Analysis of Bitcoin Currency - Essay Example

As such, Bitcoin is seen as a devolved form of currency. Despite its growing popularity, economists concur that due to its lack of regulation, digital money is not real money, hence the possibility of its spiraling out of control through a process known as bubbling.

As Boardman, Sondomir, and Sondak (38) argue, the primary aim of Nakamoto was to create a form of online currency to circumvent payment processing technicalities that online traders were facing. Specifically, the entry of the transactions on the ledger or mining processes had become difficult if not impossible for such users. Apart from mining, digital currency can be a form of exchange for currency, goods, and services. Through Bitcoins, users can make purchases of goods, send, and receive money via electronic means for a small fee and with the help of a wallet application on an Internet-enabled gadget.

Virtual currency as a system of payment for commodities purchased online has undergone rapid growth, and businesspersons have the advantage to enjoy the use of the currency owing to its lower than the 3 percent typically charged for loading and or use of credit cards. Nonetheless, many governments from around the world have been hesitant to welcome the use of the currency within their respective jurisdictions, with some warning their citizens against the use of the service due to its lack of consumer safeguards.

Bitcoins are vulnerable to theft and chargeback defaults. As Boardman, Sondomir, and Sondak (12-29) have indicated, the use of the currency for commercial purposes is still minimal and largely preferred by speculators. This alone has added to the lots of worries and its volatility, hence the fear of the bubble effect. Bitcoin speculators have contributed to the bubble effect theory explaining the unpredictable future of the currency. This is especially true considering that speculators who top the list of Bitcoin users argue that with $200 in one’s virtual account now, the value of the money will increase to $600 or $1,000 since they will find people who are willing to buy it at that higher price.

The buying of the currency in hope that the value would increase is a serious flaw in the thinking of such “investors.” As such, economists consider Bitcoin as a currency that is not real and will crumble once the speculators are sure that their money will not grow.