Living in the era of information technology implies that the majority of transactions are digitalized. These changes have influenced many spheres, and it could be said that they were the primary drivers for the development of various types of digital currencies (Chuen, 2015). These categories of money can be actively used to purchase different goods and services online while being considered as reliable financial instruments. Bitcoin is one of the well-known currencies, and it has worldwide recognition. It is the central player in the market of the digital currencies and can be considered as one of the concepts that have an impact on the development of the modern e-commerce (Tschorsch & Scheueramann, 2016). Overall, it could be said that this trend is one of the main concepts of e-economy, and it shows that the financial world continues to evolve and takes advantage of various innovative financial principles and novelties (Chuen, 2015).
Speaking of the value of this topic to businesses, platforms like Bitcoin offer more opportunities to companies that operate in different industries. For example, they ease transactions by making money transfers fast and secure. At the same time, due to the rising popularity of digital currencies worldwide, the companies have to monitor any changes in demand for these financial tools and be prepared to modify their payment methods to stay competitive and be attractive to their customers. As for society, active involvement of the Internet in everyday activities implies that digital currencies such as Bitcoin may become more popular, as they ease the purchasing process. Overall, digital currencies are important to consider in the context of this case study since they have a critical impact on consumer behavior and the economic environment.
Case Study Analysis
As it was mentioned earlier, the central aim of this case study is to focus on digital currencies such as Bitcoin. The concept of Bitcoin was developed in 2009 by Nakamoto, who introduced the idea of the decentralized currency (Tschorsch & Scheueramann, 2016). This idea implies that the issue of bitcoins is not controlled by the authorities such as banks and other legal entities, but all transactions are transparent and publically visible. It could be said that the primary reason for creating this digital currency is the need to introduce a new universal financial instrument that can be discovered as an equivalent to gold (Popper, 2015). Nonetheless, this matter implied that only a limited number of bitcoins are released and traded within a system. Relying on software protocol helped the founders create a self-functioning network where any user with Internet access could be involved in transactions that would not be controlled by the governmental institutions (Popper, 2015). It was marketed as an alternative way to save, create, and transfer money to other users. It’s positioning as a decentralized network with universal currency attracted many followers who did not trust or wanted to avoid governmental authorities or banks.
One of the examples of Bitcoin use is transferring money from one individual to another. For example, Alice transfers a bitcoin with the specific identification number to Bob while the description of this transaction is reflected anonymously in the public files (Tschorsch & Scheueramann, 2016). In this case, this situation signifies that one of the main benefits is the transparent nature of all actions. The concept of Bitcoin allows all participants of the network to monitor the transfers made in the system (Tschorsch & Scheueramann, 2016). This mechanism helps increase security in the case of money transfers from the buyer to the seller or from one individual to another. At the same time, because no information about the private user is presented publically, the transactions can be discovered as secure, as anonymity plays a role of a protector from identity theft (Naware, 2016).
Another advantage pertains to the fact the platform has low transaction fees (Naware, 2016). For example, Alice from the United States of America makes a purchase online, and she transfers a fixed number of bitcoins to the seller, who is located in Australia. In this case, the merchant has no right to increase the fees since they are set within a system. Simultaneously, this example can be referred to as another benefit that implies that purchases and transactions can be made without being dependent on the working schedules of the governmental entities (Naware, 2016).
Speaking of Bitcoin from the investor’s perspective, it can be discovered as one of the long-term strategies to generate additional revenues. For example, Bitcoin’s active growth started in 2013 while Cyprus and other countries were experiencing an economic crisis and recession (Miller, 2016). This matter situation occurred, as unlike traditional currencies, Bitcoin was not affected by changes in inflation rate and GDP. These factors along with the unstable economy make savings in dollars or euros an unreliable investment (Miller, 2016). Thus, the scarcity of bitcoins, constantly rising demand, and speculations of the traders determine that the currency will continue to increase in a geometrical progression. Nonetheless, Bitcoin hurts economic growth, as the governments of different countries cannot control the amount and value of bitcoins.
