Impact of Bitcoin on The World Economy

Bitcoin has moved the conversation from one of theory to one of acceptance. Bitcoin has demonstrated that it is possible to have a currency which is not backed by a central bank a feature of interest to many creditor nations as well as sovereign funds. It is of great interest to any creditor who has so far been unsuccessful in their holdings from the US dollar. Rekindled debates about the merits and viability if not coexistence of both inflationary as well as deflationary currencies in the public consciousness (Shankar Sangeetash, 2018).

Base on simplistic reactionary view of Preventing Inflation: reduce tools to manage an economic crisis. Pure Free Market behavior has undesirable social outcomes when large entities fail. Bitcoin has yet to prove itself through an economic cycle involving entitles depending on it. Current world economy works on the basis of inflationary currencies only. Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments and Big Data, Gold is primarily hoarded due to its deflationary tendencies.

Even under extreme pressure, Iran could not use Oil as a currency during the last few years of sanctions. Limited supply and fixed interval inflation is a design goal and a perceived strength.

Bitcoin reality is that this is fueling hoarding instead of the savings behavior it was designed for. The projected supply over time is estimated to be 21 million. Although bitcoin is not yet widely accepted around the world, the situation may change soon given the rising trend in demand. Probably, if its use has become widespread, its market value is stabilized.

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In any case, it seems that there are geographical differences. Generally, a considerable increase in the demand for bitcoins is observed in countries whose official currency tends to depreciate. However, the widespread use of bitcoins would mean a change in the international monetary system since this virtual currency is outside the scope of monetary policy. Therefore, it is assumed that a hypothetical scenario of massive use of such crypto currency would wrestle with appropriate legislative measures against them. In short, without the support of the authorities of all countries, it seems unlikely that bitcoin will completely replace conventional fiduciary money in countries whose official currency tends to depreciate.

However, the widespread use of bitcoins would mean a change in the international monetary system since this virtual currency is outside the scope of monetary policy. Therefore, it is assumed that a hypothetical scenario of massive use of such crypto device would wrestle with appropriate legislative measures against them. In short, without the support of the authorities of all countries, it seems unlikely that bitcoin will completely replace conventional fiduciary money. Benefits and Limitations of Bitcoin “As in case of payment methods like credit cards and PayPal, the transaction can be reversed back up to 90 days. Here, in case of Bitcoin, once the transaction is made it cannot be pulled back” (Rahul Gaikwad, n.d). Its percentage based transaction structure offers the best solution available today for micropayments. Many retailers have given up micropayments as a significant percentage of the sale is lost through overheads.

The fastest ways to gain transact business across international boundaries today. The vast majority of currency systems require involved processes to setup international transactions. All that is needed technically for a business to access a global market is to install bitcoin software. Since regulation has not caught on in these cases, there is a first mover advantage currently available. The fastest form of money transfer available for remittances using the services of an exchange like coin store, an expatriate can instantly transfer money and have it converted to a local currency at the receiver’s end all within ten minutes and using free software on a low-end android smartphone (Shankar Sangeetash, 2018). These bitcoins can be hold or stored in a Digital wallet. Bitcoin are secured with public key cryptography in which two keys are generated. One is public key and another is private. Public key is used as account name or number whereas private key is have owner credentials.

This private can only be used to provide the ownership of the Bitcoin and if user anyhow lost this key then there will be no way to claim ownership. These wallets are the softwares which holds the digital credentials of bitcoin holdings of the user. These wallets can be online and offline. Online wallets are the service provided by some websites where credentials can be stored online and offline wallets are the software application stored on the user’s computer. Due to its property of anonymity, Bitcoin has been associated with online criminal activities. In 2012, around 4.5% to 9% of all transactions related to Bitcoin were for the drug trading on Deep web drug market, Silk Road. Theft cases of bitcoin are also very difficult to track. Apart from these, there are cases of Malware stealing bitcoins, botnets mining bitcoins. As in case of payment methods like credit cards and PayPal, the transaction can be reversed back up to 90 days. Here, in case of Bitcoin, once the transaction is made it cannot be pulled back (Rahul Gaikwad, 2018). Same may be seen when 2 major exchanges, Bitcoin market and MtGox, were hit by PayPal scams when a group of individuals exchange their PayPal currency to Bitcoin from a stolen PayPal account.

Reference

1. Gaikwad, R. (n.d.). BITCOIN_ITS_ECONOMIC_IMPACTS. Retrieved from http://www.academia.edu José, D. (2017).
2. Retrieved from https://www.fh-luebeck.de Sangeetash, S. (2018).