitive complexity are at best exaggerated or misunderstood. Finally, as the concept of a cryptocurrency is remarkably new, this paper will illustrate Bitcoin’s extraordinary potential: increased security, flexible transparency, and new payment opportunities.

Dollar devaluations, ongoing global geopolitical concerns, wars and rumors of wars, all point to very unstable and uncertain times. Simply put, fiat, or paper money, will always collapse if the government that issued it also goes south.

The Second Law of Thermodynamics (also called the Law of Entropy) states that, generally, the universe moves from order and structure to a state of disorder. What we witness around is staggering complexity. Complexity has found its way into economics too. Eric Beinhocker, the author of “The Origin of Wealth”, estimates that in New York City alone, there are some 10 billion SKUs, or distinct commodities, being traded in a day. This is why, when an invention as simple as bitcoins was created, it made the economy uneasy. Over the past years, there has been an increase in interst in the cryptocurrency system by financial institutions and governments. However, their position is typically stated by “I like blockchain but not bitcoin.”

Ever since the US dollar went off the gold standard in 1971, other countries have had doubts about keeping the dollar as the world’s reserve currency. The first concern was that no fiat currency has succeeded long-term. In a study of 775 fiat currencies (Mack, 2011), there was no historical precedence for a fiat currency that has succeeded in holding its value. 20 percent failed through hyperinflation, 21 percent were destroyed by war, 12 percent destroyed by independence, 24 percent were monetarily reformed, and 23 percent are still in circulation approaching one of the other outcomes (Mack, 2011). The average life expectancy for a fiat currency is 27 years, with the shortest life span being one month (Mack, 2011). It is one thing if an individual country’s fiat currency collapses, but if a world reserve currency collapses, such as the US dollar, the world’s economy will collapse with it.

The most famous cryptocurrency, Bitcoin (BTC), has surpassed a $5k USD market value on October 12th. People who boarded the bandwagon early are now rejoicing on their fruitful intuition. After several years of unfulfilled promises, the cryptocurrency market has shown huge growth in the past couple of months.

Bitcoin was created in 2009 as an international currency to make digital transactions easier and faster(Yellin). “This computerized money exists only as strings of digital code” (“A New Specie”). This currency is used without intermediaries

Many people who have heard of bitcoins struggle to understand how it can have an actual, tangible dollar value. The idea of money not backed by any government or authority having value sounds absurd. For that matter, most people fail to think about the value of any traditional ‘fiat’ currency. After all it is just paper isn’t it?

We take the position that digital currencies are a fad. As argument, we try to clarify the definition of currency in general and explain what a "digital currency" really mean. Than we examine the arguments for the digital currencies and at the end we present the evidences of perils of digital currency.

Without a bank to manage the supply of this crypto currency, the price is unregulated and proves to be extremely volatile. This price fluctuation is one quality that is holding the legitimacy of Bitcoin back because it needs a consistent value for practical use in the monetary world. As speculative investors buy and sell Bitcoin, the price varies at extreme rates. But in support of Bitcoin’s long-term future, the price has shown a steady uptrend in the past year, peaking at around $1200 (See Apendix I). Eventually, a steady value will be reached to establish the actual price of Bitcoin.

Bitcoin now has the largest market capitalization among all kinds of crytocurrency. Bitcoin 's success has generated a number of other crypto-currencies including Litecoin, Peercoin, and Namecoin, etc. Bitcoin, an electronic currency, is established by computers producing a string of unique numbers through complicated math problems. Bitcoin is sold on unregulated exchanges and acknowledged by an increasing number of people and businesses due to the fast speed and low transaction cost. One Bitcoin is now valued at about $500 and other crypto-currencies hold less value. The trend is that cryptocurrencies are attracting more interest as potential investments. A distinguishing feature of crypto-currency is that it is not issued or backed by government. So it is difficult for government to manipulate or interfere with. Governments around the world hold different perspectives

currency system, as long as it is an inanimate object, someone will try to copy

Bitcoin has no value of its own contrary to what many argue. Its value is derived by the number of people adopting it and pouring their money into the BTC ecosystem. Investments by deep-pocketed investors like Winklevoss twins (estimated BTC stake around 11 million USD back in April), Chamath Palihapitiya, ex-Facebook executive and early employee, who has already dropped $5 million into BTCs and has plans to invest another $10 million are the reasons for skyrocketing price of bitcoins [3] [4]. Add to this, the publicity and trust in the system they are generating. Bitcoin's future potential was a hot topic this October at emTech, an MIT conference on emerging technologies [5]. Considering BTCs more as a start-up rather than a currency, its growth curve makes more sense but unlike a start-up it’s not generating any value itself but gaining people’s trust. And that’s what gives it value.

It’s important to note that since Bitcoins are produced without the involvement of governments or banks, they avoid taxes. Lastly, the cap of 21 million bitcoins has driven the value of a single coin up as shown by the below graph depicting expected growth of coins over time.