bitcoins on the American economy?
The United States is
considered to have the highest number of digital currencies users and the
highest number of Bitcoin ATMs and also the highest Bitcoin trading volumes
globally. As it is, The United States is the biggest market of Bitcoin. However,
Bitcoin is thriving all across the world.
BitCoins is leading a
revolution in the American economy. Currencies like BitCoins have opened doors
for a new type of market is controlled by no one. BitCoins characteristics,
such as near zero transaction, have made it preferable to the traditional money
we are using. What can be said is that it is just the start and the
possibilities to come are endless.
As on 27th
December 2012, Bitcoin was valued at 13.45 $ and as on 27th December
2017, it values at 16 406 $. BitCoins have seen many ups and downs in its value
and this scenario will probably continue. However, BitCoins is the most popular
cryptocurrency and it is still rising considering the amount of investors they
Bitcoin on Banks.
After almost ten
years when BitCoins was launched, central banks around the world have
recognized the increasing potential of digital currencies.
The potential impact
BitCoins on the central banks should not be underestimated. The Bank for International
Settlements (BIS) “argues that central banks must look at questions of both
privacy and efficiency when assessing digital currencies, as well as the
financial stability implications that arise from those currencies” (Martin,
2017) . Furthermore, some
banks around the world are not excited about digital currencies. For instance, Jamie
Dimon the leader of J.P. Morgan Chase & Co. bank harshly criticized digital
currencies and called it a “fraud,” and a “tulip bulb” (Mourdoukoutas, 2017).
The fear of banks is
rational regarding the advantages of BitCoins over traditional banks. According to Bilton (2017) Bitcoin and other
similar digital currency disrupt the need for a bank to intermediate
transactions. It isn’t controlled by any single person; instead, it’s
controlled by the peer-to-peer software that allows people to own Bitcoin.
Unlike typical financial institutions, you don’t need a driver’s license to
open a Bitcoin account; you don’t pay a “bank” to store your money in its
vault; and anyone with an Internet connection can access it, use it, and easily
buy and sell it across continents, just like all other digital entities.
many central banks are observing the development in the rising growth of
bitcoin and some even recognize it. Australian for instance removed bitcoin
from double taxation policies; the Australian government also legalized bitcoin
and allows using it just like money. Japan also eliminated the consumption tax
on bitcoin trading, when it officially declared bitcoin as legal. It further eliminated
the possibility of double taxation on trading of bitcoins.
bitcoin threaten economic stability?
Since the beginning
of Bitcoin in 2009 economists have been wondering whether Bitcoin and other
similar digital currencies are good for the economy or they are dangerous.
One of the reasons
why some consider Bitcoin a danger is that, traditionally, transactions between
two parties have operated under a centralized payment system, meaning that an
independent intermediary sits between two parties (or more precisely, the banks
of the two parties) to securely process the payment. Invariably, this
intermediary is a central bank (Frost, 2016).
That is not the case anymore with Bitcoin, which is a decentralized
Furthermore, Bitcoin might be used as a means
for tax evasion, where participants or investors do not need to disclose their
identities and transactions are decentralized. That is a danger for the
government, which considers tax evasion illegal in its jurisdiction. However,
the government still has to decide whether they should be treated as a form of (non-monetary)
property, or as a form of currency.
the other hand, some economists are positive about Bitcoin and other virtual
currencies. Bank of England deputy governor Jon Gunliffe said that Bitcoin is
not big enough to pose a risk to the global economy (Musaddique, 2017).
Moreover, Boring (2014) said that “Bitcoin could strengthen the world economy
if Washington does not destroy it”.
Despite the growing
number of cryptocurrencies (more than 100+) shaping the way for future cashless
world, bitcoin-mania has showed no diminishing effects even though its
competitors are gaining considerable attention in the market. They have been
trying and developing strategies that Bitcoin cannot fulfil. Bitcoin is
considered as the leader or “The Godfather” of all cryptocurrencies and will
continue to maintain its unique standing in these roles.
advancement and growth in technology can never be controlled nor predicted the
stability of bitcoin may be affected when the competitors develop methods to
overcome the specific niche
operational roles of digital currency. For example, Ethereum looks at smart
contracts, Zcash looks at anonymity etc.