Nonetheless, apart from the benefits mentioned above, many disadvantages tend to exist. The most common threats are related to the potential price volatility due to a limited number of bitcoins, lack of recognition, and possible issues with encryptions and protocols (Naware, 2016). Additionally, many drawbacks are associated with the anonymous nature of transactions and the absence of a centralized controlled system. For example, in 2016, the Bitcoin platform was used to finance and fund a group of terrorists in Indonesia from the Islamic State (Yumar, 2017). The investors highly relied on digital currencies, as their concepts of anonymity and rapid delivery of financial resources made it difficult to track these money transfers (Yumar, 2017). Alternatively, this currency was used not only to support terrorism but also to sell and buy drugs and weapons. The Silk Road is one of the examples, as it was a website that actively used bitcoins as a trading currency to exchange them for drugs (Maftei, 2015). This side of Bitcoin supports the growth of crime levels related to drug trafficking and gambling while making it a serious social issue.
Conclusion
Based on the analysis conducted above, it could be said that Bitcoin can be considered as the future of the global economy, and it will become a pivotal player in the exchange market. This situation may incur, as Bitcoin’s value continues to increase due to low volatility and responsiveness to various political and economic factors, its scarcity, and the rising popularity of e-commerce worldwide. At the same time, its major benefits that attract the audience are associated with the transparency of transactions, their anonymity, fast transfers, and low fees. A combination of these factors signifies that concepts such as Bitcoin will revolutionize the principles of consumer behavior and e-commerce. Nonetheless, apart from the positive features, many examples show that the advantages of Bitcoin are used for illegal purposes to sell drugs and finance terrorism. These mattes imply that the working mechanism of Bitcoin has to be enhanced to avoid legal problems and decrease a negative impact on society.
References
Chuen, D. (2015). Handbook of digital currency: Bitcoin, innovation, financial instruments, and big data. London, UK: Academic Press.
Maftei, L. (2015). Bitcoin – Between legal and informal. CES Working Papers, 6(3), 53-59.
Miller, M. (2016). The ultimate guide to Bitcoin. Indianapolis, IN: Pearson Education.
Naware, A. (2016). Bitcoins, its advantages, and security threats. International Journal of Advanced Research in Computer Engineering & Technology, 5(6), 1732-1735.
Popper, N. (2015). Digital gold: The untold story of bitcoin. London, UK: Penguin Books.
Tschorsch, F., & Scheueramann, B. (2016). Bitcoin and beyond: A technical survey on decentralized digital currencies. IEEE Communications Surveys & Tutorials, 18(1), 1-37.
Over time, there has been a rising demand for digital platforms that enable businesses and individuals to make payments in an efficient and free manner. The advent of bitcoins, a digital peer-to-peer currency, proved to be a solution to the rising demand. Since its inception in 2008, bitcoins have enjoyed a gradual growth in the market and especially in the gaming industry. It is paramount to assert that both the business entities and consumers enjoy the benefits of bitcoins. Benefits of bitcoins such as swiftness, security, and decentralization are not only felt by business entities but also by individuals buying products and services using the currency. While several countries in the world were reluctant to accept bitcoins into their systems, some are slowly realizing the role that the currency plays in its economy and are accepting their use. Notably, while the currency has several advantages, it also has disadvantages that come with its use. Anonymity, competence in computer technology, fraud, and absence of a chargeback pose as drawbacks that affect the overall performance of bitcoins. It is within this backdrop that the study assesses the inception and use of bitcoin currency in businesses and online gaming.
Discussion
History and Company Background
The Bitcoin industry emerged in 2009 after a group of programmers developed a currency that utilizes codes and mathematical formulas. Satoshi Nakamoto is one of the founders of the currency and is the pioneer of bitcoin transactions. Nakamoto then handed over the business to Gavin Andresen who propelled the business to its current niche in the market (Richter, Kraus & Bouncken, 2015). After its inception, the currency did not enjoy an immediate acceptance from merchants and individuals, but over time it started gaining popularity. The main drivers that helped the currency to succeed and enjoy its present popularity include online gaming. Due to the bureaucracies and delays associated with several online payment systems that did not guarantee payment, bitcoins, which has no chargeback, became the option for online gamers and businesses. As such, the currency slowly became a popular medium of exchange in the online gaming industry. After its acceptance in the gaming industry, business organizations began assessing the benefits linked to the currency and increasingly started using it as a form of payment.
