Why Is Regular Money Superior to Bitcoins - Essay Example

Why is regular money superior to Bitcoins? Proponents of bitcoins argue that bitcoins are much better that regular cash. Their argument is based on the fact that bitcoins have no central controller. As such, bitcoins transactions are only conducted by two people. That is the seller of the bitcoins and the receiver that has to be paid for work related. Unlike regular cash transactions, such transaction eliminated third parties such as the central bank or regular banks. Such methods according to the proponents of bitcoins are far more effective and efficient method of payment. They argue that the process is secured than normal cash transaction because transaction goes from one account to another. The success of the transaction is confirmed by the network. In this case, the two parties trust the cryptographic technology that plays a major role in the transaction (Fung, and Halaburda 13). However, the argument is refutable because money is still and will remain more superior to the bitcoins. Regular cash has central controllers such the central banks, commercial banks and the government. Money issued is monitored and controlled by the parties mentioned. On the other hand, bitcoins is decentralized form of currency. The point is that the two parties only do transactions with no third party involved as in the case of regular cash. However, there are risks involved when dealing with bitcoins. The inexistence of central controller shows that the users or any other person can make duplicate bitcoins. As such, the bitcoins in the case are risky to the users because the bitcoins becomes valueless due to existence in large numbers. Additionally, they are also risks involved when transacting with the bitcoins. In most cases, regular cash transactions involve more than two people. It is, therefore, possible to trace the people involved in the transactions before in case anything faulty arises. However, the case of bitcoins is quite different; two people do the transaction, and the currency is decentralized meaning that there is no central controller. The fact that the currency is untraceable increases crime activities. Because of the difficulties to trace the transactions involving bitcoins, the use of bitcoins attracts crime activities such as human and drug trafficking. Such crime activities will make the authorities outlaw the use of bitcoins. As such, regular cash is still the best than the bitcoins (Worstall). The advocates of the bitcoins also claim that bitcoins can be carried anywhere without risks of being attacked by thieves. One can carry billions of bitcoins on a flash drive. However, difficulties arise when locating a person or a shop that accept the bitcoins. Unlike regular cash, only a few businessmen accept bitcoins. In this case, regular cash wins as the alternative method of payment. Additionally, bitcoins violates one function of money. Money is a medium of exchange that should be widely accepted anywhere when transacting. Regular cash meet this requirement because the user can pop into any shop and exchange goods for cash. On the other hand, bitcoins can only be exchanged for goods in specific shops that accept it (Kudlow). There is a view by the proponents of bitcoins that regular cash are risky because of changes in the economy. They argue that cases of inflation make cashless reliable than the bitcoins. Regular cash according to their view are printed every day, in this case, more money circulating increases cases of inflation. It is, therefore, important to consider bitcoins as the best alternative form of currency because it is immune to inflation. However, the claim that regular cash is unworthy because of inflation can be proven false. As mentioned earlier on this paper. Regular cash are centralized while, bitcoins are decentralized. The point is that, with regular cash, there is someone out there that regulates the issuance of cash to the public. Among the regulators are the central bank and other government institutions. Their work is to oversee the amount of money in circulation. As such it is easy to monitor the rate of inflation with the use of regular cash. Conversely, bitcoins are decentralized form of currency. Mining of bitcoins can be done by more than one user when the need arises. As such, inflation is not possible to contain with the use of bitcoins in an economy (Fung and Halaburda 13). Security is another issue related to any of the currencies. Regular cash is said to be insecure because large sums of money cannot be carried around without causing any security issues. In this case, proponents of bitcoins argue that bitcoins are more secure than regular cash. However, regular cash is still more secure because they have more methods that can be used to made secure payments. For example, credit cards and debit cards. Bitcoins are insecure to hackers and cyber-crime individuals. Bitcoins relies on cryptographic technology for security reliance. However, with the increasing number of hackers and cybercrime activities, such security features can be exploited. Furthermore, studies reveal that bitcoins users must be well aware of the security features before considering storage of bitcoins. One is not required to undergo training so as to understand the use of regular cash. It is known everywhere that regular cash is kept in banks or pocket whenever one is carrying a small amount of money (Worstall). As such, regular cash emerges as the most important type of currency than bitcoins. There is also an issue of user protection; in this case, the users of bitcoins have no protection such as insurance. Banks do not provide the user of bitcoins with insurance. In addition, bitcoins are stored on wallets kept on hard drives; problems arise when someone accidentally wipes out the hard drive. With no backups for stored bitcoins, it will be the end of the bitcoins. Cash are more secure in storage places such as banks because customers are assured of security even in case of calamities such as fire. Divisibility is one characteristics of money; regular cash achieves this feature because it is available in coins and notes. As such, it is possible for users to obtain goods or services in places that require a small amount of money. Divisibility also makes it possible to have a physical currency that can be used in shops. However, the case is different with bitcoins; it does not have a physical form. Therefore, it is impossible to use in some stores that cannot convert bitcoins to regular cash. Based on this view, it can be argued that regular cash are far more superior to bitcoins (Pride 524). Volatility is another issue that has currently been witnessed largely with bitcoins. Based on a number of researchers, bitcoins are more volatile than regular currency. For example, studies show that for the last three months, the price of bitcoins has dropped drastically by 60%. The drop in the price of bitcoins is far more than the drop witnessed on the Russian ruble as a result of the change in oil prices. The fluctuation in the price of bitcoins makes it impossible for traders to accept any transaction that deals with bitcoins. The fact is that no one will accept currencies that change in price within a short time. Base on the evidence indicated in the paragraph; it is clear that regular currencies are far much better than bitcoins because they are less volatile (Casey). Conclusion Bitcoins is part of changes of technology that many of us must appreciate. They require fewer expenses to create, unlike the regular cash that requires finances for the institutions responsible and the minting of currencies. However, the study above indicates that regular currencies are far much better than bitcoins. The study explores the issue of security, volatility, divisibility and acceptance of any of the currencies. Regular cash emerges as the best than bitcoins. Works Cited Casey, Michael J., and Paul Vigna. “Bitcoin and the Digital-Currency Revolution.” The Wall Street Journal, 2015. Fung, Ben and Halaburda, Hanna. Understanding Platform-Based Digital Currencies. Bank of Canada Review, 2014 Kudlow, Larry. “Kudlow: Bitcoin Is Not Money.” CNBC. Feb 28, 2014. Web. 17 April. 2015. Pride, William M, Robert J. Hughes, and Jack R. Kapoor. Business. Cengage Learning 2013. Print. Worstall Tim. To Be Better Than Money Bitcoin Must Be Better Than Money; It Aint. Forbes. 05 Feb, 2015. Web. 27 April 2015. Read More