Pros and Cons of Bitcoin Digital Currency - Research Paper Example

Pros and Cons of Bitcoin Pros and Cons of Bitcoin Advantages There are a quite a few of the advantages in using Bitcoindigital currency. It is possible to send and acquire money anytime and anywhere in the world. There are no worries about border crossing, worrying about banks being closed or other limitations that may happen when you need to transfer money. You have complete control of your Bitcoin money and there are no government regulations or any central authority figures involved in this currency. Evidently, no other currencies in the globe can compete with the digital currency in terms of the freedom it offers individuals (Ali et al, 2014). Prior to the introduction of the digital currency, many business deals prove impossible because of the limitations of the currencies. However, such aspects are no longer applicable with digital currency as businesspersons are likely to enjoy a higher level of autonomy and choice (Ali et al, 2014). The security and networking for Bitcoin users is safe and they have complete control of their transactions. There are no extra fees charged by merchants without the user finding out. The user gets in touch first with the merchant before charging them any extra fees. In addition, Bitcoin protects the user’s personal information so it cannot be viewed by other people who could in-turn try and steal their identity (Cook, 2014). However, all payments in bitcoin cannot be transacted and finalized until the owner’s information is linked to the transaction. Therefore, the backing up and the encryption of the Bitcoin guarantees safety for the money. The user’s information is transparent by using the block chain, where all finalized transactions can be viewed by anyone, but your personal information is blocked or hidden from everyone. You can verify transactions anytime in the Bitcoin block chain. Due to Bitcoin being cryptographically secure, it cannot be changed by any organization, government or person. There are usually no fees or very low fees when making payments to Bitcoin unless you would like it done in a quick manner (Dumitrescu & Firică, 2014). Then you can increase the fee so that the payment is processed faster. The Digital Currency converts bitcoin into flat currency, which helps the merchant process their transactions at lower fees than when using credit cards or PayPal. The risks are few for Merchant transactions due to bitcoin’s system being cryptographically secure, where fraud is not possible. It is very hard to break the block chain, which is the public ledger. It is safer to use bitcoin than using credit cards, debit cards, and PayPal, where the crime rates and fraud rates are high (Greene & Shy, 2014). Disadvantages The lack of understanding or awareness of the digital currencies and bitcoin has made the coins limited to the users already applying it to their lives. There should be networking along with education for people, businesses, and staff that work for the companies because this would be a beneficial thing to everyone involved. Businesses such as Overstock and TigerDirect, that are accepting bitcoin as payment because of the advantages, however, are small compared to the physical currencies. Unless there is sufficient education on the use of bitcoin and its potential advantages, it will remain the not preferred currency by many people (‘Insight: Advertising - Digital Currencies - Reward and incentivise consumers’, 2014). Only a few businesses realize the value of bitcoin, and it is still in its infancy stages. This means that as it grows to a measure of stability, people should receive education on its use. The risk in bitcoin is due to its instability and unpredictability due to its limited amount of demand for them. However, this is changing on a daily basis. The price for Bitcoin should eventually go down as more companies, trading centers and media accept bitcoin. Currently, the bitcoin currencies are unstable due to inflation in different countries. The volatility of the digital currency poses risk to those intending to use it in business. The fact that bitcoin has not attained its full potential explains the current volatility (Rotaru, 2013). One can only hope that as it exhibits growth, it will be more secure and accessible. Moreover, many people associate the volatility with unpredictability. This means that few people are willing to use it until it stabilizes. There are rumors about bitcoins being used for illegal drug transactions where a US Senator called it “one stop shop for your illegal drug needs”, and where people can have the drugs delivered right to their front door step quickly and cheaply (Zetter, 2014). You can log on to Silk Road and then you are now in the Amazon of illicit substances with different product offerings from different sellers that vary in cost and potency (Sablik, 2013). “If Bitcoin stabilizes and grows in popularity, it will become an increasingly useful tool for various illegal activities beyond the cyber realm,” the FBI writes in the report (Zetter, 2014). “For instance, child pornography and Internet gambling are illegal activities already taking place on the Internet, which require simple payment transfers. Bitcoin might logically attract money launderers, human traffickers, terrorists, and other criminals who avoid traditional financial systems by using the Internet to conduct global monetary transfers” (Zetter, 2014). This is the greatest challenge of using bitcoin because transactions are not subject to tracing. It is difficult to identify the real culprits when this foreign currency is used in illegal activities. Currently, the war against drugs is a social issue in many countries (Santhana, 2014). With the nature of the digital currency, drug trafficking and other crimes are likely to register soaring rates. This means that, there is a salient need for advancements in the digital currency that will prevent the risk of increased crime. Although the security of individuals is an assurance in the use of bitcoin, it is illegal to cover up criminals. As for now, there are still no clear guidelines for addressing this issue. Bitcoin transactions are published online, but the only information that identifies a bitcoin user is a bitcoin address, making the transaction anonymous. As the FBI points out in its report, the anonymity depends on the actions of the user. Bitcoin is still in its beginning stages, but is currently in the process of updating their system that will have new features, tools, security and the accessibility and some day will be at its fullest potential (Velde, 2013). References Ali, R., Barrdear, J., Clews, R., & Southgate, J. (2014). Innovations in payment technologies and the emergence of digital currencies. Bank of England Quarterly Bulletin, 54(3), 262-275. Ali, R., Barrdear, J., Clews, R., & Southgate, J. (2014). The economics of digital currencies. Bank of England Quarterly Bulletin, 54(3), 276-286. Cook, R. J. (2014). Bitcoins: technological innovation or emerging threat?. The John Marshall Journal of Information Technology And Privacy Law, 30535. Dumitrescu, D., & Firică, O. (2014). A turbulent it currency infant in the global business environment. Quality - Access to Success, 1579-86. Greene, C., & Shy, O. (2014). E-cash and virtual currency as alternative payment methods. Journal of Payments Strategy & Systems, 8(3), 274-288. Insight: Advertising - Digital Currencies - Reward and incentivise consumers. (2014). Campaign Asia-Pacific, 53. Rotaru, A. (2013). Aspects Regarding Alternative Currencies. (English). Romanian Statistical Review, (Sup), 283-291. Sablik, T. (2013). Digital currency. Econ Focus, 17(3), 18-27. Santhana, P. (2014). The Pros and Cons of Bitcoins. Baseline, 1. Velde, F. R. (2013). Bitcoin: A primer. Chicago Fed Letter, (317), 1. Zetter, K. (2014). FBI Fears Bitcoin’s Popularity with Criminals. Retrieved on 27th November 2014 from http://www.wired.com/2012/05/fbi-fears-bitcoin/ Read More