Problem: Currency instability in Third World and developing countries
The Business Perspective: A large portion of the global population is unbanked. By providing an alternative to traditional banking and currency methods, Bitcoin and other cryptocurrencies may allow an increase in economic development and decrease global poverty.
What is Bitcoin?
Bitcoin is a cryptocurrency, or electronic cash with no central bank or administrator. Therefore, there is no need for intermediaries or middlemen. To start earning Bitcoin, you trade in cash for units of cryptocurrency, which is a “signature” (long line of security code encrypted with 16 distinct symbols). “Mining, or processing, keeps the Bitcoin process secure by chronologically adding new transactions (or blocks) to the chain and keeping them in the queue,” which creates blocks, then blockchains. A block is a confirmed transaction that then joins the blockchain, a public ledger, or a record-keeping system noting all transactions between participants.
How may Bitcoin solve the problem of currency instability?
Third World countries find Bitcoin the most reliable source for giving/receiving money, particularly in developing countries with wild currency swings. Bitcoin may also reduce corruption, as the users can monitor a transaction and make sure the Government’s financial agreements remain honest. Bitcoin also allows for easier money transfers, locally and internationally. Bitcoin is less likely to be stolen, seized or rendered useless.
What are some of the issues with Bitcoin?
Hacking, especially through mobile wallets and transaction delays, is a concern. It takes at least 10 minutes for a transaction to register and become a block, and once a transaction occurs, it is irreversible. Power usage increases constantly and rapidly with Bitcoin. Mining, or the process of creating the blockchains, uses as much power as a small country. According to The Guardian, “In China, which leads Bitcoin mining, 60% of energy comes from coal. Even if mining uses clean power, it carries the opportunity cost of not using said power for greener purposes, such as charging electric cars, which replace fossil-fuel-guzzling vehicles.”
What are some of the benefits of Bitcoin?
Transactions are pseudonymous, since each person is given a signature and does not have to use their real name. Transactions can also be quick and international. Additionally, users have access to all transactions to prevent double-spending or stealing.