Paper Example on Cryptocurrency Transparency

Introduction

Technological change is a continuous process with various implications for businesses and trade. In a fast globalizing world, international trade and interactions are bound to increase thus the need to understand how technological developments in the form of cryptocurrency will influence this emerging trend. It is also necessary to determine the possible ways through which the cryptocurrency can be improved to avoid common challenges such as infiltration by outlaws and use in the black market (Courtois & Bahack, 2014). The underpinning for such a study is to ensure that technological development involved in the creation of cryptocurrencies resolves some of the problems witnessed with other currencies without exposing the users and industry at large to possible risks. When such threats are eliminated, and transparency achieved, then it will be possible to assure efficacy in the digital currency industry.

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There is a projection that the surge in cryptocurrency will hit the highs like the 1990s internet boom. The digital currencies will grow in market share to trillions, and more investors are likely to immensely cash into it (Goriacheva et al., 2018). One unique characteristic of electronic currency which is also a source of their security is that their origin is anonymous and does not require intermediaries such as banks for their use in completing transactions (Cheah & Fry, 2015). This anonymity hinders the currency's control by monetary institutions and governments thus making it tolerant for manipulation by outlaws such as drug traffickers and money launderers. Therefore, there is need to ensure accountability and transparency in the use of cryptocurrency (Bunjaku, Gorgieva-Trajkovska, & Miteva-Kacarski, 2017)). In essence, as more and more cryptocurrencies enter the market every day, the focus should shift from sheer celebration of their incredible security in international trade to a demand that they attain the highest levels of transparency and verification.

Trust and security are underlying considerations in cryptocurrency since new ones continue to emerge everyday hence the need to explore some of the current and future strategies that crypto-currency developers should follow to avoid possible backlash (Grinberg, 2012). Despite the fact that the cryptography technology is poised to be one of the most secure methods, it is not sufficient in fostering a systematic sense of security among potential investors and traders (Cheah & Fry, 2015). Without deliberate efforts to explain, explore and develop elaborate protection of cryptocurrency, it will remain hard for the investors to trust them. Their decentralized nature hinders the possibility of governments and bank authorities from controlling them. It is implicit that the players within the digital currency industry should focus on not only demonstrating the legitimacy of their projects but also educating the broader market to identify available cryptocurrency investment opportunities.

Any companies interested in launching a new crypto-currency has the burden of showing to the potential investors that they will be reliable in facilitating accountable transactions. It is in this light that approaches such as developing a technical white paper containing precise information about the currency project plans, developers and leaders should be established before its development (Grinberg, 2012). Through such an approach, the likely investors in the currency can maintain a continuous track of its progress. Furthermore, the electronic money seems to have some volatility which means that seeking the highest levels of transparency is the only way of covering investors against a possible dip in the currency performance (Cheah & Fry, 2015).

Ideally, a focus on cryptocurrency transparency changes the discourse from a discourse on its tremendous benefit which may conceal serious errors. An emphasis on the openness of cryptocurrency gives meaning to some of the active interventions in the industry such as the 2017 establishment of Digital Currency Index (DCI) (Kaplanov, 2012). In essence, one mechanism for guaranteeing the transparency of cryptocurrency is through setting up a system in which investors can track the performance of the currency. Some of the variables that determine the openness of an electronic coin include its development, anticipated return and degree of volatility (Hughes & Middlebrook, 2015). Without an accountable body such as banks or government agencies in the digital currency industry, the investors need a way through which they can gain insights into a range of pertinent issues which are often unavailable (Tucker, 2009). Therefore, research into other means of informing the investors about a cryptocurrency provides a valuable approach that confides in the critical public awareness about the value of individual currencies. The net effect is that the potential investors will be able to have an informed decision before deciding to invest in digital currencies based on perceived risks and benefits.

Conclusion

Looking at the need for transparency in the cryptocurrency opens the discussion on the stakeholders and their specific roles in ensuring the continued growth of the electronic currency in the market. For instance, it emphasizes the currency developers to put in place the mechanisms to prove their potential to investors. This research provides insights into ways that cryptocurrency developers can use to achieve higher levels of accountability such as promoting consistent communication with the investors. Through maintaining a steady connection with all actors in the industry, the cryptocurrency developers accomplish a firm basis of trust, transparency and continue its dominance of the new era of high technology.

References

Bunjaku, F., Gorgieva-Trajkovska, O., & Miteva-Kacarski, E. (2017). Cryptocurrencies-advantages and disadvantages. Journal of Economics, 2(1).

Courtois, N. T., & Bahack, L. (2014). On subversive miner strategies and block withholding attack in bitcoin digital currency. arXiv preprint arXiv:1402.1718.

Cheah, E. T., & Fry, J. (2015). Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin. Economics Letters, 130, 32-36.

Goriacheva, A., Jakubenko, N., Pogodina, O., & Silnov, D. (2018). Anonymization Technologies of Cryptocurrency Transactions as Money Laundering Instrument. KnE Social Sciences & Humanities, 3(2), 46-53.

Grinberg, R. (2012). Bitcoin: An innovative alternative digital currency. Hastings Sci. & Tech. LJ, 4, 159.

Hughes, S. J., & Middlebrook, S. T. (2015). Advancing a Framework for Regulating Cryptocurrency Payments Intermediaries. Yale J. on Reg., 32, 495.

Kaplanov, N. (2012). Nerdy money: Bitcoin, the private digital currency, and the case against its regulation. Loy. Consumer L. Rev., 25, 111.

Tucker, P. C. (2009). The digital currency doppelganger: Regulatory challenge or harbinger of the new economy. Cardozo J. Int'l & Comp. L., 17, 589.