It is paramount to explain that the first bitcoin transaction that took place after the development of the currency involved Nakamoto and Hal Finney who participated in the transaction after downloading the currency software. Thereafter, the currency continued experiencing increasing transactions. It is vital to explicate that the core objective of bitcoin manufacturers was to develop a currency that facilitates maximum profits in a transaction. Turpin (2014) states that due to its minimum transaction charges and peer-to-peer mode of operation, buyers and sellers can do their businesses without worrying about the amount of money charged by intermediaries. The current dynamic and ever-changing consumers who compare the value of their money with the returns are other factors that led to the rise in bitcoin use. One of the major aspects that need to be defined is the fact that bitcoin uses a web of programmers who ensure that transactions are swift and fair. The web, which incorporates several internet users, is not subject to breakdowns because a failure of operation in one server does not affect the others from operating.
The decision to Include Bitcoin Payment/Develop a Game
The decision to include bitcoin payment in the list of online payment systems lies in the benefits associated with its use. The numerous benefits that people enjoy when they use bitcoin as a medium of exchange form the central factor that determines its use in business and online games. Some of the benefits that include speed make the currency very effective especially for online gamers and business entities. According to Bouoiyour and Selmi (2016), the absence of intermediaries in bitcoin transactions and the involvement of parties to a business is a milestone that amplifies its position in the currency platform. Another benefit that determines the decision to use bitcoin as a method of payment revolves around the minimal details used in account development. Unlike several online payment systems that need personal details before opening an account, individuals can operate bitcoin accounts without using their names or disclosing their details. The relevance of anonymity emanates from the fact that hackers can sometimes access personal information requested by online payment systems and engage in unwarranted activities that affect the subject of individuals. Due to its ability to accept account creation using names that may not be authentic, bitcoins dictates the decision to use the currency as a payment method.
Consequently, the development of online games using bitcoin is very effective and less costly. The little expenditure incurred when establishing a game using bitcoin takes effect because of factors like minimal transaction charges, the absence of intermediaries, and convenience. Factually, the transaction fees incurred when using bitcoins as a medium of exchange are minimal about other online platforms of payment. On the other hand, bitcoin use eliminates intermediaries that are common in other online platforms such as PayPal, a phenomenon that augments the decision to use the currency in-game development (Tschorsch & Scheuermann, 2015). When using bitcoins, payments take place minutes after a transaction. Therefore, instead of using other online platforms of payment that force one to wait after making a transaction, people decide to use bitcoins. A combination of the merits amplifies the decision to develop a game using bitcoins.
Marketing Strategies and User Base Establishment
Fundamentally, user base establishment and marketing strategies have a close relationship. The relationship between the process of establishing a user base and marketing strategies takes effect because a good strategy leads to a well-developed user base. Bouoiyour and Selmi (2016) allude that regardless of its slow takeoff, the bitcoin industry understood the challenges faced by online gamers and business entities that received payment using online systems. As such, the company capitalized on the weaknesses demonstrated by other online systems of payment and created a strategy that advanced its position in the market. Speed, convenience, elimination of bureaucracy, decentralization, and continuous service are among the components utilized by the bitcoin industry in the development of their strategy. Through the strategy, the bitcoin industry was in a better position to win the market share and outsmart its competitors.
Bitcoin’s market share has been rising gradually. However, the recent turn of events changed its position in the market. Market speculation, a global shift towards virtual currency and online payment, Brexit, and fluctuations witnessed in various economies of the world are some of the factors that propelled bitcoin to the topmost niche in the market. In the early parts of 2017, bitcoin’s market share rose to hit the highest levels ever witnessed since its inception. According to Turpin (2014), the gradual rise of bitcoins has taken about a decade. Conversely, the recent development in the bitcoin industry was not gradual but spontaneous. The demand for the currency hit high levels and experts project a continued rise. Although bitcoin is enjoying increasing prospects, the drawbacks associated with anonymity have affected its image. Drug peddlers and fraudsters are using the system to sell their products because the system does not require personal details. In effect, the bitcoin industry has become a safe place for drug dealers who transact their businesses without the fear of being discovered.
Conclusion
The increasing demand for an effective online payment system initiated the development of bitcoins. Notably, the demand transpired because contemporary consumers want a platform that enables them to purchase products and services without changing their schedules. As such, the inception of bitcoin that is effective and less costly proved to be a solution for not only the consumers of online games and other products but also businesses. Since its inception in 2008, the currency has continued rising and recently hit the highest levels in comparison to other online systems of payment. It is important to explain that although bitcoin is projected to increase in use and popularity, much has to be done by its developers. The risk of fraud, anonymity, and absence of a chargeback are drawbacks that limit its performance.
