The Cryptocurrency Concept Analysis

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Table of Contents

Introduction
Ethical SWOT Analysis
Historical Context and Ethical Questions
Literature Review
Equity Impact Assessment
Code of Ethics
Recommendations
Conclusion
References

Introduction

Cryptocurrency is a means of exchange designed around the digital use of encrypted figures. The term cryptocurrency derives from cryptography, which implies a secret means of sending information to the correct persons without a third party. The basis of cryptocurrency operations is essential codes that allow the private exchange of business. Even though many governments view it as a disruption to the traditional banking systems, this emerging issue has gained significant traction over the last few years. Today, there are over 15,000 cryptocurrencies that exist around the world, with a total market capitalization of about $300 billion (Russell, 2020). This method of exchange is used in various fields, including ATMs, electronic commerce, and passwords.

An American cryptographer first introduced the idea of cryptocurrency by inventing digital cash in 1989. Since then, various programmers have created algorithms central to the encryption of codes. However, the first transaction using cryptocurrency was recorded on 12th January 2009. Today, numerous cryptocurrencies operate, gaining popularity through their secure and cost-effective properties (Russell, 2020). Cryptocurrencies like Bitcoin and Coinbase make transactions easy for people with limited technical knowledge trading with digital coins. Bitcoin is the world’s largest digital currency and is known for its fair rates of exchange.

Ethical SWOT Analysis

Cryptocurrencies lacked value in their early years of operation and were rendered worthless. With time, the coins gained merit, and several people started making thousands of dollars by trading.

Strengths

Cryptocurrency uses blockchain technology, a decentralized method that is easy, transparent, and safe, making it suitable to apply by many people. This technology prohibits the involvement of a third party during the transaction process. This implies that transactions happen quickly and faster and with minimal or no interference from government organizations. Blockchain technology really boosts the economic turmoil for many cryptocurrency users. In addition, cryptocurrency trading is fully anonymous and 100% untraceable (Al-Amri et al., 2019). Blockchain technology makes this network private; hence the users’ financial data is fully hidden. Every crypto trader receives a unique PIN upon signing up, which masks the user’s identity. The PIN changes once the currency is sold, and only the sender and the buyer get access. Because of this increased security, many people have joined cryptocurrency trading activities (Billah & Atbani, 2019). The transaction processes are simple, and the settlement fees are close to zero, making it favorable for many people.

Weaknesses

During the first few years of its discovery, trading in cryptocurrency was faster. Today, transactions are not as fast as they used to be due to the flooding of the blockchain network. With the expanding market, transaction speeds are expected to be even slower (Billah & Atbani, 2019). Until this problem is solved, it is unlikely that cryptocurrency will usurp the fiat system. The encryption of transactions makes it hard to recover a lost wallet password (Al-Amri et al., 2019). Many people who forget their account passwords lose their transaction details and access to their accounts. In addition, the value of cryptocurrencies has shifted in the past few years. The reliability of cryptocurrencies is too questionable; it looks like a very volatile investment. The prices can crash anytime since the currency has not proved itself a long-term investment. It is worth noting that they have only been around for a decade.

Opportunities

We must appreciate that we are moving away from physical money usage into cashless currencies as a society. Big institutions like Amazon have started accepting payments in terms of Bitcoins. With growth and adaption ratio, cryptocurrency can become a global reserve currency (Al-Amri et al., 2019). In recent years there have been increased cases of data breaches in banks and financial institutions, raising the question of the safety of the client’s information. Many people are looking for alternatives, and blockchain technology promises the safety of customer information. The transactions are encrypted and provide a very high solution to data protection. Cryptocurrency networks can allow investors to reduce bureaucracy and increase trade efficiency.

Threats

The anonymity of banks and other government organizations poses a big threat to the operation of cryptocurrencies. Knowing that a transaction is untraceable provides a good environment for criminal activities. If more criminals purchase and use illegal cryptocurrencies, this will be a problem for the government and law enforcement agencies. It will be hard for the government to trace and prosecute such acts. Although it may be difficult to control cryptocurrency operations due to anonymity, the government will still try (Al-Amri et al., 2019). The government will understand the huge profits in this market and increase attention to imposing taxes. The values of the latest coins skyrocket, and every coin will try to compete favorably in the market, leading to unhealthy competition and the destruction of the market. Criminals are taking advantage of the cryptocurrency leading to threats with unknown identities. The issue of environmental degradation has made this activity banned in several countries.

Historical Context and Ethical Questions

Historically, the idea of cryptocurrency started in the year 1989. However, the first transaction with cryptocurrency occurred in 2009 using Bitcoin. After its discovery, Bitcoin prices stayed relatively low, with users unsure of its trajectory. In 2013 there was a sudden projection of its price from $1 per coin to around $1,250.00 per coin (Wang et al., 2022). This increase in the price of Bitcoin brought about attention to the crypto market, and many crypto coins started flooding the market with promises of different levels of usability. The most serious development of this market was witnessed at the beginning of the year 2020 with the outbreak of COVID-19.

