Do some Internet research to see if you can find answers to the following questions, and any others that may arise in your research.
What is Bitcoin? Who invented it? How is it used? Who accepts it as legal tender? Why do they accept it instead of fiat (paper) currency? Fiat money is legal tender created by governments with which they expect you to pay your taxes. That is essentially what makes it “legal” as a sovereign state’s fiat currency and hence must accepted as payment by everyone else. Paper or fiat money has no intrinsic value.
Why is it not traceable by governments and financial institutions, and hence demanded as ransom payments by hackers?
How is it “mined?” Why does the software “mining” of Bitcoin use so much computer time and electrical power? More electricity is employed mining Bitcoin than is need to power Ireland.
Why are China and NKorea now involved in mining Bitcoin?
Gold was the original money, and in spite of modern mining technology, it is barely worth the effort and cost it takes to mine gold ore and refine it. Is it worth the effort and cost it takes to mine Bitcoin?
Why are Venezuela and NKorea inter alia considering creating new crypto-currencies like Bitcoin? What advantage do they expect from inventing and using it?
Since the invention of coinage or specie money by King Croseus of Lydia in 565 BC (and a Raja in Northern India in the same decade), money has always been a government controlled commercial payment mechanism (so they can tax transactions involving money), but Bitcoin is not. How are governments reacting to it?
What is the future of Bitcoin and other crypto-currencies expected to be in your opinion? Why?
Present your research in the form of a six to eight page essay emailed to me as an attachment with your name on it by 12 PM Saturday February 16 . A simple list of answers to questions will not be accepted, your research report must be in proper essay form and must have a thematic form or personal thesis statement and your own research conclusion supported by your references, Since all your citations will likely be URLs they can be included in the text in parentheses at the point where you refer to, and hence, cite them.
See how powerful and subversive we software engineers are. We can threaten the world economy and sovereign states. Out next move will be world domination, after we first figure out how to make quality software, of course.
ESSAY ON BITCOIN
In the global world of today’s economy, Bitcoin plays an important role as it offers a new form of sound money which can be outside the control of any government or authority in the world. In this essay, an overview of Bitcoin is given with its importance in present day economy. The mining of this form of sound money has also been described in the following essay. The worth of Bitcoin than any other crypto currencies such as gold has also been analyzed. The response from the government on the impact of Bitcoin has been detailed. The essay also entails the future aspect and importance of Bitcoin and other crypto currencies.
Overview of Bitcoin
Bitcoin is a digital or a form of cryptocurrency that utilizes the policies of cryptography for generation and regulation of units of currency. In other words it is known as a decentralized digital currency. It was invented by Satoshi Nakamoto in the year 2009. It was reported that, as Bitcoins are virtual coins to be self analyzed by value, so they works itself and don’t needs any banks to store or move the money. Based on the views of Wisniewska (2016), there are some companies and service points such as Microsoft and Newegg who accepts Bitcoin as a legal tender. Japan and Germany also considers it to be legal but those countries pose tax differently based on whether the authorities are dealing with enterprises, exchanges and users. Bitcoin is most accepted value by different countries instead of fiat or paper currency as it can be sold and purchased expeditiously. As per the views of DeVries (2016), the paper or other fiat currencies though can be exchanged but it doesn’t provide an easy activity to exchange money. Fiat currencies can only be exchanged by visiting a money exchanger and that money cannot be spend until and unless it has been accepted widely. In case of Bitcoin currency, one needs to set up an online portal with online exchange facility and thus it will be done within minute’s time.
Bitcoin demanded as ransom payments
Tracking of exact Bitcoin is not possible by the government. It was reported that researchers have developed a system known as Bitcoin-compatibility system that has made much difficult for the observer to detect the Bitcoin transaction (phys.org, 2017). In first, the Bitcoin was operated through a public key where a track was kept that how many bitcoins an user have. However, over time, the private companies and the Bitcoin transactions have adopted highly effective methods to deactivate those public keys.
The deactivation of public keys has demanded the hackers as ransom payments. Moreover, hackers have now demanded Bitcoin as a ransom transaction system. Based on the views of Paquet-Clouston et al. (2018), hackers have demanded such as their request of payments in Bitcoin will broadcast a Bitcoin address from where the victim will need to send money. However, this is a ransom payment address as clustering hierarchies in the Bitcoin network can be possibly computed.
Mining of Bitcoin and its usage on computer time and electric power
Bitcoins are a sequence of virtual data and so they don’t exist physically. According to Ankalkoti and Santhosh (2017), Bitcoin can be mined by getting over a dominant CPU with the power most processing power. Fastest speed of internet link is mandatory. There are many online networks nowadays that constantly glaze on the newest Bitcoin transactions. However, accessing to a Bitcoin client is needed and an attempt has to be made on validating the Bitcoin transactions by describing many blocks of data known as hash. After the hash has been established, a communication network known as nodes have to be developed and then this nodes gives the assurance for a transaction to be successful. Once a transaction is successful, the miner is finally rewarded with Bitcoin.
