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Globalization of Bitcoin
Globalization of Bitcoin
When the word Bitcoin comes to mind, it can be a hard object to visualize because of its intangibility. It cannot be touched like a U.S. dollar and the exchanges made with it cannot be seen in a literal sense. Bitcoin is a textbook example of a form of a modern day fiat currency that’s value is being driven upwards by nothing more than big pockets and irrational exuberance. Regardless of why it’s increasing in price, it’s already begun to have an impact on global markets.
Bitcoin first emerged onto the banking scene in 2009 in a paper called Bitcoin: A Peer-to-Peer Electronic Cash System written by Satoshi Nakamoto. The concept of bitcoin can be separated into two major aspects: the blockchain, which is the public ledger that records transactions made with bitcoin, and transactions, which focuses primarily on receiving and placing payments between users. The blockchain that bitcoin uses is a continuously expanding list of records (called blocks) that are encrypted with 3 pieces of data attached to it, a cryptographic hash, data, and a recording of the time. Blockchain was invented specifically for the bitcoin concept in 2008 which has led to its various success amount the Big Four accounting firms that are currently testing the technology in various formats. Specifically, Ernst and Young has given each of their Swiss employees a bitcoin wallet and even has a bitcoin ATM in their office. As with all currencies, an accounting standard must still be established with the FASB to prevent inconsistent accounting practices. As a result of there being no strict accounting guidelines for digital currencies, investors can be turned off to the fact that bitcoin could potentially be an auditing nightmare. On the positive side, this problem presents potential for creating a universal ledger.
This system, unlike typical currencies, enables transactions to be made between users without passing through a central authority. It was created with the intention of not having to pass through a central authority or institution because of the growing uneasiness that people have with traditional banks. Also, another major difference between typical fiat currencies and bitcoin is that bitcoin’s supply is tightly controlled by a complex algorithm that releases a small number of new bitcoins every hour until a cap has been reached. This makes bitcoin somewhat more desirable than normal fiat currencies because as demand continues to increase, the supply will stay constant causing the value to increase. With traditional currencies, central banks have the choice of releasing unpredictable amounts of currency which can cause investors to view traditional currencies as less-desirable. Other factors such as pseudonymity in transactions can appeal to large arrays of consumers.
Cryptocurrencies, such as bitcoin, are accelerating the path to globalization in ways never thought to be achievable. Business in the 21st century prides itself on efficiency and cost-cutting more than ever. Bitcoin is helping companies revolutionize the way they make transactions by getting rid of unnecessary processing times and outrageous fees. When using a credit card, the credit card information is processed which becomes very tedious when done often whereas bitcoin transactions happen instantly in real time. Another way in which bitcoin can help accelerate globalism is that international payments can now be made without paperwork and in a convenient way. A very common but often overlooked exchange of money is immigrant workers sending payments to their family in different countries. In a recent report done by Businessweek, average fee for remittance was 9% of the money transferred with an additional 5% for converting that money into cash. Currencies like bitcoin are helping to eliminate the need for a middle man in cash transactions. With roughly 40% of the world not having a bank account, this simple way of making transactions can be accessible to anybody with a smartphone.
One of the biggest issues that bitcoin can fix is giving people the opportunity to record assets in a way that is easy to compare on an international scale. By keeping a digital ledger of every transaction made through a blockchain, bitcoin is opening a way for the world to potentially have a universal ledger so that everybody’s assets and transactions can be viewed in a consolidated manner. Although bitcoin may be considered shaky by some investors, it has already began revolutionizing the way people view currency. No longer is currency something that can be lost or destroyed or inaccessible to some due to their remoteness in society. Bitcoin is an ease of access and a sense of security to all who encounter it.
- Carrick, Jon. “Bitcoin as a Complement to Emerging Market Currencies.” Emerging Markets Finance and Trade, vol. 52, no. 10, Feb. 2016, pp. 2321–2334., doi:10.1080/1540496x.2016.1193002.
- “Bitcoin Seeks Recognition From U.S. GAAP.” Thomson Reuters Tax & Accounting, 11 July 2017, tax.thomsonreuters.com/media-resources/news-media-resources/checkpoint-news/daily-newsstand/bitcoin-seeks-recognition-from-u-s-gaap/.
- “How Bitcoin Could Shake up International Trade.” Trade Ready, 8 Jan. 2018, www.tradeready.ca/2018/topics/international-trade-finance/how-bitcoin-could-shake-up-international-trade/.
- “Price Dynamics and Speculative Trading in Bitcoin.” Research in International Business and Finance, Elsevier, 10 May 2017, www.sciencedirect.com/science/article/pii/S0275531917303057.
- “Advantages and Disadvantages of Trading Bitcoin and Cryptocurrencies.” ECS: Elite CurrenSea, 19 Mar. 2018, www.elitecurrensea.com/forex-and-cfd-blog/education/pros-cons-bitcoin-cryptocurrencies/.
© 2018 Agrima Mahlawat