The year 2021 was characterized by an increased surge in this market as more pension funds and financial institutions started showing the legitimacy of the crypto market. The amount of money that these organizations were making started to increase rapidly. Another move that helped this market draw attention was the intention of the US government to tax activities involving cryptocurrency (Wang et al., 2022). The government estimated an approximately $10,000.00 to tax from trading with Crypto monthly.

There are various ethical issues surrounding the trading activities of cryptocurrencies. One major issue is the anonymous nature of the currencies. While many people who trade Crypto see this as an added advantage, it creates a loophole for criminal acts. Various research works prove a positive connection between criminal acts and cryptocurrency transactions in the pacific region (Al-Amri et al., 2019). Even though the United Nations has continuously focused on curbing the potential for funding human and weapons trafficking, the anonymous nature of the crypto market makes this process impossible.

Another ethical question regarding cryptocurrency is the fear of legitimizing the currency market. The users of cryptocurrency cannot allow governments and banks to have control of their activities. This question has been discussed over the past few weeks, with some countries thinking of creating government-based crypto coins. Various governments have adopted the changes in technology to design and attempt to use national cryptocurrencies (Russell, 2020). However, this idea faces a dilemma as the International Monetary Fund (IMF) pushes various governments to avoid Crypto-based activities, which would destabilize the international monetary system.

The ethical issues surrounding the cryptocurrency trade bring both positive and negative aspects. The activity, however, has brought more advantages to the people with its legitimacy and widespread use. Locals can now trade peer-to-peer without interference from the government and intermediaries. The transaction can remain anonymous, and the market can have the opportunity to control inflation rates. While it is argued that it promotes illegal activities, the current tender systems have always allowed for illegal activity (Yue et al., 2021). Changing the form of the legal tender will not necessarily worsen the crime. We are sitting on the edge of a new international monetary system.

Literature Review

A narrative literature review aims to understand and evaluate knowledge relevant to a particular topic. It also works to reveal the strengths and weaknesses or claims that deserve further research. The use of a narrative literature review in this study enables us to investigate how cryptocurrencies have been conceptualized in recent studies and assess the theoretical underpinning of this emerging trend in technology.

Vilkov and Tian attempted to analyze the future growth of Bitcoin and other cryptocurrencies using the SWOT analysis technique. They concluded that cryptocurrency revolutionizes the digital currency market with free flow and zero transaction fees. The increased advancement in technology has contributed to the increased use of these digital currencies. However, it is worth noting that digital currency cannot fully replace the fiat system (Vilkov & Tian., 2019). Some recent events and movements also influence that Bitcoin can contribute to a shift in economic paradigms.

Ajmi and Arfaoui tried to use the SWOT analysis to analyze the effects of cryptocurrency on politics. The study concluded that digital currency is the new model for the global economy and influences major political decisions in countries during the campaign. Within ten years, the digital currency has won the hearts of many investors. The future potential is the weakness of the cryptocurrency movement (Ajmi & Arfaoui, 2020). Russell had presented the effects of cryptocurrency on the country’s banking systems and monetary policies. The study concluded that the advancement of technology and openness to accept Bitcoin circulation and government intervention by creating laws are future strengths of digital currency (Russell, 2020). This has greatly affected the circulation of money through the central bank. The study also included the weaknesses, strengths, threats, and opportunities of Bitcoin and other cryptocurrencies.

In their study, al-Amri et al. proved that the use of digital currencies would rise to become self-regulated money free from government control. The SWOT analysis proved that the reoccurrences had opportunities and strengths with the rapid growth of capitalization and great people’s interest (Al-Amri et al., 2019). The results concluded that cryptocurrency adoption is scalable throughout the research period, and there is furthermore scope on factors influencing cryptocurrency. Yue et al., in the year 2021, studied the effects of cryptocurrency on the economy. The research reported that the use of crypto in the economy had shifted the economic model.

The sources identified in this paper were relevant as they focused on cryptocurrency as a major technology trend. The sources had a minor and major focus on cryptocurrencies, and they presented opportunities for using Crypto. These sources provided insights into the challenges of adopting cryptocurrencies in today’s financial systems.

Equity Impact Assessment

Since the discovery of cryptocurrency in 2009, the impact of these activities has been felt in all aspects of life. Socially, Cryptocurrencies have created a more affordable and reliable remittance payment method (Wilson, 2019). Cryptocurrencies have promoted social impact programs globally, and various beneficiaries of these programs have realized maximum profits and benefits (Wang et al., 2022). This has eliminated the issues of corruption and waste while conducting these programs. Today, the United Nations Food program uses blockchain technology to deliver cash-based transfers, saving millions of dollars and helping numerous people.

