Introduction
Bitcoins appear to be the most well-known cryptocurrency in the world, which implies an electronic user payment system by analogy to digital wallets and bank accounts. Unlike traditional monetary resources, digital coins are not dependent on the economics of a particular country or central bank. All the operations regarding emissions, payment processing, and composition of accounts are realized by users. Therefore, the aforementioned system is associated with apparent advantages, which are especially attractive for wealthy people, who are eager to save their money from inflationary pressures and other threats. Nevertheless, there are considerable risks, which should be taken into consideration too. This way, the purpose of this paper is to review bitcoins and their system and consider whether it is applicable to become a payment option for my business on the basis of the presented information.
Sources Research
These days, there are a huge variety of articles intended to explain some issues related to bitcoins on the Internet. They are intended to reveal some points, which are difficult to understand for a user. It should be noted that they appear to be educative and reliable. In order to find appropriate sources, the following keywords were applied: “bitcoins”, “understanding how block technology works”, “bitcoins what are security risks”. In addition, collocations “bitcoins cryptocurrency laws”, “bitcoins marketing issues”, “bitcoins marketing issues”, “bitcoins economic issues”, “bitcoins financial issues”, and “bitcoins for business” were used too.
The sources predominantly imply articles from online journals, which were published no more than five years ago. They are written by journalists, who are professionals in the field of finances. As for the journals, some of them are devoted to financial and business thematic, such as Forbes, others specialize in cryptocurrency. It regards the following articles: Beware of Crypto Risks – 10 Risks to Watch, 5 Major Indian Laws That Apply to Cryptocurrency, and Bitcoin’s Marketing Problem. Apart from that, the pages from the websites without author were also applied, as they provide an easy explanation of complicated terms. They are Bitcoin Is Crucial to defend Our Economic Freedom and How Blockchain Technology Works. Guide for Beginners. This way, it is possible to explore the most relevant and credible sources of information.
Block Chain Technology Operation
Block chain technology is an integral part of every operation, which is involved in bitcoin usage. It presents a type of database, which stores information in blocks, which are connected via special chains. All the verified transactions are included in the chain of blocks (How Blockchain Technology Works). It is possible to check the account balance and assure whether the actual owner spends his or her bitcoins (How Blockchain Technology Works). The integrality and chronological order are based on reliable cryptology.
Security Risks
As has been mentioned above, despite all the benefits of the cryptocurrency, it is also associated with particular risks. For instance, the advent of bitcoins has contributed to the democratization of many points regarding finances, which “This lowered barrier to entry creates a wide entrance and a very narrow exit” (Disparte). There is an apprehension: “while the asset class is generally uncorrelated to the traditional economy, it is all correlated to itself, which can create market panics and runs” (Disparte). Intangible and illiquid nature is among other issues, which may cause doubts about the reliability of bitcoins. The overwhelming majority of crypto companies do not have appropriate insurance in accordance with modern standards (Disparte). Cyber risks, human errors, technological faults, and other circumstances should not be excluded from the list of possible threats too.
Cryptocurrency Legislation
There are countries, which have a great number of laws applied to cryptocurrency in present-day developments. One of the instances is India, and this example would be used for covering this section. The Indian government is elaborating particular legislation on cryptocurrency, though several laws exist in this regard. One of them is “the infamous RBI circular that prohibits all regulated entities from providing services to crypto businesses” (Helms). The Securities Contracts (Regulation) Act 1956 may also be applied to cryptocurrencies, which are deemed securities. However, some uncertainty in its respect exists, as some tokens “may fall within its remit if, inter alia, they are issued by an identifiable issuer and backed by the underlying assets of the issuer” (Helms). “The regulations under the Companies Act, 2013 and rules thereunder would be triggered, along with other RBI regulations”, and all of them are essential for all the tokens (Helms). Therefore, it is evident that although there is legislation on bitcoins usage, it requires some elaboration.
Marketing Issues
It should be noted that operations with bitcoins are associated with particular marketing issues. It is claimed that “one of the confusing parts of Bitcoin’s, and one of its first marketing issues, is that it’s also the name for the underlining technical protocol for storing and exchanging the currency” (Ramos). Another issue regards the creation of this cryptocurrency, as it was presented an anonymous in 2009, who had alias ‘Satoshi Nakamoto’. This fact does not contribute to the credibility of bitcoins from the perspective of people, who are not aware of this financial aspect to a large extent. In addition, the collapse of MtGox and the allegation of criminal activity also raise concerns.
Economic and Financial Issues
Moreover, there are some economic and financial issues connected with bitcoins. There is a concern:
“Fake cash is financially and socially harmful: it is inflationary; it benefits a couple of at the cost of numerous others; it triggers boom/bust cycles; it leads to overindebtedness; it damages society’s morals; it leads the way towards tyranny” (Bitcoin Is Crucial to defend Our Economic Freedom).
Bitcoins appear to be extremely important in the context of battles for freedom and cash. The success of a community-based payment system cannot be underestimated, though the “triumph is not attained” (Bitcoin Is Crucial to defend Our Economic Freedom). Bitcoin is a method for achieving more freedom in financial issues, while the majority of the population is not aware of it. Moreover, they are frightened of such s system and not eager to use it.
Conclusion
Having presented all the information on bitcoins, which is sufficient for a business owner whether this cryptocurrency should be applied or not, it is essential to present the final decision. It is undeniable that bitcoins usage implies particular benefits, and they have a promising future. Nevertheless, it is associated with security risks, and the government has not established appropriate legislation in this regard. For this reason, its implementation to business, especially the small and medium ones, may encounter severe threats. A more effective solution could be to delay this issue till the moment it reaches its triumph, and the risks are minimized.
Works Cited
“Bitcoin Is Crucial to defend Our Economic Freedom | by Melis | The Capital | 2020”. Cryptopress, 2020. Web.
Disparte, Dante Alighieri. “Beware of Crypto Risks – 10 Risks to Watch”. Forbes, 2018.
Helms, Kevin. “5 Major Indian Laws That Apply to Cryptocurrency”. Bitcoin.com, 2019.
“How Blockchain Technology Works. Guide for Beginners”. Cointelegraph.
Ramos, Rick. “Bitcoin’s Marketing Problem”. Rick Ramos, 2014.