The Two Sides of Blockchain and Cryptocurrency Essay

Paper Type:  Essay
Pages:  7
Wordcount:  1809 Words
Date:  2022-06-19

Introduction

Transaction or processes between two separate entities are managed and controlled by third parties other than the two principals involved in the given transaction. Centralization and control of currency transactions between people and organizations are commonly made by these third parties (Bohme, Christin, Edelman, & Moore, 2015). Making payments or transfers through digital platforms require the services of a middleman, mostly involving credit card providers or banks, who enable the transaction to be completed. These transactions are facilitated at a cost, usually charged to the sender. The same centralization process applies to other systems and domains, including music and software. Blockchain technology was developed to resolve this problem by getting rid of these third parties. It creates a decentralized atmosphere where entities involved in a transaction do not need to go through or use the platform of a third party. Data and transactions are no longer required to pass through the typical third parties like banks. According to Holotiuk, Pisani,and Moormann (2017), blockchain technology was first introduced to the public through Bitcoin. Through Bitcoin, a decentralized atmosphere for cryptocurrency was created, where different entities can exchange services or goods using digital money. The application of the blockchain and cryptocurrency technology in different parts of the economy has both positive and negative effects. Cryptocurrency and blockchain technology are trends that have been positively applied to e-commerce and real estate, but at the same time has disrupted the global economy by posing a challenge to the dollar standard and disrupted the SWIFT network.

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Understanding the Block Chain Technology and Bitcoin Cryptocurrency

DeVries (2016) described blockchain as a decentralized data solution distributed amongst different nodes. These participating nodes are responsible for approving and maintaining the ever-increasing catalog of data records. The data, majorly described as transactions, is documented in a shared ledger. The lack of third parties, therein, enables all transactions in the blockchain to be readily available and share to all participating nodes. This characteristic enables the system to be transparent compared to the traditional centralized systems. Furthermore, the anonymity of all the participating nodes makes it secure for them to approve the transactions. Cryptocurrency is based on the theoretical aspect of decrypting encryption procedures to develop limited distinctive hashes (Farell, 2015). The network of computers used to verify these transactions enables the users to trade these hashes similar to the way physical currency is exchanged. The Bitcoin system was devised in such a way that there is a limited number of Bitcoin at any given time, a characteristic that prevents its oversupply and ensures that it is always rare.

The value of Bitcoin is pegged on the trust that the users have on it. Bitcoin users trust that if they accept the currency as a form of payment, the Bitcoin could be used to purchase other goods or services at a later date. The value of the Bitcoin can is not subjected to any fixed figure as it keeps on changing depending on the amount of trust and demand created by the users. One of the unique features of the blockchain is that no single transaction in the public ledge can be deleted or modified after the transactions have been approved by the participating nodes (DeVries, 2016). The blockchain is famous for its security and data integrity because these approved transactions or data are permanently available in the public ledger. As a result, many businesses, including e-commerce and real estate have embraced it. Nevertheless, it still has a few disadvantages, because it has disrupted the global economy by affecting traditional means of cross-border currency transfers through the SWIFT and poses a challenge to the dollar standard.

Bitcoin in E-commerce

The internet has restructured different areas of the economy. Bitcoin is a system that has completely changed how currency is viewed and used. Through the digital currency, which is created, held, and transferred electronically via the web, people can transact online without the need to involve third-partyentities like the banks and credit card companies. Bitcoins users are not tied to any physical residence or space but are rather free to transact anywhere in the world as long as they have access to the internet and their Bitcoin accounts. Besides, through Bitcoins, e-commerce transactions are now faster, easier, and safer than most money transfer services used by both business owners and customers. Besides, this cryptocurrency is effective for the average shopper as it does not rely on central banks or the government but is instead managed via the blockchain network. Despite some risks as stated by Yli-Huumo et al., (2016), Bitcoin is an interesting and extremely dynamic technology that has changed how e-commerce is being conducted and continues to be the fundamental piece that has resolved the traditional currency in efficiencies experienced in the past by online sellers and buyers. More companies understand that consumers always want an easy way out. As a result, online shopping stores have accepted to take payments in the form of digital currency, contributing to the growth of the businesses and the influence of the cryptocurrency.

