Bitcoin has introduced many new ideas for ways we can transfer money but, as it continues on its path for success there are still many problems that need to be fixed. In 2008, “Satoshi Nakamoto”, a man whose real identity remains a mystery to this day started Bitcoin. Mr. Nakamoto created Bitcoin with the intent to make an alternative way of transferring money with no centralized bank. This idea has aroused many companies and investors because there is no centralized bank meaning, Bitcoin is not affected by inflation and there is no stable value which makes this cryptocurrency highly volatile. No central bank also gives more authority to people who use Bitcoin because they have full control over their money. By becoming more relevant and maintaining a high value, Bitcoin has helped countries who are struggling with the value of their own currency. Security problems along with scams and theft have made clients hesitant towards adopting Bitcoin into their system. Companies and investors are repelled by cryptocurrencies because it is still a considered a radical idea and clients are not fully educated on the concept. Major companies have suffered vast losses due to security breaches which also repels clients away from Bitcoin. Bitcoin has come a long way since its creation in 2008 but there must be more adjustments made before world wide usage.
Bitcoins price increases and decreases everyday, the currency is extremely volatile. When the first Bitcoin transaction took place in 2009, one coin was worth basically nothing. In March of 2010 Bitcoin was valued at $0.003 USD per coin which is still not much but nonetheless Bitcoin was making progress. As Bitcoin increased in value, on July 8, 2011 Bitcoin was valued at an all time high of $31 USD per coin, months later toward the end of 2011 Bitcoin dropped to $2 USD per coin. As Bitcoin continued to fluctuate it experienced more of an increase over the years although, Its value suffered minor setbacks that are still present today as the value changes. Bitcoin’s first major jump in value was in November of 2013, during this month in 2013 Bitcoin jumped from a value of $100 USD to anywhere ranging from $350 to $1,242 USD. The most notable time when Bitcoin was valued among other currencies was on December 15, 2017, when it reached a value of $17,900 USD per coin. “Bitcoin has no revenue, earnings or underlying asset value. Its price rise is driven by demand alone, and that shows signs of a frenzy” (Huang, 2018). While some see Bitcoins volatile value as good thing where they can buy coins at a low price and sell them during high demand; others are unwilling to take the risk of investing in Bitcoin because they are aware that its value can decrease anytime. Since Bitcoin is not a currency that people are educated about and, the fact that it is extremely volatile will drive people away from adopting it. “An economy in which Bitcoin was the dominant currency would be a more volatile and harsher economy, in which the government would have limited tools to fight recessions and where financial panics, once started, would be hard to stop” (Surowiecki, 2018). Governments would suffer immensely if they adopted Bitcoin as a national currency. Due to Bitcoins fluctuating value, industries and shops within these countries that adopt the cryptocurrency would constantly change the prices of their products so they can keep up with the value of Bitcoin. In order to be seen as a national currency Bitcoin must establish a value that will not change every day.
Bitcoin is still seen as a radical idea to most clients but it also offers advantages. Countries such as Venezuela and Zimbabwe have currencies that are suffering immensely because of inflation. To fix these currency problems Venezuela has started to think about adopting Bitcoin into their economy. “While the currency of Venezuela has nose-dived, the value of a Bitcoin is rising. In a country where inflation is expected to exceed 2,300 percent in 2018, it seems like a reasonable risk to take.” (Pavlus, 2018) Since Bitcoin is not affected by inflation Venezuela is all for adopting Bitcoin into their economy before their currency amounts to nothing. Zimbabwe is another country that is starting to consider the usage of Bitcoin. Ever since Zimbabwe abandoned its own currency for the U.S dollar they have been experiencing numerous problems in the ways their money is used. “Zimbabwe relies on currency imports to run its economy??”and it’s facing a shortage. Bitcoin is now common enough that it’s even accepted by car dealers.” (Pavlus, 2018) Since Zimbabwe does not have enough of its new adopted currency they need to rely on Bitcoin as a way for money transactions. Other advantages Bitcoin offers is the hefty amount of money you could possibly make by selling your coins. The Winklevoss twins are two brother who benefited greatly from investing in Bitcoin, their 2013 investment of 11 million USD accumulated over the years and is now worth roughly 230 million USD. A venture capitalist named Tim Draper invested in Bitcoin and scored big time. Draper bought 30,000 Bitcoins in an government auction which was worth about 19 million USD at the time; as Bitcoin continued to gradually increase in value over time, his purchase of 30,000 Bitcoins is now worth 171 million USD. These people and countries have benefited from Bitcoins release but others still are skeptical about the cryptocurrency.