In effect, bitcoin stakeholders need to improve on factors that can hamper the progress of the currency. Fundamentally, the relevance of improving the currency emanates from the fact that the modern consumer will continue demanding virtual currencies and online systems of payments. The increasing demand for online payments that are effective and fast is one of the factors that necessitate improvements in the bitcoin sector. Although bitcoins are among the most successful currencies in the online payment sector, the stakeholders in the company need to understand that the contemporary market is ever-changing and subject to unexpected dynamics. Competition, changing legislations, and fluctuations in consumer purchasing power are some of the components that should be under a keen watch of the company. By ensuring that they are in tandem with the components, the currency sustains its growth and popularity.
References
Bouoiyour, J., & Selmi, R. (2016). Bitcoin: a beginning of a new phase?. Economics Bulletin, 36(3), 1430-1440.
Richter, C., Kraus, S., & Bouncken, R. (2015). Virtual currencies like bitcoin as a paradigm shift in the field of transactions. The international business & economics research journal, 14(4), 415-575.
Tschorsch, F., & Scheuermann, B. (2015). Bitcoin and beyond: A technical survey on decentralized digital currencies. IEEE communications surveys & tutorials, 18(3), 2084-2123.
Turpin, J. (2014). Bitcoin: The economic case for a global, virtual currency operating in an unexplored legal framework. Indiana journal of global legal studies, 21(1), 335-368.
Many countries such as India, Indonesia, and Japan among others have endorsed the use of Bitcoin and Ripple, despite the lack of clear policies on the operations and sustainability of such new digital currencies. However, others, including China, have banned the entire crypto-mining phenomenon, hence blurring the future of Bitcoin and Ripple. Owing to the uncertainty concerning whether these two cryptocurrencies will ever be vital financial assets, this article argues that more countries are expected to emulate China’s move to the extent that Bitcoin and Ripple will be useless in the next half a century.
According to Chancellor, the state theory presents currency as a form of credit given by a country, owing to its value that is derived from the fact that it can facilitate the reimbursement of taxes. Capitalist economies, many of which are highly industrialized and powerful, for instance, the U.S., the UK, Japan, Brazil, and South Korea among others, are characterized by a huge system of credit connections (Matsuura 7). Hence, the introduction of Bitcoin and Ripple as a form of cryptocurrencies that do not provide a means of establishing credit is expected to be outlawed in virtually all capitalist nations in the next 50 years since they will hinder the already highly developed and globally accepted credit culture.
Also, although the impact of broken global links following some countries’ move to endorse Bitcoin and Ripple will be gradual, the severity of the situation will be felt since issues such as “scarcity of the digital currency, a severe economic contraction, and stagnation without end” (Chancellor) will be inevitable. Based on this projection, it is crucial to point out that chances of the global community allowing transactions to be conducted using virtual currencies, specifically Bitcoin and Ripple, as opposed to money regulated by financial institutions, are significantly low. This claim holds since the already established international domination of money is almost impossible to substitute with any other form of digital currency, including Bitcoin and Ripple. According to Menegus, Bitcoin, and Ripple’s gradually declining return on investment implies that cryptocurrency companies’ business margin will tend to zero in the next 50 years. Hence, the two virtual currencies may never serve as important financial assets since many countries will have implemented China’s strategy of abolishing crypto-mining.
In an article by Kettley, the latest 50% drop in Ripple’s value in a record time of 7 days may be viewed as a signal that the virtual currency will crash within the next half a century. Ripple’s falling value has shaken shareholders’ confidence, including banks that had massively invested in the virtual currency, for instance, the Bank of America (Kettley). This volatility is expected to persist in the coming decades to the extent that it will not only scare away potential investors but also result in the quitting of the current ones. Extensive investment in Ripple may never be realized, owing to its unsteadiness. Consequently, as Orcutt asserts, the number of investors who embrace this school of thought is projected to rise to the extent that a mass exit may be inevitable in the coming five decades, despite Brad Garlinghouse’s (the company’s boss) statement that financial institutions are currently heightening their transactions with Ripple.
Conclusively, the rising need for efficient, secure, and convenient transactions has led to the establishment of cryptocurrencies such as Bitcoin and Ripple. These digital currencies are deployed as a property operating as a medium of exchange. However, the paper has argued that their instability and capitalist nations’ monopoly of money, which they are not ready to let go, will render Bitcoin and Ripple insignificant financial assets in the next 50 years.