Bitcoin is famous and widely used in e-commerce because it offers instant gratification to the user. In this fast-paced, ever-changing world, users of any system prefer issues to be handled in minutes or simultaneously. Users want to save on time spent making online payments and reduce stressful experiences. Bitcoin does not let customers wait for hours or days before transactions are verified and completed (Li, 2017). Users can now have peace knowing that they would no longer be required to wait for pending transactions to be completed, or deal with rejecting transactions, nor initiate a failed transaction, or figure out, for example, why their PayPal account has been blocked. Moreover, cryptocurrency also provides a platform for those who were previously unbanked to transact online. Many developing countries lack effective and reliant financial institutions. The peer to peer system provided by blockchain gives the unbanked a chance to buy and sell products from the comfort of their homes.

Customers prefer systems that take their needs seriously. Compared the conventional financial institutions, customer service is at its best in Bitcoin. There are no financial institutions that give the customers complete control and access to their finances, even though these institutions may state otherwise. Bitcoin has enabled e-commerce to be very effective because users have access to the updated ledger and budget at any given time (Rose, 2015). Furthermore, users can run their businesses in whichever way they prefer, without any restrictions or regulations. Small business also has the opportunity to go global and engage in global e-commerce. Users have been able to place trust in a system that enables them to easily move their assets online. The popularity of Bitcoin is also based on its decentralized concept, allowing users to transact at no additional costs compared to the charges they incur when sending, receiving, or withdrawing money in the traditional financial institutions. Seetharaman (2017) stated that the increase in e-commerce could also be linked to the availability of a more secure payment system. Bitcoin is a secure payment system by design. The public ledge system reduces cases of embezzlement and fraud because users can easily track their transaction, which has a high-security check.

Application of Block Chain Technology in Real Estate

The blockchain technology can be applied to both the private and public sectors of real estate. The posting of the public land and land registry records in the public sector on the blockchain can allow relevant agencies and stakeholders concurrent access. The real-time access cuts down on the need to use third parties to authenticate documents or resolve ownership disagreements that would rather occur in an indistinct system. For example, the government of Honduras has explored the need to use the blockchain to store their public land records and promote transparency. The privatesector uses blockchain for keeping residential rental contracts and agreements that can now be effected with smart contracts. The strategy continues to make real estate agents more efficient, saving on time and resources.

Cryptocurrency Disruption to the Global Economy

Posing a Challenge to the Dollar Standard

The United States dominance in both global political and economic affairs is the ability of it to use the dollar as a generally accepted means of exchange across the globe. On economic grounds, the US Dollar acts as the standby currency to the world economy. Every financial player in the financial markets has a presence in the United States money market. This provides the reason why any disturbance to the US financial market has a ripple effect on individual nation's economic capabilities around the world. For example, the 2008 financial crisis in the United States affected many countries in different parts of the world,going as far as Iceland. The interconnectivity of the global economy is both a blessing and a curse. At the core of this interconnectivity is the US dollar as the backup currency and the US treasury the main global bank. The United States has created a centralized way to control the world economy, but which is now being threatened by the popularity of cryptocurrencies.

Some researchers, including Rose (2015)stated the importance of maintaining a centralized economic system to maintain economic stability. Li (2017)stated that the decentralization brought about by the massive use of cryptocurrencies could destabilize the economic backbone of the contemporary world. Cryptocurrencies have changed the international trade, economic,and foreign relations dynamics. Previous efforts to rid the world of dollar dependency can be actualized with the mushrooming of different forms of cryptocurrencies. Venezuela and Russia are some of the countries that have created state-owned cryptocurrencies in a bid to "de-dollarize" (Yli-Huumo et al., 2016). Venezuela at one time even went a step ahead to organize for the launching of a cryptocurrency backed by oil to enable the country to come out of the inflations brought about by the increasing sanctions from the US. The dollar is now threatened by the availability of the Bitcoins, which provide an escape route out of economic embargos (Yli-Huumo et al., 2016). North Korea has consistently insisted that it will use cryptocurrencies to move out of the rough economic embargo imposed on them by the US and her allies.

The disruption of the SWIFT network

The conventional financial settings and international money transfers require clearing entities like the banks and the SWIFT (Society for Worldwide Interbank Financial Telecommunication) (Seetharaman et al., 2017). SWIFT provides the network for financial institutions to transmit information and communicate with each other in a secure and safe platform. All international money transfers use the SWIFT network, which charges some fees and takes some days for such a transaction to be processed. The acceptance of cryptocurrencies as payment methods has posed a threat to the regular international money transfer platform. SWIFT is no longer needed as a middleman to authenticate or authorize transactions.

Bitcoin now provide a direct, minimal fee platform to transfer currency around the world. Furthermore, the a...

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The Two Sides of Blockchain and Cryptocurrency Essay. (2022, Jun 19). Retrieved from https://proessays.net/essays/the-two-sides-of-blockchain-and-cryptocurrency-essay

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