Ever since Bitcoin went public, clients are more likely to be scammed or robbed of their virtual currency. Since there is no human third party figure in each transaction through Bitcoin there is no detection of fraud by the government. With no human third party, clients can also buy and sell anything through Bitcoin which is a serious problem; Bitcoin has opened up a gate for illegal purchases such as drugs, weapons, and many other items the government would not approve of. This is a big problem considering anyone can use Bitcoin including minors to purchase anything they desire. People will also use Bitcoin as a way to avoid taxes, “Capital gains and losses should be reported by taxpayers to the Internal Revenue Service on Form 8949, even though Bitcoin isn’t recognized as legal tender in the United States. History has shown that most taxpayers aren’t doing this” (Williams, 2018). By not reporting to the IRS people who use Bitcoins are able to avoid taxes because there is no third party that taxes and monitors a transaction. Bitcoin’s solution to no third party figure is the use of blockchains and miners to aid the transaction process. Blockchains can detect fraud, most times, and make it so you do not need to release extra personal information when making a transaction. “Miners are a community of people across the world who are running the Bitcoin software, each of them recording every single transaction that takes place” (Thompson, 2018). The problem with Bitcoin’s blockchain system is that is has vulnerabilities. The 51 percent attack is a potential threat to blockchains where a group of blockchain miners are able to control 51 percent of the hashrate which allows the attacker to double spend their coins. Double spending is a form of fraud where you spend the coins once and you are able to spend them again in another transaction. This serves as a major problem because the money that is “paid” in the first transaction is never actually paid, instead the amount of coins “paid” is returned to the purchaser. Bitcoin must develop the usage of blockchains to prevent fraud; They also must monitor what is being purchased with the coins to prevent the transaction of illegal items. Bitcoin has had many failures in the past which have lead other clients to think that they can potentially lose their money from hackers. In june of 2011 the largest cryptocurrency hack would commence and would end in February of 2014; a company by the name of Mt. Gox suffered the immense loss of 450 million USD. The hackers who committed this tremendous coin heist were able to do it by stealing Mt. Gox’s private keys; by acquiring the private keys the hackers were able to empty out the wallets that were affiliated with Mt. Gox. Due to poor programing and inexperience with Bitcoin, Mt. Gox detected these scams as virtual deposits into their wallets. Mt. Gox would later would declare bankruptcy because of Bitcoin. Another company who suffered from a Bitcoin hack is NiceHash; losing roughly 70 million USD this would be considered the fourth largest cryptocurrency hack of all time. In 2012 during March, a company named Bitcoinica would suffer due to a cryptocurrency hack. Bitcoinica lost 43,000 Bitcoins, at the time this was worth about 215,000 USD. There are many more companies and clients whose coins have vanished due to their lack of wisdom on Bitcoin and, Bitcoins vulnerable security systems; Bitcoin must develop a better security system and they must educate clients on how to use Bitcoin before worldwide usage.
Despite the fact Bitcoin has flaws within its system, it can revolutionize the way we use money. It may have the potential to become a national currency but it must develop before anyone considers adopting it into their country. Bitcoin has accomplished many things people thought would not be possible but they must be reviewed and adjusted. The first decentralized bank is considered radical by many, people are not informed about blockchains and how they can serve as a replacement for a centralized bank. If Bitcoin explained how they worked and pitched their idea for currency they could be triumphant in the future. Bitcoin needs to monitor each transaction more thoroughly to confirm each and every one is not a form of fraud before industries chose to adopt it. To solve repetitive hacking and security problems that occur within companies affiliated with Bitcoin, companies who use Bitcoin and representatives from Bitcoin should moderate the company’s coin wallet daily to assure the safety and security of their coins. When Venezuela and Zimbabwe adopted Bitcoin into their economy, clients can assume that it has the potential to become a national currency; before this happens Bitcoin must determine a value that will not change everyday, Bitcoins fluctuating value will make economies suffer greatly if this is not changed. Bitcoin has shown a plethora of flaws within its system which is why it must develop before clients consider using it.
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