Bitcoin is an easiest way of transacting and receiving money. It was reported that, the group of bitcoin miners that creates bitcoins uses much quantities of electric power in their mining process (Bradbury, 2018). This favors that Bitcoin is not actually environment friendly. According to U.S. Senate Committee on Energy and Natural Resources in August 2018, about 1 percent of the world’s energy consumption is required for mining Bitcoins. This is mined by getting people around to solve a mathematical puzzle while using computers. However, after each 10 minutes, one solves the puzzle and rewarded with bitcoins and so many people’s use computers to mine bitcoins. This has thus led to the more utilization of computing power. More people joining on bitcoin network has however resulted to more mining of bitcoins and thus, more computing power and electricity consumed for each mining of bitcoin. It was reported that, Bitcoin mining consumes more electricity a year than Ireland (Hern, 2017). A continual power drain of 3.4 GW is been wasted in mining bitcoins which means that the bitcoin network consumes five times more electricity than other power stations.
Mining in Bitcoin in China and NKorea
It was reported that, mining of Bitcoin in China is thirty times more profitable and so it is considered as the largest number of miners in the world (Ngetich, 2018). Researcher has found that Bitcoin mining revenue is on rise and so the revenue has increased in China to about 4.7 GBN. This has took a profitability hit in China market and besides this profitability, large number of miners has joined the fray pushing mining to at a difficult edge. However, at this same time, there was reduction cost in the means of electricity for a majority of miners except the markets of China. This took rise to mining Bitcoin in China with about 11 mining facilities and 20, 000 mining units. China pays thus a mere of 0.08 dollar KWH thus deducting its power and electricity cost.
Bitcoins has been profoundly adopted by the country of North Korea as it has developed the policy of generating funds during the regime. It was reported that, (Chen, 2017). The country have approved new sanctions against a large number of policy including banning textile exports, capping over Korea’s oil exports and executing the additional overseas labor contracts. North Korea thinks that Bitcoin mining is the most easiest and profitable way of enabling an income source for a nation who is rather craving for nuclear weapons. The country has adopted the bitcoin mining strategy for two reasons. One is for funding for the regime and second is for the most senior leaders and ruling entities that are all adapted to the internet services.
Worth to mine Bitcoin
In old times, gold was the original money but nowadays despite of latest technologies, the gold mining has recently dropped down its worth in terms of its cost and effort. It was reported that, the gold miners faces a sufficient loss and risks during their wage and it can turn a miner to wipe out completely (Kirtley, 2010). The leverage to produce gold has also now diminished considerably and this has in turn caused a lack of leverage cells in gold stock investments. Gold producers have thus been unable to hold up with gold prices
In case of mining Bitcoins, it is also not the worth of effort and cost. Based on the views of Hayes (2019), Bitcoins are worthless as it offers hundreds of millions of dollars of transaction across its system regularly without any government, central bank or a regulatory body to act as a backbone. However, as bitcoind don’t needs an intrinsic value and utilizes to formalize a pricing model depending on the marginal cost of production, it has suffered huge losses. It uses a great consumption of electric and computer power in the process of mining bitcoins. Thus, it has resulted to depict a real monetary cost for the participants who are involved in mining and thus the value of bitcoin has been remained worthless.
Creation and advantages of crypto-currencies in Venezuela and NKorea
Venezuela has responded to much hyperinflation rate of about 43 percent since 2013, where real inflation rate has reached to about 100 percent (Chandler, 2018). In that mean time, two bitcoins were traded on the local bitcoins exchange for VEF. However, this approach has quickly risen to the hyperinflation territory with a peak of 64 Bitcoin trade from about 311 dollar to 932 dollar. This has thus helped the Venezuela in giving a much higher advantage in providing a new lifeline through this crypto-currencies using bitcoin.
In case of North Korea, crypto currency was created to evade the sanctions of U.S. just like the usage of international criminals and also for terrorist financing. The main advantage of using crypto currencies in N Korea would facilitate the country for the ability to open online portals under the guidance of non-adversarial nation. This will however facilitate the anonymous communication to locate and track the users’ location and daily usage of the internet. It was reported that, economic pressure would also be counter-parted by N Korea and Venezuela from the allegation of U.S. and its allies (Sundararajan, 2018).
Government response to Bitcoin
Since the coinage, all varieties of money have always been under the control of a government controlled payment mechanism for taxing on the money involving various transactions. In contrast, Bitcoin is not under the government rules and policies and they consider it like the means of money like exchange. Based on the views of Zmaznev (2018), government has not validated the use of cryptocurrencies and according to that statutory authority; it has been a secure means of transfer in context of micro payments and cross-border transactions. Government has thus thought to provide a new set of regulations to widely accept crypto currency including bitcoin but this will only be established by carrying specific ID proof. The regulatory bodies are also adapting smart contracts by adopting the exploration of block chain technology.
Future aspect of Bitcoin and crypto currencies
The ownership and adoption of crypto currencies including bitcoin is about to rise in future as many of the interventional technologies and countries are finding it suitable to adapt the crypto currency strategy. It was reported that, crypto currency stands at around 425 GB thus revolutionizing the whole currency system (Reynard, 2018). The future of bitcoin has led to be in widespread recognition with more efficient performance. However, it can be stated that this type of currencies are widely accepted but it still has potential threats such as its electricity and computational power. Its increasing price has also been an alarming situation, so if these are maintained properly, then it will be the best possible and safe mode of transaction in future.
Based on the above essay, it can be concluded that, crypto currencies and currency like Bitcoin has been established profoundly in today’s economy. Being a safe mode of transaction, it has been widely accepted by different range of customers. However, mining of bitcoin is not at all easy as its electricity and computational cost is high. This has resulted in an increased amount of price, thus being not worth at all. Thus, if government accepts the regulation of bitcoin, then the costs may cut in future thus providing a safer, cheaper and easiest way of transacting currencies by millions in future.
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