Posted: July 7th, 2022

Bitcoin and Decentralization

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Bitcoin and Decentralization

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Bitcoin and Decentralization
Bitcoin was developed in 2009, and since then, it has grown rapidly both in terms of coverage and value. As a medium of exchange, bitcoin has provided a secured decentralized transaction network founded on blockchain technology that helps to make it easy for people to carry out virtual transactions. Moreover, the acceptance of bitcoin is a crucial part of the growth of the cryptocurrency industry. Acceptance of bitcoin across the world has developed division among organizations since some accept the utilization of Bitcoin while others do not agree to use it. The rising number of corporates that accept Bitcoin makes it more accessible for people to use it daily. However, in most cases, Bitcoin is accepted by nations that have well progressed technologically, of which some of the country’s government policies do not allow people to use the medium.
Furthermore, stores that have accepted Bitcoin attest that it is more private and secure to access funds, remove counterfeits, and risk theft. Bitcoin is a groundbreaking currency that lacks the overall acceptability feature of money. With Bitcoin, it is possible to pay for services and products online or offline, but since only a few merchants use this method of payment, it lacks the strength of being categorized as a national or international currency like the United States dollar. Additionally, Bitcoin has decentralized features that are assumed to be immune to government interference in terms of transaction processing, regulations, and monetary policy has encouraged cheap, uncensored, fast, and international transfers. However, Bitcoin’s complexities regarding transactions have contributed to its limited usage across the world. The purpose of the paper is to discuss the problem of Bitcoin and decentralization in detail and offer solutions to the problem.