Cryptocurrency has become popular in recent years, and its application has found a place in the global financial niche. Even though bitcoin trading has been unstable, its use has taken shape this year. Consequently, financial experts have suggested that the technology is likely to survive and have a meaningful impact going forward. Additionally, as more individuals embrace the use of digital currencies and related technology, financial organizations and governments are noticing the trend. The developments in cryptocurrency have created new opportunities and barriers to various players in the global economy. For instance, small businesses have found an alternative platform to grow while larger firms are beginning to appreciate the security and speed of distributed ledger systems. PayPal is one of the latest financial companies to embrace Bitcoin as a currency in its services, a step that has potential benefits to the institution and its clients.
Integrating Digital Currency into PayPal’s Operations
It is important for companies to carefully analyze financial trends in order to grow, and PayPal has done so by paying attention to developments in digital currency. The company currently has 300 million active clients, and in October this year, it announced that the customers will be able to make bitcoin transactions using their accounts (Salzman, 2020). This is a good decision because it will not only improve the experience of current PayPal users but also attract new clients who are more inclined towards cryptocurrencies. Furthermore, formalizing this type of currency in the company’s platform implies that users could have the opportunity to purchase items from 26 million merchants registered by PayPal.
Early November 2020, the company introduced bitcoin services to its American customers and plans to extend the same to its users all over the world in due time. The PayPal news to embrace cryptocurrency came at a time when the bitcoin prices were at $12,000. However, since the company’s decision, the cost has maintained a forward trajectory and as of November 20, it stood at $18,997, the highest figure to be recorded in the past three years. Furthermore, financial experts have predicted that if the growth is maintained, PayPal will be buying close to all of the new bitcoins within short periods. This fact implies that the company made the right choice and is already noticing the technology’s huge impact.
According to Smith (2020), PayPal chose the right time to make the move because bitcoin is now more stable than it has been in recent years. Aside from the company, interest from other similar entities, such as Robinhood and Cash App, has led to the cryptocurrency’s rise in popularity because individuals can now buy bitcoins easily. Previously, the process of purchasing and using bitcoins was quite technical and time-consuming because the interested parties had to take photos of themselves and wait for days before their accounts were activated (Salzman, 2020). However, the situation has changed because an applicant can now gain access to digital currency in less than a day.
Research on the use of cryptocurrencies in the business world indicates that bitcoin is largely run by institutional buyers. According to Gogo (2020), close to 21 companies, including Galaxy Digital Holdings and Microstrategy Inc., have a total of $14.42 billion of bitcoins in their accounts, which is more than 4% of the current supply. In the initial stages of the cryptocurrency’s introduction, enterprises and individuals were quite skeptical about the validity and sustainability of bitcoins (Fosso Wamba et al., 2019). Nonetheless, the innovation is becoming a currency like any other, and people quickly accept its use.
Potential Benefits of Bitcoin to the Financial Industry
The adoption of bitcoins as part of PayPal’s financial technology is supposed to improve the engagement between clients the services offered by the company. Consequently, the company’s CEO Schuman suggests that PayPal should have a routine utility to maximize the benefits of cryptocurrency by ensuring customers start thinking about the innovation. Square, PayPal’s rival is an example of an institution that has enhanced engagement by adding bitcoin as a feature in its Cash App (Gogo, 2020). Clients who make use of bitcoin trading will send more money on the platform, spend more using their cash cards, and take advantage of other related features. However, PayPal endeavors to perform better than its competitor by allowing its customers to make any online transactions using their cryptocurrency reserves (Fosso Wamba et al., 2019). Even though the institutions will liquidate the digital currency for their merchants, clients will be in a position to save their money as bitcoins until they want to use it.
Additionally, the introduction of bitcoins in PayPal will enhance financial inclusion considering the company serves a variety of clients. Peer-to-peer (P2P) and production to consumer (P2C) are examples of transactions made online that will benefit from digital currency. According to Levy (2020), bitcoins reduce the costs of sending money to friends and companies because the charges are close to free. This means PayPal and other similar institutions will be able to attract more clients due to the affordable transaction rates. Furthermore, cryptocurrencies will improve the efficiency, resilience, and speed of the company’s payment system. This feature will reduce the number of times customers wait for their transactions to be completed.
