ENGL 106 Cryptocurrency Term Paper
ENGL 106, Cryptocurrency, Term, Paper
Can cryptocurrencies become a standard, widely accepted form of payment? Why or why not?
Today, I am going to discuss the most controversial topic that is “Cryptocurrency”. It might be possible that only 30% to 40% of us know about this new type of currency. So, let me introduce what the cryptocurrency is and what it is controversial.
As all, we agree that technology has achieved new milestones that have changed the world and lifestyle of people as well. With time new inventions change the way of dealing that strengthened the economic system (Ammous).
Cryptocurrency is a digital currency, that is created and also managed with the use of advanced encryption techniques that are known as cryptography. Cryptocurrency is created from an academic concept to virtual reality.
Cryptocurrency is digital money in an electronic payment system that does not need any governmental or financial institution backing and involvement of any intermediary such as banks. The users of this system validate payments by using certain protocols of this currency.
Since 2008, the invention of the first cryptocurrency, Bitcoin was initiated, cryptocurrency has boomed. According to the estimate, as of March 2020, there are more than 5100 different cryptocurrencies that are worth of $231 billion. Due to this rapid growth and volatility, cryptocurrency is the most controversial issue as it draws the attention of policymakers and the public (Srokosz).
Many reasons motivated me to choose this topic because the world is changing at a rapid speed. No one can ever think of the inventions that we are enjoying now a day. Thus, the digitalization of money is a new thing that is beyond everyone’s expectations. Everyone needs to keep themselves up to date on what is going around us.
As the world is operated through this digital technology and virtual reality made this possible. Therefore, it is important to know about this currency because there are many benefits to using it. As its use is rapidly increasing, there are many chances that it is considered a secure mode of payment.
There are no processing fees applied to this that makes the use of this currency cheap. As per some economist prediction, this currency soon recognized as institutional money and use as an alternative to the conventional currency (Brill).
Hence, at this point, I am sure that many of us know what the cryptocurrency is? And why it is controversial. Up to today, there is no alternative to the currency that financial institutes, government, and policymakers can introduce but the notable feature of cryptocurrency shows that it has the potential to act as an alternative of money.
There is no centralized system or authority that controls cryptocurrency. This is operated through blockchain technology. With the use of this technology, the pubic ledger accounts are protected against the manipulation that makes the payment secure and only the user who has a passcode or private key can only access this currency. Thus, this whole process all the users to take valid transfer without any trusted centralized intermediary (Perkins).
As per my research on the topic, and previous trends show that cryptocurrency can become an alternative of currency because of the changing system and changing environment of the world demand for it. the rapid advancement, digitalization, and virtual reality made it possible.
With time, it will become the need for a system and financial intermediaries will adopt this, thus, the economic policies and monetary policy will change accordingly. So, my argument is that cryptocurrency can become standards and use it as a widely accepted mode of payment.
“Cryptocurrency can be used as widely accepted currency and become the standard of payment.”
Cryptocurrency is not an ownership of anyone. But still, people use it and get good gains from it. As people are earning from it and due to its potential benefit that it does not have processing fees, and the return of investment in this currency is greater than any other currency. Therefore, people want that it should be accepted as a standard of payment.
Many research findings are in favour of this currency. These research findings highlight the potential benefits of this currency. So, I am sharing some of the prominent research findings that support my argument. (Cryptocurrency can be used as a standard of payment).
Devries, Peter. D, in his research on “An Analysis of Cryptocurrency, Bitcoin, and the Future” defined cryptocurrency as a digital barter. Because it is the only renowned and widely acceptable currency that is based on disruptive technology and it is also a good alternative to the traditional financial system (DeVries).
He argues that this currency will bring revolution in the digital trade market and also fill the economic gap that the traditional financial market is not able to fill. Through this currency, many opportunities will be given to people in the development of cloud-based infrastructure. Thus, this currency brings economic prosperity.
Therefore, it must be used as a standard of payment that is worthy from an economic point of view and the extent to which it brings prosperity it strengthened the economic system (Perkins).
The findings of Devries, Peter. D is supported by the CNBC report because this currency is used in restaurants, café, and supermarkets. In 2018, the average spending that was done through this currency was $190 million that was $9.8 million in 2013 (Nova).
The owner of Starbucks stated that a new digital currency is going to be introduced soon through which customers can buy coffee but if it is paid with tax it can only be accepted. Furthermore, Bitwala is a financial technology company that deals in cryptocurrency. This company is planning to open a cryptocurrency bank. This band will convert normal currency into cryptocurrency (Bech).
The benefits of using this currency as a standard of payment are not limited to businesses and person but it is a good alternative to the costly traditional system. The traditional currency is operated through a network of governmental and financial institutes.
