Bitcoin technology. The Bitcoin miners are highly specialized and

Bitcoin

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Introduction

 

 

Bitcoin is a term that is gaining huge popularity in the
media agencies and economic forums. However, a majority of people do not
understand what Bitcoin is and why its discussions are gaining momentum.
Bitcoin is a form of a decentralized digital currency which provides a
combination of peer-to-peer networking, online transactions, digital encryption
and cryptography (Albuquerque and Callado, 2015). the currency can be used as a
depository of digital money, an instant personal loan or for transaction purposes.
Bitcoin services are free of service charges.

The transaction process in Bitcoin is called mining. Through
this process, the current Bitcoin ledger records are added to the past
transaction records. The current Bitcoin transaction records are called blocks
while the past transactions are known as the block chains. When several
“miners” across the world provide Bitcoin mining services, they are given an
incentive in exchange. This incentive improves their morale of continuing
performing transactions using the Bitcoin technology. The Bitcoin miners are
highly specialized and use high-performance equipment when conducting the
mining processes. Mining “pools” are used often to increase the efficient use
of the resources. Mining pools are blocks formed by several groups of miners
(Laszka, Johnson, and Grossklags, 2015). Although the mining is done in blocks,
each miner is rewarded depending on the proportion of contribution he puts in.
Each block receives a maximum of 50 bitcoins from the network. This number
decreases with the usage of the software over time. The software is designed in
a way that the total number of bitcoins that exist in the world is not more
than 21 million. This is in contrast to the traditional money. The traditional
money is prone to overprinting which makes it unlimited.

Bitcoin is the latest concept of money. Money concept began
with batter before progressing to metal money. The use of metal coins continues
to be used even today although other forms of currency such as paper money and plastic
money are the widely used.  Plastic money
is presented in form of ATM cards, credit cards and so on. Computers and the
internet have taken the concept of money to another dimension.  Today, people can conduct transactions online
and also through mobile banking. The concept of Bitcoin was first proposed in
1998 by Wei Dan. Wei Dan wanted a formation of a cryptocurrency which would act
as an alternative to the centralized and govern-backed traditional money. It
took almost 11 years before his concept was officially implemented. However,
since the first official implementation was carried out, Bitcoin has been
drawing the attention of practitioners, economists, academicians and the media.

As of 2012, there were about 167 currencies in the world
which resulted due to the fact that majority of the countries in the world had
their own currencies. The emergence of a global currency divided the society
into three: those who are supporting Bitcoin, those against it and those who
know nothing about it (Gao, Clark and Lindqvist, 2015). Those who are
supporting Bitcoin have associated several benefits which with such a financial
model. One of these advantages includes the reduction in the costs which are
associated with international transactions. A common citizen does not have to
pay heavy taxes when sending or receiving money from a different country. The
said advantage does not benefit citizens alone but also multinational
corporations. Other benefits of using bitcoin are that the currency is
non-inflationary, the transactions are faster and payment information cannot be
stolen since no intermediary involved.

The reasons that hamper the global spread of Bitcoin are
mainly social or political in nature (Dodd, 2014). Those who are against
Bitcoin argue that governments and citizens attach pride and sentiment to what
represents their country. Some of these symbols include national anthem, flag,
constitutional documents and even the currency used by the country.   It is considered a national loss when a
country loses such symbols. Majority of those who have heard about Bitcoin but
do not know anything about its operations do not accept its use too. The main
dissatisfaction with the currency originates from money laundry that occurs in
the black market (Mikeladze, 2017). Initially, bitcoins were used by people
operating in the black market and in money laundering businesses. These people
did not want to get their payment secured nor did they want to reveal their
personal information.

Conclusion

There are possibilities that the traditional currency will
be replaced by Bitcoin in the near future. However, for it to be accepted and
recognized as the world currency, it must evolve into a more secure form of
currency. This can be achieved if the mindsets of citizens and governments are
changed and made to realize the benefits of a single currency. Those who know
nothing about Bitcoin should also be educated about it and its benefits. For
Bitcoin to grow from its volatile stage, it has to liaise with governments in
insurance of theft protection policies and also with other forms of online
payments. The risks of theft can be minimized by protecting Bitcoin in an
analogous way where depositors are protected by the banks through Federal
Deposit Insurance Committee (FDIC).

References

Albuquerque, B. S. D., &
Callado, M. D. C. (2015). Understanding Bitcoins: facts and questions. Revista
Brasileira de Economia, 69(1), 3-16.

Dodd, N. (2014). The politics and
social life of Bitcoin underline the significance of the new currency. British
Politics and Policy at LSE.

Gao, X., Clark, G. D., & Lindqvist,
J. (2015). Of two minds, multiple addresses, and one history: Characterizing
opinions, knowledge, and perceptions of Bitcoin across groups.

Laszka, A., Johnson, B., &
Grossklags, J. (2015, January). When bitcoin mining pools run dry. In International
Conference on Financial Cryptography and Data Security (pp. 63-77).
Springer, Berlin, Heidelberg.

Mikeladze, A. (2017). Bitcoins
within Georgia’s Money Laundering Scheme. European Journal of Economics and
Business Studies, 9(1), 9-16.