Expected Challenges of Introducing Bitcoin to FinTech
Like any other financial strategy, the use of cryptocurrency at PayPal also has limitations. First, there is a concern about client data privacy considering all bitcoin transactions can be traced and done in public. A user will need to transfer bitcoins from their wallets to PayPal accounts and vice versa, and all these transactions can be tracked online (Smith, 2020). Consequently, there are likely to be questioned on security, especially on clients who understand little about bitcoins. PayPal currently has data privacy rules to protect its users from information misuse, but it will be difficult to do the same when using digital currency. Secondly, using bitcoins as a currency will also lead to regulatory-related issues (Smith, 2020). Financial technology institutions must adhere to regulatory frameworks put in place by governments. Online transactions create platforms for black market activities, and the use of cryptocurrency makes it difficult for law enforcers to monitor such illegal conduct. Consequently, PayPal has a challenge of enacting policies that will regulate the use of bitcoins for sustainable purposes.
Conclusion and Recommendations for the Integration of Cryptocurrencies
Bitcoin and other cryptocurrencies are the future of financial technology. PayPal has taken a vital step to accept bitcoins as one of the methods of transaction in its operations. Cryptocurrency has existed for close to 10 years now, and, despite its advantages, very few people and institutions use it. However, in the past three years, the financial industry has seen stability in technology use and a steady increase in its prices. Consequently, PayPal has made a bold decision that has the potential of enhancing client engagement and taking financial technology to another level. Other global financial institutions, such as Payoneer, should also consider adopting the technology.
However, since the future will be defined by digital currencies, PayPal should focus more on creating its cryptocurrency to mitigate the discussed regulatory and security issues. Facebook initially invested in the project its digital currency by the name Libra but failed due to regulatory challenges. PayPal has a chance of improving on those issues by ensuring its cryptocurrency policies match those of respective financial regulating bodies. The company has chosen the right path by introducing bitcoin. Nonetheless, a more sustainable plan would be to develop its unique digital currency.
With the advancement of technology, online transactions have been on the rise. These include Bitcoin, a digital currency with no physical existence. When one engages in an online transaction, one expects that their information is secure and confidential. However, the increment of such systems has opened chances for information attacks by malicious users (Bourgeois et al., 2019). With Bitcoin, various measures have been installed to ensure top-notch information security; however, the mining and transactions are not completely secure, so they may be a target for hackers (Gallaugher, 2015). Therefore, Bitcoin is vulnerable to information security threats such as double spending, distributed denials of service (DDoS), and selfish mining.
Discussion
Bitcoin is vulnerable to double spending, a state where an attacker makes multiple transactions with one Bitcoin. The attacker initiates a transaction with two different receivers without their knowledge. Therefore, the system validates only the first transaction, and all others are disregarded (Gallaugher, 2015). Thus, only one receiver confirms the transaction, and the attacker will have received multiple payments. Such a threat can be addressed by installing ‘observers’ in the network.
DDoS is a common threat with online applications such as Bitcoin wallets owned by clients to manage their transactions and funds. DDoS is an attack that denies access to such applications, affecting transactions and may lead to loss of information (Bourgeois et al., 2019). Thus, it is imperative that the wallets are encrypted and have an offline backup to ensure the information can be accessed even after a DDoS attack.
Additionally, Bitcoin is vulnerable to attack due to selfish mining. In this threat, there are selfish and honest miners. The colluding miners force the latter to make computations on blocks that are not included in the blockchain (Bourgeois et al., 2019). While the honest miners continue wasting their blocks, the selfish ones keep theirs private. However, they eventually reveal them and make more revenue. This can be addressed by improving the Bitcoin protocols to eliminate any success of selfish mining.
Conclusion
Admittedly, Bitcoin transactions, like any other online operations, are susceptible to threats of information security. Such include DDoS, double spending, and selfish mining; however, these can be prevented. For instance, DDoS can be addressed by ensuring that information is encrypted and backed up. Fixing Bitcoin protocols is also essential in ensuring that selfish mining is eliminated. Setting strong passwords can also prevent access to confidential data.
References
Bourgeois, D, Smith, J. L., Wang, S, & Mortati, J. (2019). Information systems for business and beyond. Open Textbooks. Web.