Problem
Bitcoin is a cryptocurrency that has been a developing market globally, and the development has also spread to Africa. Nigeria and Kenya are among African countries with many upcoming digital entrepreneurs with a developing influence in the cryptocurrency of the world market due to the currency’s benefits. It is recognized that Africa is rising to become the fastest developing market in cryptocurrency. It has been detected that the market can lead to the development of other crypto markets. Usually, cryptocurrency is a useful method for entrepreneurs who want to be aware of international forex exchanges as well as currency rates (Naware, 2016: 2024 – Do my homework – Help write my assignment online). Hence, this is due to cryptocurrency being constrained to any exchange rates, taxes, interest rates, and levies made by particular countries since they are not considered as conventional currencies that are not standard currencies, and also, they are not regulated by the demand and supply curve made by the currency.
Moreover, cryptocurrency, or in this case Bitcoin, does not involve the presence of a middleman since they are one-on-one situations compared to traditional systems that involve intermediaries. The easy transaction is an advantage linked with cryptocurrency since commissions, paperwork, and fees are eliminated from the circumstances. Furthermore, the transaction fees involved in cryptocurrencies are lower than traditional methods, for example, one bank to another bank account transactions that charge excess for a transaction. Moreover, cryptocurrency is very diverse from keeping money in a bank account since it allows individuals to own it. A bank can keep possession of all money in the account in case the holder dies.
Since the release of Bitcoin in 2009, there has been considerable trading capacity accompanied by sizeable expenses. The three main factors of the bitcoin system include the blockchain, users, and miners. To become a bitcoin miner does not need to have any authorization since the database does not need any permission. Living in the information technology era suggests that numerous transactions are digitalized. Hence according to Chuen (2015 – Research Paper Writing Help Service), some of these changes have affected numerous spheres, and it could be concluded that they are the main influencers for the growth of numerous types of digital currencies. The type of money can be utilized to buy different services and products online while being viewed as a dependable financial instrument. Bitcoin is the main player in this sector of digital currencies can be viewed as among the concepts that affect the growth of contemporary e-commerce. Generally, according to Chuen (2015 – Research Paper Writing Help Service), Bitcoin and other digital currencies are key concepts of the e-economy; furthermore, it shows that the financial world consistently evolves and benefits from several innovative novelties as well as financial principles.
The value of Bitcoin to business is vast; this is because Bitcoin provides more opportunities to organizations that operate in diverse productions. For instance, they make transactions easy, fast, and safe. Moreover, because of the growing recognition of digital currencies internationally, organizations have to examine any alterations in demand for these financial tools and prepare themselves to change their methods of payment in order to stay competitive and attractive to their consumers.
Active involvement of the society in internet activities enables digital currencies; for instance, Bitcoin may grow more popular since they make purchasing easier. Generally, digital currencies are essential since they have a crucial effect on consumer behavior as well as the economic environment (Tschorsch & Scheueramann, 2016: 2024 – Do my homework – Help write my assignment online). The concept of Bitcoin is an idea of decentralized currency, which suggests that Bitcoins are not controlled or influenced by authorities, including banks and legal institutions. Instead, the Bitcoin concept offers transparent as well as publicly available transactions.
The primary reason for developing Bitcoin as a digital currency is in order to introduce a better international financial tool that can be very crucial (Popper, 2015 – Research Paper Writing Help Service). Bitcoin has been marketed as an alternative method to create, save, and transfer money to other people. Furthermore, the positioning of Bitcoin as a decentralized network with international currency attracted numerous people who do not trust or want banks or government authorities. According to Tschorsch & Scheueramann (2016: 2024 – Do my homework – Help write my assignment online), In most cases, Bitcoin is used to transfer money from one person to another. For instance, one individual transfer a bitcoin with a certain identification number to another person while the transaction description is shown anonymously publicly. Such a case shows that bitcoin is a digital method of transaction that is transparent through all actions.
Moreover, the concept of Bitcoin also allows each participant of the platform to regulate the transfers made in the database (Tschorsch & Scheueramann, 2016: 2024 – Do my homework – Help write my assignment online). As a result, this enhances security in regard to money transfers from an individual who is the buyer to another one who is the seller. However, at the same time, since there is no data regarding the private user is showed in public, the transactions are seen as safe and secure. Additionally, anonymity plays a significant role in protecting identity larceny (Naware, 2016: 2024 – Do my homework – Help write my assignment online). There are other numerous benefits associated with the use of digital currencies
Another advantage pertains to the fact that the platform has low transaction fees (Naware, 2016: 2024 – Do my homework – Help write my assignment online). For example, Alice from the United States of America makes a purchase online, and she transfers a fixed number of bitcoins to the seller, who is located in Australia. In this case, the merchant has no right to increase the fees since they are set within a system. Simultaneously, this example can be referred to as another benefit that implies that purchases and transactions can be made without being dependent on the working schedules of the governmental entities.
Additionally, according to Miller (2016: 2024 – Do my homework – Help write my assignment online), from an investor’s perspective, Bitcoin can be perceived as one of the long-term strategies to bring more revenues. For instance, the active development of Bitcoin began in 2013 when Cyprus and other nations were encountering an economic recession and crisis. When this situation took place, Bitcoin was not affected like how traditional currencies were impacted by the changes in GDP as well inflation rate. These aspects accompanied by an unsteady economy make a saving in euros and dollars become an investment that is unreliable. Therefore, the shortage of Bitcoins, the constant rise in demand, and assumptions of merchants ascertain that the currency will continue to increase in terms of geometrical development.