Cryptocurrencies facilitate the aspect of foreign donations and funding to political parties. 56% of countries globally do not accept the sponsorship of political candidates during campaign activities. Since there is no oversight on cryptocurrencies, they seem to fund many parties. For example, the 2016 USA elections appear to have been facilitated by the influence of cryptocurrency. According to various sources, funds from the Russian government were transferred through Crypto into the USA during this election period (Ajmi & Arfaoui, 2020). In Ukraine, research has it that 57 government officials have declared over 21,000 bitcoins.

Since its discovery, blockchain technology has improved financial institutions across borders for transactions. Currencies like Bitcoin have created a unique and unmanageable market, making it impossible for the global economic market to thrive (Yue et al., 2021). The low transaction cost of cryptocurrencies makes them superior to the traditional monetary system. The years 2016 and 2017 were characterized by an increased number of people working using blockchain technology; since then, the number has increased drastically (Wilson, 2019). The technology is automated and digitized; therefore, the figures can never be changed and altered.

The main environmental effects of cryptocurrencies come from the high amount of energy required in the transaction process. Mining new coins require tremendous energy, ranging from one cryptocurrency to another. The most popular cryptocurrency that requires incredibly energy-intensive is Bitcoin which requires an estimated 2100 kilowatt-hours of energy to mine (Wang et al., 2022). It is estimated that Bitcoin mining activity generates 97.2 megatons of carbon dioxide, which is dangerous to the environment. Mining cryptocurrencies threatens fragile energy grids in countries with weaker infrastructures. Many cities worldwide have experienced power loss due to Bitcoin mining. Countries like China, Iran, Algeria, Egypt, and Morocco have moved to ban cryptocurrencies and outlawed these activities altogether.

Code of Ethics

A code of ethics refers to the legal framework through which an organization and its employees should follow. It describes the ethical behavior expected of the company and its operations. The rise in the crypto market has led to increased attention, and the activities have to be regulated using codes of ethics. All crypto companies must comply with the laws, rules, and regulations of municipalities, states, and countries in which they operate. All crypto companies must comply with the securities laws prohibiting insider trading (Ajmi & Arfaoui, 2020). The companies must also comply with laws concerning disclosure requirements, anti-bribery laws, payments, and health and safety rules.

In addition, all companies trading in cryptocurrencies should address the issues of conflict of interest. A crypto associate is not allowed to work for other competitor firms as this will give rise to a conflict of interest. The associates should also cease using business assets and opportunities for personal gain. The assets of works should be protected and ensure efficient use. Loss of assets affects the profitability of cryptocurrencies (Yue et al., 2021). Family members of crypto traders should never receive gifts or offers from trading activities.

Recommendations

The emergence of cryptocurrency technology has dramatically impacted the social, economic, and political environment. Several people appreciate the transparency, viability, and speed of transactions through cryptocurrencies. Various people have invested in crypto mining activities, making a considerable sum daily. In addition, the move has led to a new global market independent of financial institutions (Al-Amri et al., 2019). People can now transact businesses over a significant geographical distance without delays or government interference.

While many people appreciate the benefits of cryptocurrency, this technology’s ethical dilemma is still questionable. The fact that this market is not regulated makes it vulnerable to cyber-attacks leading to a loss of investments (Al-Amri et al., 2019). Investing in cryptocurrency is a risk-taking activity, and only financially stable people can do this. In several other countries, governments are still delaying its implementation. Many people feel the adverse effects of the activities surrounding the mining of crypto coins. The processes involved in mining activities negatively impact the environment.

Conclusion

In conclusion, the growth analysis of cryptocurrencies shows that the adoption process of cryptocurrency is high in the global world. Lack of enough knowledge and information is the major drawback to this market. However, with well-regulated policies, the crypto market can grow faster. Moreover, the cryptocurrency market analysis shows that not many people would invest in it due to its volatile nature. Many investors prefer to use bonds, shares, and stocks as they have stayed for a long and are trusted by huge organizations. Though profitable, cryptocurrency is a volatile market and a risky investment for starters.

References

Ajmi, H., & Arfaoui, N. (2020). Effects of the political risk on bitcoin return and volatility: Evidence from the 2016 US presidential election. Journal of Financial Economic Policy, 13(1), 94-115.

Al-Amri, R., Zakaria, N. H., Habbal, A., & Hassan, S. (2019). Cryptocurrency adoption: Current stage, opportunities, and open challenges. International Journal of Advanced Computer Research, 9(44), 293-307.

Billah, M. M. S., & Atbani, F. M. (2019). SWOT analysis of cryptocurrency and ethical thought. Journal of Islamic Banking & Finance, 36(1), 204-432.

Vilkov, A., & Tian, G. (2019). Blockchain as a solution to the problem of illegal timber trade between Russia and China: SWOT analysis. International Forestry Review, 21(3), 385-400.

Wang, Y., Lucey, B., Vigne, S. A., & Yarovaya, L. (2022). An index of cryptocurrency environmental attention (ICEA). China Finance Review International, 34-51.

Wilson, C. (2019). Cryptocurrencies: The future of finance? In Contemporary Issues in International Political Economy (pp. 359-394). Palgrave Macmillan, Singapore.

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