Final Synthesis

Alan Arcos Block 5 May 23, 2014 For Better or Worst. Till Currency Do Us Part. Dearly beloved: The Bitcoin is the start of something new for our economy. Regardless of its weaknesses, it is the foundation for the improvement of how the world buys, sells, and earns money. First of all what is the Bitcoin? Well it was first introduced to the world in 2009 by a developer called Satoshi Nakamato. Never the less no one has been able to identify him or localize him. It is most commonly referred to as a virtual currency or crypto currency since cryptography is utilized to control the creation and transfer of the bitcoin. One of its most notorious characteristics is its decentralized source. Hence its name “decentralized currency”. Though this has been a source of scrutiny for the Bitcoin from major players in the economic world like, Wall street, and the US Treasury, it is also the roots of its power. Since it is not controlled by a group like a bank or by a government, the Bitcoin is immune to inflation. The method used to distribute them, which will be explained later on, is a break through in controlling the amount and the way people obtain it. Buying/ Selling: To start things off, Bitcoin transactions can not be traced. The reason being, no one around the world will ever know who you are, where you live, and how many bitcoins you hold in your possession. The cause of this is the Wallet. Its the only thing that will carry your information, and its completely yours. Unless you disclose you wallet, no one will be able to follow your bitcoins. You will have complete anonymity. The second golden egg is No Taxes. Yes, you heard correctly, No taxes. According to the case study conducted by students of

Stanford university, the Bitcoin is practically “tax free”. This miraculous characteristic is the product of the previous one mentioned. Since no one can trace your transaction, a taxation system cannot be implemented. Therefore we can go back to saying “No taxation without representation”. Even though this may seem like a benefit, people do need to consider that without taxes, public institutions would not be properly funded. Imagine you live far away from a market you are interested in. If the Bitcoin system is implemented you can access that market without having to travel to it, and without having to pay with the local currency. The Bitcoin becomes universal, like a Lingua franca, which is a language that is used universally for trading. Since the Bitcoin transaction is somewhat untraceable, people would not know who you are. Even though this is a benefit, it is also problematical. It has been reported that Bit coin has attracted “bad actors” as the Forbes magazine depicts them. Since all of the Bitcoin’s owners identities are confidential, “bad actors” have begun to take advantage of the system. Like it attracted investors, the bitcoin has begun to attract drug dealers, money launderers, and in some extreme cases, human traffickers. Yet, the Bitcoin has the potential to raise the standard of living around the world. The only thing it need is more power, and a firm stance in the worlds economy. It has the ability of connecting the entire world together regardless of your location, language, or form of currency. In addition it is important, for the Bitcoin and its system to act as a centripetal force towards investors. Bill Miller, the former Legg Mason Chairman and Chief Investments Officer, announced this year that he personally own bitcoins. His exact words were, “Bitcoin is like a venture investment. It could go to zero, but whats interesting is the addressable market.” In other words Miller, knowing the risks that the Bitcoin could provide, is still investing in it. He believes

that the bitcoin will become so popular and accessible, that it will be the brink of a new market. It is important, for the Bitcoin and its system to act as a centripetal force towards investors. Mining: Even though many people have scorned the Bitcoin for its decentralized state, they fail to realize that it is beneficial to them. Even though the bitcoin might help evade taxes, which in turn results in less money going into public institutions, it provides an excellent way for the government to gain money. This method is called mining. Since the bitcoin is not controlled by an institution therefore eliminating the control over the distribution and creation of the coin, the bitcoin is distributed by means of solving a block. In other words “a value must be solved through mathematic computation of the block” like said in a publication on Wordpress by an unknown source. It explains that every time a block is solved through peer-to-peer cooperation, each person receives 50 Bitcoins. The way this is done is through the computers processing power. In other words the better you computer is hardware wise, the faster you will be able to solve the block. Just to point out, each of the blocks are created by very intelligent people. How is the distribution regulated? Well the blocks are not easy to solve. That is why it implements a peer-to-peer system. So, deepening on the solving rate of each block, the distribution and value of the bitcoin is modified. This supports the idea, that the bitcoin is not controlled by a central authority, but rather controlled by the communities capacity to solve its blocks. Yet people have pointed out, that block solutions can be counter fitted. This is true, but like any modern computer system it adapts, and has its own sort of anti-virus that recognizes false solutions and eliminates them.

Any Doubts?:

The reason why so many people scorn the Bitcoin, could be because of its volatility. It has been said that is very volatile because since its creation and implementation into the economy, the Bitcoin has gone through severe changes in value. Since there is a limited amount of bitcoins, and the demand keeps increasing daily, its price is expected to grow. Never the less economists have seen that an increase in bitcoin value has always been followed decrease of the same value, thus giving the bitcoin its volatile characteristic. According to CoinReport, a website focused on todays growing digital currencies, the volatility of the bitcoin is expected to decrease as time goes by. In the end will the Bitcoin be a problem or a solution to todays economy? This is a question that will only be answered through time. Bitcoin is is the bases for a growing infrastructure for the futures economy. If it continues to grow and attract people, then it will inevitably become a strong enough system. According to Kevin Maney of Newsweek Global, as the system becomes more attracting, it will start to attract more and more investors, and people with resources willing to contribute to its growth. This will help stabilize the bitcoins market value, at the same time reducing its volatility. In the end the Bitcoin will result in beneficial system that not only gives us anonymity but also a stable and trustworthy system in which people can pursue their economical desires.

I Do: The bitcoin may seem like a potential risk to our economy, but then, every known currency to date has had its up and downs. The Bitcoin is one of them. It is still a child in the

economic world, and it must be allowed to grow. The merging of todays technology and the concept of currency will not only help stabilize the worlds economy in the long-run, but it will revolutionize the way the economy flows across the market.

Bibliography

N.A( N.D). What are the Advantages and Disadvantages of Bitcoin?. CoinReport. Retrieved April 20, 2014, from https://coinreport.net/coin-101/advantages-and-disadvantages-of-bitcoin/

A, N. (2011, June 15). What is BitCoin and What is BitCoin Mining?. Foreverrising Blog. Retrieved May 12, 2014, from http://foreverrising.wordpress.com/2011/06/15/what-is-bitcoinand-what-is-bitcoin-mining/ Boring, P. (2014, February 4). Bitcoin Could Strengthen The World Economy If Washington Doesn't Destroy It. Forbes. Retrieved May 12, 2014, from http://www.forbes.com/sites/perianneboring/2014/04/02/bitcoin-could-strengthen-the-worldeconomy-if-washington-doesnt-destroy-it/ Wile, R. (2014, March 28). One Of The World’s Most Famous Value Investors Says He Owns Bitcoin. Business Insider. Retrieved May 13, 2014, from http://www.businessinsider.co.id/legg-masons-bill-miller-says-he-owns-bitcoin-20143/#.U3zIfV7yDwI Maney, K( 2014). THE OTHER SIDE OF THE BITCOIN. Newsweek Global. Retrieved May 5, 2014, from: http://search.ebscohost.com/login.aspx?direct=true&db=mih&AN=95014866&site=src-live Onies, A. (2013). Bitcoin, Decentralized, Peer-to-peer, Crypto-currency. Wordpress. Retrieved May 5, 2014, 2014, from http://cs.stanford.edu/people/eroberts/courses/cs181/projects/201011/DigitalCurrencies/disadvantages/index.html