Nevertheless, apart from the discussed advantages of incorporating Bitcoin in the market, it is also known that it can negatively impact the market. The most common risks are associated with the possible price instability because of the limited number of bitcoins, potential problems with protocols and encryptions, and insufficient recognition (Naware, 2016: 2024 – Do my homework – Help write my assignment online). Moreover, numerous disadvantages are linked with the anonymous kind of transactions as well as the lack of a centralized managed system. For instance, according to Yumar (2017), in 2016: 2024 – Do my homework – Help write my assignment online, the Bitcoin system was utilized to fund and finance a terrorist group in Indonesia from the Islamic state.
The investors highly depended on digital currencies as their aspects of secrecy and the faster supply of financial resources that made it challenging to track any of the money transfers. Furthermore, Bitcoin was used to fund the terrorist group financially, but it was also used to sell and buy weapons and other illegal products. The Silk Road is a very good example that can better explain the scenario mentioned above since the website was actively using Bitcoins as a trading currency in order to exchange them with illegal products. Therefore, it is quite clear that Bitcoin can also support the development of crime levels and buy and sell illegal weapons and gambling, which makes it a critical societal issue.
Solution
Regulating cryptocurrencies such as Bitcoin through banks can have several possible motivations. It can be because of investor or customer protection, potential risks, and financial integrity concerns. Cryptocurrencies and banks do not have an easy relationship. It is possible that cryptocurrencies would take a part of the banking business. Therefore, to avoid such an occurrence, banks can try to get involved in cryptocurrencies. The initial part of the traditional banking system to be affected would be the payment service provider. Banks could help regulate cryptocurrencies by offering banking services in certain deposits to cryptocurrency businesses by engaging in the cryptocurrency ecosystem.
Additionally, banks can also provide cryptocurrency wallets or introduce proprietary trading desks that are cryptocurrencies. Most likely, cryptocurrencies such as Bitcoins can impact a bank’s payment function; however, it should be noted that the effect on lending and deposit-taking would be negligible (Maftei, 2015 – Research Paper Writing Help Service). Hence it the liquidity and maturity conversion by banks would not be interrupted by the Bitcoin and other cryptocurrency business. However, even though at the moment, lending and borrowing cryptocurrencies is not yet available in the banking business, this could be an aspect to implement in the coming future. A major issue in the cryptocurrency market is liquidity threats for the customers. Furthermore, apart from technical constraints on the monetary strategy rooted in the protocol, most cryptocurrencies such as Bitcoin have high exchange but less use-value. Therefore, this suggests that when there is distress, it is possible that liquidity problems would cause enormous instability.
However, if banks are also subjected to any liquidity threats, significant actions ought to be employed in order to safeguard the banking structure. Moreover, since the possibility of banking systems getting involved in cryptocurrencies can be the main source of general risks and concerns, banking supervisors decrease the possibility of risks of cryptocurrencies like Bitcoin directing through payment systems and banking by aims on the sensible supervision of payment institutions and credit instead of involving themselves in the engaging in the regulations of cryptocurrencies.
For instance, barring banks from establishing a bank account for cryptocurrency for instance Bitcoin exchanges can smother the development of cryptocurrencies in making obstacles to the cryptocurrency network. Furthermore, this would efficiently operate as the size cap in the cryptocurrency ecosystems since they would be disadvantaged in terms of the key sources of credit in the economy (Nabilou, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers). Also, as discussed before, technological growth provides other openings for indirect management since the banking system can carry out several roles. In this case, most of the banking regulations would have an indirect effect on the cryptocurrency ecosystem.
Conclusively, Bitcoin can be viewed as the future of the international economy, and it is growing to become a crucial part of the exchange market; however, as Bitcoin’s value increases consistently because of low stability as well as responsiveness to several economic and political aspects, its scarcity, and the increasing popularity of e-commerce globally. Nevertheless, at the same time, its significant benefits that attract customers are linked to the transparency of transactions, low fees, fast transfers, and anonymity. These factors show that the Bitcoin concept is expected to change the standards of e-commerce and customer behavior. Nonetheless, despite all the positive impacts of Bitcoins, there are some negative impacts, such as people using Bitcoins to purchase illegal products or fund terror groups. Hence it is essential to have a solution for the Bitcoin and decentralization problem. As discussed in the paper, banks can be used to indirectly regulate cryptocurrencies such as Bitcoins to avoid legal issues and reduce the negative effect it has on the general society.

References
Chuen, D. (2015 – Research Paper Writing Help Service). Handbook of digital currency: Bitcoin, innovation, financial instruments, and big data. London, UK: Academic Press.
Maftei, L. (2015 – Research Paper Writing Help Service). Bitcoin – Between legal and informal. CES Working Papers, 6(3), 53-59.
Miller, M. (2016: 2024 – Do my homework – Help write my assignment online). The ultimate guide to Bitcoin. Indianapolis, IN: Pearson Education.
Nabilou, H. (2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers). How to regulate bitcoin? Decentralized regulation for a decentralized cryptocurrency. International Journal of Law and Information Technology, 27(3), 266-291.
Naware, A. (2016: 2024 – Do my homework – Help write my assignment online). Bitcoins, its advantages, and security threats. International Journal of Advanced Research in Computer Engineering & Technology, 5(6), 1732-1735.
Popper, N. (2015 – Research Paper Writing Help Service). Digital gold: The untold story of bitcoin. London, UK: Penguin Books.
Tschorsch, F., & Scheueramann, B. (2016: 2024 – Do my homework – Help write my assignment online). Bitcoin and beyond: A technical survey on decentralized digital currencies. IEEE Communications Surveys & Tutorials, 18(1), 1-37.

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