These institutes have to main infrastructure, electronic network, employees and also required time to finalize the transaction that makes the process of money costly. Due to which the user has to some additional amount on the use of money. But in this electronic exchange of money, there is no need for such costly infrastructure because it is operated through a decentralized system and the only internet is required to operate this system (Ammous).
Thus, there is not process fee and also the transactions are secured. Hence, it gives a cost advantage for national and international money transfer. The transfer of international money requires the involvement of banks of both countries and the possible exchange of one currency into another makes the process length and costly.
Therefore, the proponents of cryptocurrency proposed that it is used as a standard of payment than this costly traditional money system can be replaced with the more efficient and less costly system. Because it is operated through the internet that is already globally present and it is not backed by government fiat currency, therefore, no additional cost will be applied (Srokosz).
Cryptocurrency has many advantages that are mentioned above due to which people can use them as money to some substantive degree. This can be accepted as a standard of payment if people and businesses accepted as payment. Currently, it faces many challenges due to its adoption. There are many reasons due to which this cryptocurrency will be less likely to be used as a standard of payment.
This currency is not legal tender; it means that creditors will not use them legally to settle their debts. The businesses and consumers are also confused over this decentralized computer network that is not easy to understand for anyone. Furthermore, the high volatility in the price of cryptocurrency challenges its ability to serve as a unit of account.
Within a short period, this currency faces many fluctuations that create confusion between the sellers and buyers. In 2019, the price of the cryptocurrency was declined by 34%. Some of the commonly cited risks that cryptocurrency will face are money laundering and tax evasion (Vejačka).
There is a school of thought that sees cryptocurrency as a financial medium for terrorists, fraudsters and criminals that highlight their involvement in trading on the Dark Web and ransomware scams. But the recent upsurges established cryptocurrency as a viable investment. There are many advantages to using cryptocurrency.
In a traditional transaction the involvement of brokers, legal representatives and agents is required but the cryptocurrency transaction is a to one affair that takes place on peer to peer networking structure. Hence, it brings clarity in audit trials and has greater accountability (Brill). It is providing more confidential transaction and the information is limited between the sender and receivers.
The financial institutes and credit companies charge their desired transaction fee and they generate billions every year. However, cryptocurrency is free from the exchange rate, transaction charges, interest rate, or other levels imposed by different countries. The owner of the cryptocurrency enjoys sole ownership while in traditional banking the third party enjoys the stewardship of your funds.
For a currency to be accepted as a standard of payment, several features have to be present in it. It must be classified into an asset class that cryptocurrency lacks. This is a digital currency that only exists with the existence of a digital system. The high volatility and low liquidity of this currency create a hindrance for this currency to be accepted as a payment standard. Outside the electronic media, there is no tangible existence of this currency (Srokosz).
Hence, for the acceptance of this currency as a standard payment, the regulatory authorities must classify it into a proper asset class, so that it can be easily traded at the stock exchange. When state banks, policymakers and regulatory authorities made a framework under which they officially announced this currency to be used as a standard of payment. Then, it can be used by a common for their daily transactions.
Concluding the findings of this paper in a nutshell, it is evaluated that cryptocurrency can be used as a standard of payment due to its ease of use, low transaction fees, individual ownership, greater adaptability, and stronger security. But the liquidity and high volatility is the main resistance for its acceptability by regulatory authorities.
The regulation and standards are not supportive of this currency due to which it is not considered as the standard of payment although its benefits ranked as an admirable currency that makes use of money cheap and easy for people. So, it depends on how would you rate this currency and whether you want to use it as the standard of payment or not.
Ammous, Saifedean. “Can cryptocurrencies fulfil the functions of money?” The Quarterly Review of Economics and Finance (2018 ): 38-51.
Bech, Morten L. “Central Bank Cryptocurrencies.” BIS Quarterly Review September (2017 ): 1-10 .
Brill, Alan. “Cryptocurrencies: The Next Generation of Terrorist Financing?” Defence Against Terrorism Review (2016): 7-30.
DeVries, Peter D. “An Analysis of Cryptocurrency, Bitcoin, and the Future.” International Journal of Business Management and Commerce 1.2 (2016): 1-7. Nova, Annie. Bitcoin takes on cash, as more places accept the cryptocurrency. 2 March 2018 . <https://www.cnbc.com/2018/03/02/spending-cryptocurrencies-on-everyday-purchases-is-getting-easier.html>.
Perkins, David W. “Cryptocurrency: The Economics of Money and Selected Policy Issues.” Congressional Research Service (2020): 1-31. Srokosz, Witold. “LEGAL AND ECONOMIC ANALYSIS OF THE CRYPTOCURRENCIES IMPACT ON THE FINANCIAL SYSTEM STABILITY.” Journal of Teaching and Education (2015): 619–627.
Vejačka, Martin. “Basic Aspects of Cryptocurrencies.” Journal of Economy, Business and Financing (2014 ): 75 – 83 .