Researched by: Moammar T. Nawang
On the rise of the internet age comes the rise of a new type of digital cash, the Cryptocurrency. Cryptocurrency is a form of digital money that is made to be secure and, in most cases, anonymous. It is a associated with the internet that is using cryptography, the process of converting legible information into an almost uncrackable code, to track purchases and transfer of cryptocurrency. The first and most popular type of cryptocurrency, which was created in the year 2009, was the Bitcoin.
There has been an explosion of cryptocurrencies in the past ten years, and now, there are more than a thousand available online. The value of bitcoin soared as high as $20,000 before decreasing back to less than $8,000. Bitcoins are created in blocks of 50 bitcoins through the process called “bitcoin mining”. It has been popular due to its characteristics. First, it is decentralized in nature. Bitcoin is not controlled by any central authority like banks. Every machine that mines bitcoin and processes transactions makes up part of the network. The machines work together; thus, a central authority cannot interfere with monetary policies or decide to take people’s bitcoins away from them. Second, bitcoin is easy to setup. Compared to traditional banking, bitcoin accounts can be set up in minutes. Third, bitcoin is popular due to its anonymity. The users can hold multiple bitcoin addresses and it these are not linked to any names, addresses, or any personal information. Fourth, bitcoin is transparent since it stores details of every transaction in the network. Fifth, bitcoin is popular because of transaction fees are only minimal. International transfer of money with traditional banks cost a sum of money, but bitcoin does not. Sixth, bitcoin is fast. People can send money anywhere and it will arrive after a few minutes, as soon as the bitcoin network processes the payment. The more days passing by, people are getting educated about bitcoins and other cryptocurrencies.
Bitcoins also have disadvantages. Some people believe that the demand of bitcoin is that it can be used secretly for any illegal or antisocial acts. According to Mercedes Kelley Tunstall, “Bitcoin has built its reputation and structured its virtual currency around being both anti-government and anti-establishment.” Bitcoins are used as currencies for purchasing illegal objects from the deep web, that can’t be bought on a regular store, like illegal drugs. People also need to be cautious when using bitcoin. The lack of security for bitcoin means there is no safety net or a perfect way to protect your bitcoins from human error (passwords), technical glitches and bugs (hard drive failures, malware), or any fraud. Moreover, according to an analysis published in The Wall Street Journal by Campbell Harvey, a finance professor at Duke University, bitcoins have been 7.5 volatile as gold. Such violent price movements within a short of time are not consistent with an ideal exchange system for buyers or sellers which limit bitcoins as a significant vehicle for businesses.
In a short time, Bitcoins have captured the attention of financial speculators, con-men, and cyber punks alike. The demand for a suitable currency is real; however, it’s simply too soon to project whether bitcoins are the answer, or just another speculative explosion. If you decide to buy bitcoins or take them in exchange for goods or services, limit the risks. Remember that the risks of engaging in virtual currency transactions are entirely your own.