The following are the major
rivals of bitcoin that are rapidly on the rise:
1. Ripple (XRP)
Ripple is a real-time
global settlement network that offers international payments instantly with
end-to-end transparency as well as with low-cost. It is considered to be
bitcoin’s logical successor by certain industry experts. It was released by the
former bitcoin developers in 2012. Unlike bitcoin, Ripple is not just a
currency but a system through with any currency can be traded or transferred at
lower costs. Also, mining is not required for Ripple unlike bitcoin. Because of
this, it gains an advantage of reducing network latency and the usage of
Ripple believes that
‘distributing value is a powerful way to incentivize certain behaviors’ and
thus currently plans to distribute XRP primarily “through business development
deals, incentives to liquidity providers who offer tighter spreads for
payments, and selling XRP to institutional buyers interested in investing in
2. Ethereum (ETH)
Ethereum was launched
in 2015, and is a decentralized software platform that enables Smart Contracts
and Distributed Applications (DApps). These are allowed to be built and run in
secured way such that it works without any downtime, fraud, control or
interference from a third party. Ethereum initially launched a pre-sale for
ether and received an amazing response during 2014. Ethereum, is a
platform-specific cryptographic token, which are used for running the
applications of Ethereum. It is like a vehicle for moving around on the
Ethereum platform, and is mostly required by the developers who try and look
forward in developing and run applications inside Ethereum.
According to Ethereum, it can be used to
“codify, decentralize, secure and trade just about anything.” Following the
attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum
Classic (ETC). Ethereum (ETH) has a market capitalization of $41.4 billion,
second after Bitcoin among all cryptocurrencies. (Related reading: The
First-Ever Ethereum IRA is a Game-Changer).
3. Litecoin (LTC)
Litecoin, was introduced into the
market in the year 2011, was among the initial cryptocurrencies following
bitcoin. It was often referred to as ‘silver to Bitcoin’s gold.’ Charlie Lee, a
MIT graduate and former Google engineer was the creator of litecoin. Litecoin
is based on an open source global payment network and uses “scrypt”
as a proof of work, the decoding can be done by as simple methods as with the
help of CPUs of consumer grade. The open source global payment is not
controlled by any central authority.
Although Litecoin is like Bitcoin
in many ways, it has a faster block generation rate and hence offers a faster
transaction confirmation. Other than developers, there are a growing number of
merchants who accept Litecoin to process large volume of small transactions.
Zcash is another
decentralized and open-source cryptocurrency released towards the end of 2016.
It came up with the concept of anonymity amongst all the emerging
cryptocurrencies. With the saying, “If Bitcoin is like http for money, Zcash is
https” they offer privacy and selective transparency of transactions. Hence
like https, Zcash claims to have extra security with all the transactions being
recorded and published on a blockchain. Certain details such as the sender,
recipient and amount remain anonymous.
Zcash offers its
users the choice of ‘shielded’ transactions, which allow for content to be
encrypted using advanced cryptographic technique or zero-knowledge proof
construction called a zk-SNARK developed by its team.
5. IOTA (MIOTA)
IOTA is another
newest contender in the cryptocurrency field, founded in 2015. It is an
open-source distributed cryptocurrency focused on providing payments and
communications between machines on Internet of Things securely. Unlike the
commonly used technology of blockchain, IOTA uses directed acyclic graph (DAG)
called Tangle, partnered with Microsoft, Fujitsu and several other companies.
Considering itself as the first marketplace powered by the Internet of Things,
IOTA provides transaction free regardless the size of the transaction. The
number of transactions handled by the system can be unlimited as well as with
faster confirmation times.