Essay Example on Bitcoin the elusive mysterious Cryptocurrency

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INTRODUCTION Bitcoin the elusive mysterious cryptocurrency grabbed headlines all over the globe a few years ago In early 2009 someone using the pseudonym Satoshi Takemoto announced on a cryptography listserv the release of a new open source online currency system which he or she called Bitcoin Bitcoin has gained widespread recognition through online media and despite high volatility it remains a marginal but distinctive financial asset Moore and Christin 2013 It is undoubtedly the most significant intervention in the field of Cryptocurrencies electronic currency Many say bitcoin is a cryptocurrency which is clearly and indisputably a gigantic bubble that s set to burst But what exactly is a bubble A speculative bubble is a peculiar kind of fad or social epidemic that is regularly seen in the speculative markets not a wild orgy of delusions but a natural consequence of the principles of social psychology coupled with imperfect media and information channels Robert Shiller 2013 Rogoff 2017 mainly argues that this bubble will burst under government pressure This essay aims to critically evaluate the arguments present in Rogoff s article by drawing on claims from other secondary articles and my research on the topic SECTION 1 SUMMARY OF ROGOFF 2017 



The article mainly underlines the fact that Bitcoin is bubble which would possibly burst if the government steps in to regulate it It begins with a rhetorical note questioning the status of Bitcoin on whether the cryptocurrency is a bubble or a great investment in the new age of financial technology Rogoff is confident that the technology i e Block chain will continue to thrive but the price of Bitcoin would crash He agrees although the technology is easy to duplicate however it is difficult to replicate a similar credibility and large applications of ecosystem that have been created and established by Bitcoin He states that experts agree that the ingenious technology behind virtual currencies may have broad applications for cybersecurity which could be used to improve cybersecurity and develop a more secure payment mechanism Many think that bitcoin will never be allowed to supplant national currencies as large scale anonymous transactions could make it extremely difficult for the government to collect taxes and could give rise to issues such as tax evasions and other criminal activities Rogoff states that Governments cannot overlook these problems and thus there are possibilities that the government would soon need to step up and regulate bitcoin systems and argues if this happens then bitcoin will be stripped of its near anonymity characteristics and its price will collapse

However he foresees that the price of bitcoin would perhaps not fall to zero even if it were regulated since bitcoin transactions amount to much less as compared the fees charged by big banks on its transactions As said by Rogoff it would not be hard to see banks creating digital currencies of their own thus tilting the game towards them in a win win situation He states looking at the history of currencies the private sector innovates but eventually it is regulated by the state Bitcoin is a game changer in the name of currency and challenges the authority and power of government backed fiat currencies The fact that it is backed by nothing questions the state of its purpose and continuity SECTION 2 BLOCKCHAIN There is no denying on Rogoff s claim that the technology supporting Bitcoin i e Blockchain would continue to thrive even if bitcoin crashes But what exactly is Blockchain Blockchain is the core of Bitcoin s system and it's transparent and clear as transaction in the records are public The block chain is in fact a huge chain that consists of several blocks of transactions that occur at a particular time period It creates a time stamped chain of receipts and expenditures among every single participant of Bitcoin system and with such irrefutable proof it's not possible for anyone to cheat someone or indulge in double spending It is a digital leger that is dispersed across networks and is used in the cryptocurrency space to securely record every transaction between users CNBC It is a global online database that anyone with an internet connection can use

Unlike traditional databases which are typically owned by big institutions a block chain does not belong to anyone and with an entire network of people monitoring it cheating the system by faking documents transactions and other information is nearly impossible CNBC It is a decentralized public ledger that tracks every transaction in bitcoin s history In his article Rogoff confidently states that the Block chain technology will thrive even if the price of bitcoin collapses The block chain is the key innovation that makes Bitcoin both unique and groundbreaking SECTION 3 GOVERNMENT AND BITCOIN Rogoff s main argument in the essay is that the bitcoin bubble will burst if the government steps in to regulate it Central Bank of the country is responsible to regulate inflation and deflation in the economy through its power over the fiat currency With Bitcoin challenging its way and getting more attention from the people than intended Governments across the globe have been reacting with this differently In this section I have highlighted the contradictory view of the Japanese and Chinese Government towards Bitcoin JAPAN Japan is arguably the most cryptocurrency positive country and has managed to become so by recognizing bitcoin as a legal means of payment but not as a traditional currency Bitcoin trade in Japan accounts for about half of the global trade volume That number has surged since the government passed a new law earlier this year recognizing bitcoin as a legal form of currency CNBC 2017 Another factor contributing to a bitcoin boom in Japan ultra low interest rates from the central bank that has left investors looking for places to find returns on their cash Daily Mail 2018 Thus bitcoin serves as the best option for an investment which gives great returns


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