Bitcoin fall in a broad form of monetary history. Bitcoin is a decentralized digital money that may be sent from user to user on the peer-to-peer Bitcoin network without intermediaries. Network nodes verify transactions via cryptography and are recorded in a distributed public ledger called a blockchain (Baldwin, 2018). A blockchain is a distributed digital database that records all cryptocurrency transactions. It is constantly expanding as completed blocks and new recordings are added. Each block includes the previous block’s cryptographic hash, a timestamp, and transaction data. Bitcoin nodes utilize the blockchain to distinguish valid transactions (Smith, n.d). Bitcoin transactions from attempts to re-spend coins that an unknown individual or organization under open-source. Bitcoin and cryptocurrency can revolutionize how people store, transfer, and create value in money.
Naturally, money is believed to be a physical commodity that may be used as a medium of exchange, such as gold or silver. People consider money a unit of account, a store of value, and a means of trade. Money can be both tangible and accounting units. Money is a physical commodity employed as a medium of exchange and a unit of account when employed as a store of value (Ajami & Goddard, 2017). The method by which banks produce money through lending is so elementary that it repels the mind. For instance, banks generate revenue by lending money they do not possess. Ultimately, confidence must be placed in the honesty and integrity of the organization that issues and regulates the amount of currency in circulation. The government is responsible for issuing money and controlling its supply; it is improper and harmful to allow private entities to do so (Ajami, & Goddard, 2017). Whether issued by a government or a commercial bank, the value of money originates from confidence in the issuing entity.
Investors naturally regard Bitcoin as a speculative asset, and its price has been volatile. Bitcoin fits into the comprehensive history of money in multiple ways. Bitcoin accounts for money in a variety of ways. It is a decentralized currency, meaning any government or financial entity does not control it. It is a digital currency used to purchase online products and services. Bitcoin is a global currency, meaning it may be used everywhere (Baldwin, 2018). Despite these benefits, there are numerous hazards connected with investing in Bitcoin. One of these hazards is that the price of Bitcoin is highly volatile and subject to sudden changes (Smith, n.d). This means that Bitcoin investments could result in substantial financial losses. Another risk is that Bitcoin’s underlying technology, blockchain, is still in its infancy and not completely understood (Baldwin, 2018). This means that the Bitcoin network might be hacked or that Bitcoin’s value could drop if the technology cannot scale.
The emergence of money involves a critical process whereby commodities were utilized as currency in the past. Gold, silver, and shells were universally desirable and acceptable objects. As time progressed, they began to utilize metal bits as currency. These items were easier to transport and divide than commodities. Gold and silver were the first metal coins minted in China at approximately 1000 B.C. People began using paper over time, and the first paper currency was created in China between 700 and 800 AD (Ajami & Goddard, 2017). In approximately 1800 BCE, the Roman Empire established the first banks.
In 1816, England initially adopted the Gold Standard, and in the 1920s, credit cards were first issued. In the 1990s, online payments became available for the first time. Digital currencies initially appeared in the 2000s (Ritchie, 2022). The most crucial event in human history is the creation of money. Throughout the history of numerous nations, money has caused some of the most crucial occasions. The invention of money allowed individuals to exchange products and services without negotiating a fair price (Ritchie, 2022). Due to its portability and compact size, paper currency facilitated international trade. Individuals can invest in potentially growing currencies and spend more easily using digital currency.
Money emerged in the early 19th century, whereby various forms of money were utilized. For instance, DigiCash, e-Gold, and Liberty Reserve were some of the earliest attempts in the 1990s (Ritchie, 2022). Bitcoin, however, is the first digital currency to gain mainstream traction and become widely accepted. It has also revolutionized the way money is transferred, allowing people to exchange money across the globe quickly and securely (Ritchie, 2022). This has made Bitcoin an attractive alternative to traditional banking systems, which are often slow and expensive.
In comparison between Bitcoin and past forms of money, it is evident that Bitcoin is superior to previous types of currency for several reasons. Bitcoin is decentralized, meaning that no single entity controls it. No central authority, such as a bank, verifies and approves Bitcoin transactions (Smith, n.d). This task is instead distributed across a network of computers that anyone can join. Bitcoin is unlike previous forms of money, which a central authority has always governed (Smith, n.d). Traditional payment systems record all transactions through a third party, such as a bank.
