Essay Example on Bitcoin: A Digital Currency Revolution

Introduction

Bitcoin is a digital currency that is made to work as a mode of the transaction through cryptography. Bitcoin was established on 18 August 2008 through a domain called bitcoin.org. Since that time, Bitcoin has developed to be a renowned form of exchange in the market (Nakamoto, 2019). The first transaction through Bitcoin was carried out by its programmer, by the name Hal Finney on 2 January 2009 (Nakamoto, 2019).

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How Bitcoin Works

For one to use Bitcoin, they have to sign up through an installation of a bitcoin's wallet on the laptop or smartphone, which will, in turn, rate a bitcoin address that one can use to create the services that they need. The subscriber then will disclose their address to friends and family so that the subscriber is paid through the wallet.

Bitcoin has a blockchain termed as a public ledger that is shared, holding the network of Bitcoin. Through the said ledger, bitcoin wallet can calculate spendable balances so that the current transactions are confirmed, showing that they belong to one who has spent them. Chronological order and integrity are facilitated by cryptography.

The transaction involves the exchange of "value" in the Bitcoin wallets to be included in the blockchain (Nakamoto, 2019). The wallet has code information called a "private key," which is used to verify the exchange of the coins and give a piece of arithmetic evidence that the operations indeed came through the wallet's owner. Also, an authenticity that protects the transfer against being altered another party once it is established.

The process involved in Bitcoin is termed as "mining," which is a spread agreement mode that is meant to allow purchases by adding the coins to the blockchain. For a transaction to be approved, it must be added to a block that must fix exactly the cryptographic rules. Mining ensures that no one is in control of what is included in the blockchain.

The theoretical characteristics support the creation of the Bitcoin digital currency

Several factors facilitated the emergence of bitcoin. Naturally, human beings feel insecure when their resources are managed by people. In the Bitcoin, system currency is not regulated by banks nor a centralized institution but in the chain block of one's wallet. When someone's money is not controlled by any other person apart from the owner, this gives the person their sense of security rather than preferring bitcoin to become an option.

The cryptosystem involved in Bitcoin is natural and brings in the concept of fairness and freedom. Get their platform of exchanging currency with people that they want without an intermediary, instantaneously without any exploitation through pricing .bitcoin also uses a system based on mathematical formulas that are straightforward and transparent.

Also, Bitcoin is based on the value of a currency that exists on that particular day that the transaction takes place, unlike the banks that are prone to fluctuations. Therefore people have to forego banks to enjoy the bitcoin system. Bitcoin has a lower transaction cost compared to bank transfers, and 1/3 people tend to prefer it in making their transactions (Nakamoto, 2019). At the same time, Bitcoin is more convenient because the subscribers transact direct once they have their wallet, which saves time that people may require to go to the bank and the long queues.

The most outstanding characteristic of Bitcoin that makes it accessible is in alignment with human values. Naturally, people feel good when they are in control of their finances. When the investments are put in a secure place, people relax, and the chances of conmanship are meager there for bitcoin becomes a people's favorite. Bitcoin services give the low-income earner in the society to access finances at a reduced cost through the cryptosystem. Banks charge people for banking services while bitcoin is entirely free.

The US government's role in advancing the usage of digital currency

Bitcoin, since its establishment in 2008, has developed into a mode of payment for goods and services around the globe (Nakamoto, 2019). Some electronic suppliers, such as Intel and Microsoft, accept Bitcoin as a form of payment.h however However the US government has not adopted bitcoin as a mode of payment of taxes and fees. The legislative body requires the state to develop the implementation of the use of Bitcoin in payment of taxes, and government fees were declined.

The government should promote the development of Bitcoin as a mode of payment if it comes up with policies that allow the cryptosystem to be used in making government transactions such as payment of legal fees such as payments or settling of taxes. However, the government only regards cryptocurrency as a virtual currency that can only be seen as a virtual asset. The irony with the whole thing is that the government does not allow bitcoins as a form of payment but taxes the users through the transactions they make. Also, the government makes deductions d from the losses the user makes through deduction from the tax bill.

The government should accept the Bitcoin system as a mode of payment for taxes and civil fees since the system is friendly to the low-income earners in the USA. By promoting a system that is used by the middle and low-class people will encourage the people to make more transactions, which will, in turn, bring more revenue to the government.

The cryptocurrency is not stable, given that it is subjected to market fluctuations. Also, the system is prone to hacks. In 2015, a company by name, Bitstamp, lost close to 19.00 bitcoins, which are equivalent to $5million through hacking. In 2014, Mt. Gox company also lost an amount totaling $450 million, which led to its closure (Nakamoto, 2019).

Bitcoin Has A Quasi-Monopoly on The Digital Currency Market

I disagree with the writer that Bitcoin is monopolistic. The market is so many coins that have the same services, such as those of Bitcoin. However, bitcoin seems to be having more subscribers because of its stability in the market of virtual currency. In Japan, the money has been fully regulated and is used as a mode of payment in almost all stores. On top of that, the coin competes worth the yen ion value, a quality that makes the currency more attractive to interested parties.

The coin is cheaper than the typical banking system, a characteristic that makes it more appealing to prospective subscribers. The other virtual currencies have not been able to rival bitcoin; this does not make it a quasi-monopoly but a system that has established itself to gain the trust of customers, a feature that has seen it stand out.

The Digital Currency Market Development Over the Next Five Years

Bitcoin over the period become popular among high and low-income earners. From the market analysis, Bitcoin has a big future ahead. However, it is not easy to establish, since, In 2017, Bitcoin increased its price by over 2000%, then this can serve as an indicator of a good future for Bitcoin investors (Nakamoto, 2019). On predictions, the cost of Bitcoin in the next five years will have hit above 2$4500 (Nakamoto, 2019). The forecast is based upon the analysis of the historical currency movements of the coin Bitcoin, therefore, has a chance of growing since it is the only coin that has the potential, across the other cryptocurrencies.

The coin shortly increases in value due to some technological, regulatory, and economic technicalities, which will work to its advantages. Bitcoin has been trading for about ten years, but this is not a promise that it may do better in the next five years. Bitcoin is allowed in Japan and has been fully regulated to be used in transactions. More than 200,000 stores accept Bitcoin as a mode of payment, and it is at the same value as the Japanese yen currency (Nakamoto, 2019).

Therefore, this shows that if the government of the USA regulates the use of Bitcoin in payment of goods and services, then it will increase in value, and more people will adopt it, given that it is cheaper than banking. Also, if the governments in the US and UK accept Bitcoin as a mode of payment, the coin will flourish since a larger population will adopt it as a way of making transactions. Bitcoin is Tor in virtual currency, and this gives it an advantage of being adopted by many as a mode of payment.

In five years to come, Technological advances will have made the system more secure and thus less prone to hacking, a phenomenon that has produced some investors shy away from investing at Bitcoin. The move improving the security systems will attract more investors and increasing the demand of the Bitcoin in the virtual currency business, creasing its value at the same time.

The world is evolving, and the primitive way of doing things is fading away gradually. Paper and plastic money are making their way out of the economy and welcoming the digital system. People need a system that they can trust with their money while saving on costs at the same time. The bank system will collapse with time due to their costly transactions and inconveniences that their plastic monies cause. Bitcoin offers an opportunity for investing while saving on the costs of spending one's money. Bitcoin should work on improving its efficiency in service delivery, and the system will be sure of taking over the world in the next decade.

Reference

Nakamoto, S. (2019). Bitcoin: A peer-to-peer electronic cash system. Manubot. https://git.dhimmel.com/bitcoin-whitepaper/