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Bitcoin: Credible Currency or Scam?

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Written by Stephanie Brozda

Edited by Sarah Mejia

Bitcoin is an unregulated, peer-to-peer digital currency. It was introduced in 2008 by a developer known as Satoshi Nakamoto and is seeing an increase in popularity and prices. The process of bitcoin mining involves a person or group of people, called miners, to complete difficult mathematical problems that rewards them with bitcoin currency upon completion. Special technology and equipment needs to be purchased in order to solve these difficult math problems. Bitcoin uses cryptography to control all transactions and prevent double spending; each transaction is recorded into a public ledger. These so-called miners aren’t the only people who have access to bitcoins; people can simply purchase bitcoins for cash and spend them as they please. People choose to use bitcoins to make purchases on goods and services because the transaction fees are typically lower than 2-3% compared to using a credit card. A few vendors that accept bitcoin are WordPress, OkCupid and Reddit.

The future of bitcoin is unknown; there are many issues surrounding bitcoin that could potentially cease its existence. It is too early to tell whether bitcoin will have an inflationary or deflationary effect and until it has stable control over its price fluctuations, it will not be a legitimate form of currency. The value of bitcoin depends on users’ willingness to accept it or not. If bitcoin regulated the value of the currency, then various stakeholders would be more willing to invest money into the company. Besides fluctuations in price, bitcoin has previously experienced technical errors that have allowed unlimited amounts of bitcoin to be produced. There have also been instances where exchanges have been cancelled, but the customers’ bitcoins are never returned. If bitcoin keeps experiencing technical errors, current users will be more inclined to hoard their money in fear that they could lose it. Additionally, new clients that have been considering trying the digital currency may be turned against the idea and companies are going to be hesitant in accepting bitcoins.  

Stakeholders play a major role in the expansion of companies, and bitcoin won’t see growth until more people trust and invest in the company. For example, the current bitcoin community will most likely start declining if regulation and security in the currency does not improve. Lastly, this digital currency can easily be used for drug purchasing, money laundering, and gambling. Bitcoin has been under scrutiny for the large percentage of currency being used for online gambling. Since one of the company’s competitive advantages is the absence of a central authority, the company needs to find a better way oversee all transactions or they will face the threat of being shut down. This lack of authority raises issues with people on whether the company is credible or not. To grow and attract more investors, bitcoin needs to focus on keeping price fluctuations under control. Until people feel that the value of bitcoins is credible, they will not be comfortable investing in the company. The absence of a central authority can be a major attraction for the community, but the government will intervene if users use bitcoins to “beat the system” to conduct illegal activity. 

Bitcoin, overall, has the potential to be an extremely widespread and profitable company. I feel bitcoin needs to work out some kinks and errors before they will ever see a notable growth in the company. For starters, bitcoin cannot keep seeing technical errors that allow the unlimited creation of currency. This completely eradicates the value of a bitcoin and makes people and companies wary of using this digital currency. Any potential investor and bitcoin user is going to question the credibility based on the problems mentioned above. If the company fixes these technical errors, then they may have a shot at being successful.

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**Due to technical difficulties, we recently had to switch domains and transfer all of our website content.  Please keep in mind that while we have been publishing articles for two years, the published dates shown may not reflect the initial publish date.

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Sidel, Robin. “Race to Mine Bitcoin Gathers Steam.” Wall Street Journal. Dow Jones & Company, Inc., 05 Nov. 2013. Web. 06 Nov. 2013.

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