Advantages:
- There is an ability to participate in transactions anywhere and at any time.
- You can participate in transactions anonymously.
- The user is not required to give any credit information.
- Bitcoins can increase in value from time purchased giving them more buying power.
- Anyone can participate, there is no minimum
- Questionable legality in multiple jurisdictions.
- Unknown tax implications related to regulations not keeping up with technology.
- Volatile changes in worth of the actual bitcoins
- The concern that proceeds are going towards terrorism/narcotics trafficking which could shut down the system.
- Theft of bitcoins from virtual wallets is very prevalent.
Bitcoin is a virtual currency that
was created in 2009 by a person named Satoshi Nakamoto. According to
Bitcoin.com “Bitcoin is a consensus network that enables a new payment system
and completely digital money. It is the first decentralized peer-to-peer
payment network that is powered by its users with no central authority or
middlemen.” (Bitcoin.com2014) It was
created as a digital currency that was not owned by one person but by everyone
and ultimately responsible to no one government or agency. The Bitcoin has progressed
since its inception and has grown in the marketplace.
Bitcoin was originally meant to be
shared by all people with the original source code available to all; everyone
is able to see all transactions. Over the years since its inception Bitcoin has
had highs and lows as far as value goes and as far as use. The idea was that
bitcoins could be used for services rendered or to purchase products. Bitcoin
itself would release a certain amount in periodic increments and those could be
earned by being the first one to solve a cryptographic puzzle.
The security of Bitcoin itself seems
to rely on the fact that there are no secrets as everyone has access to the
information. There are however problems with the bitcoin exchanges and their
security because of viruses aimed at stealing people’s wallets and also the
people themselves who run the exchanges. Because bitcoins need to be stored
just as we keep paper money in our wallets in our pockets, web businesses came
in to being that stored your bitcoins in a virtual wallet in cyberspace.
There are legal issues as far as
countries go and many countries are currently looking into virtual currencies
like Bitcoin for the potential pitfalls and also for the tax implications of
virtual money. One of the points made is that central banks are required to
notify the government when large transactions are made or if there is
questionable outsourcing of money to possible terrorist organizations whereas
virtual currency like bitcoin and others have no requirement. Bitcoin was created and implemented for
people who were disappointed with the government and the financial
institutions. Bitcoin came to fruition at the same time the financial markets
were not doing well and the governments were bailing out the banks and car
manufacturers. There are ethical issues with Bitcoin especially its use for
illegal activities that needs to be evaluated, for a time Bitcoin was associated
with the website Silk Road which was a clearinghouse for all manners of illegal
activity. In fact for a time bitcoin was labeled as a money-laundering front
for drug dealers and terrorists, which brought added scrutiny to the bitcoin
revolution.
Bitcoin or other virtual money has
the potential to evolve into common use by everyday people. Even today there is
a huge percentage of people who never carry cash and only deal with debit and
credit cards, which is really one step away from virtual cash. I think that
there are hurdles for virtual cash that will have to be overcome in order for
virtual cash to become mainstream.
Bitcoin and the other virtual
currencies have progressed a very long way in a short amount of time, however,
they still are extremely volatile and not a good replacement for hard
currency…yet. I believe that with some regulation virtual currency will become
the norm and will wait on the sidelines until it can be proven that this is a
safe and secure way to do business, but when governments and regulators get
involved it will negate the reason for starting a company like bitcoin in the
first place which was an inherent dislike and distrust of the government that
put the world in such a bad place in the beginning.
Bibliography
Bitcoin
FAQ. How does bitcoin work?. Bitcoin.
https://bitcoin.org/en/how-it-works
This
the FAQ page for bitcoin which is very helpful in understanding what Bitcoin
is, how it works and the ideas behind Bitcoin. For the layperson the FAQ page
does make it easy to understand.
Bustillos,
Maria. (April 2013). The bitcoin boom. The
New Yorker.
This
article gives great background about the bitcoin ups and downs and what brought
bitcoin to its highs and its decline.
Cardinal,
David. (February 2014). Bitcoin explained: Crypto fad or the future of money?. Extreme Tech.com. http://search.proquest.com.mutex.gmu.edu/docview/1496069921?accountid=14541
Elwell, C., Murphy, M. &
Seitzinger, M. (December 2013) Bitcoin: Questions, answers and analysis of
legal issues. Congressional Research
Service. CRS Report. HTTP://congressional.proquest.com.mutex.gmu.edu/congressional/docview/t21.d22.crs-2013-gvf-0432?accountid=14541
This is a research report that was prepared for Congress to
make all the members familiar with Bitcoin and its implication in the United
States. There is also a section that delves into the current currency law in
the United States and how it relates to bitcoin and other virtual money types.
Hanley, Brian. (December 2013). The false premises and
promises of bitcoin. Cornell University
Library. http://arxiv.org/abs/1312.2048
This is a very technical abstract but easy to read for a lay
person. It gives some history of bitcoin and explains why this type of currency
will not grow to outplace credit cards and actual cash transactions.
Korlov, Maria. (July 2012).
Bitcoin: Seven reasons to be wary. Network
World. http://search.proquest.com.mutex.gmu.edu/computerscience/docview/1027433390/3B836DAD3E56462EPQ/9?accountid=14541
This is a short on-line article that just highlights what
people should watch out for when it comes to using and investing in bitcoin.
Wallace, Benjamin. (Dec 2011). The rise and fall of Bitcoin.
Wired. 19(12) http://search.proquest.com.mutex.gmu.edu/computerscience/docview/913382219/A18D06B6DD404557PQ/1?accountid=14541
This article is both user friendly and technical also; it
gives a comprehensive history of the origination of bitcoin, where it came from
and where it is going. It helps the reader to understand virtual cash and also
has information on the link between bitcoin and Silk Road.