Bitcoin is a digital currency that is much different from any other past form of money that has existed in the past. Unlike traditional currencies, Bitcoin is not issued or backed by any government or central bank and is not physical. It is digital and stored on a distributed ledger system called the blockchain. Bitcoin is also decentralized, meaning any single authority does not manage it. Instead, transactions are verified by a network of computers running specialized software. Bitcoin also has no physical form and is created through mining, in which powerful computers solve complex mathematical equations to generate new currency units (Ginez, 2019). Bitcoin is highly secure, with advanced encryption technology protecting individual users and their funds, unlike past forms of money. Bitcoin offers users anonymity and privacy that is not available with traditional currencies. Its decentralized structure makes it resistant to manipulation or control by any single entity (Ginez, 2019). The digital nature of Bitcoin makes it more accessible than other forms of currency, enabling users to make secure, fast, and low-cost payments across the globe.
Unlike the past forms of money, bitcoin transactions are recorded on a public ledger that anyone can view. Another reason is that only 21 million bitcoins will ever be created, making them scarce (Ginez, 2019). This makes gold a greater store of value than fiat currencies, which central banks can generate indefinitely at any time (Ginez, 2019). Bitcoin is a decentralized currency, meaning no single entity controls it. Instead of a central authority like a bank, a network of computers verifies and authorizes transactions. Bitcoin is likewise limited, as only 21 million have ever been made (Ginez, 2019). This makes it a greater store of value than fiat currencies, which central banks can generate indefinitely at any time.
There are distinctions between Bitcoin and other forms of digital money. Bitcoin is the most popular and well-known digital currency, with its unique characteristics and advantages. While other digital currencies, such as Ethereum and Ripple, are based on decentralized networks and blockchain technology, Bitcoin is the first and only digital currency with no physical form (Ginez, 2019). Another key difference between Bitcoin and other emerging forms of money is that Bitcoin is entirely decentralized, meaning it is not governed or controlled by any central authority. Due to Decentralization, transactions in Bitcoin are secure, and no one can interfere with them, unlike other emerging forms of money. Other digital currencies may be more centralized, and transactions can be subject to interference from a central authority. Bitcoin is the only digital currency completely decentralized, meaning that users can make transactions without needing to trust any third-party (Ginez, 2019). This makes it a secure and anonymous currency and the most popular digital currency in the world. Other digital currencies may require users to trust third-party services or may not be as secure.
Bitcoin is the most established and well-known form of digital money today, but there are other emerging forms. These include Ethereum, Litecoin, Ripple, and many more. These crypto assets offer similar features to Bitcoin, such as Decentralization, low transaction fees, and fast transaction times. However, each of these coins also has its unique characteristics and technological features. For example, Ethereum offers smart contract capabilities, while Ripple focuses on providing a quick and efficient cross-border payment system (Ginez, 2019). This other digital money offers users different benefits, such as increased privacy.
In addition, unlike other forms of digital money, Bitcoin is the only digital currency supported by a major government. This gives Bitcoin the legitimacy lacking in other digital currencies. Many businesses and individuals accept Bitcoin as the only digital currency. This means that Bitcoin, unlike other digital currencies, has value in the actual world. Bitcoin is the only currency not prone to inflation due to its restricted quantity (Ginez, 2019). Bitcoin is the only digital money unaffected by inflation.
Conclusion
In conclusion, Bitcoin is a modern decentralized form that gains its autonomy since any authority or central bank does not offer it. Various forms of cryptocurrency have been utilized, for instance, the DigiCah, e-Gold and Liberty Reserve. Bitcoin, however, is the first digital currency to gain mainstream traction and become widely accepted. It has also revolutionized how money is transferred, allowing people to exchange money quickly and securely. Thus, making Bitcoin an attractive alternative to traditional banking systems, which are often slow and expensive.
Decentralization
Decentralization is a defining characteristic of numerous cryptocurrencies and blockchain-based initiatives. By design, cryptocurrencies are decentralized and distributed, so there is no centralized authority or point of control (Daisyme, 2022). Decentralization in cryptocurrencies provides several benefits, including resistance to censorship and fraud, enhanced security, and better privacy. Decentralization carries several difficulties, particularly in terms of scalability and administration. Cryptocurrencies are a relatively young technology that is undergoing ongoing development.
Therefore, there is no universal approach to Decentralization. Each project must carefully consider the involved tradeoffs to develop a system that works. Adopting Decentralization in cryptocurrency makes firms more resilient and secure and gives users greater control over their finances. The policy enables investors to make independent decisions because the firm’s directives are not dependent on a specific authority (Daisyme, 2022). Consequently, this develops a system of trust, as the system must rely on its integrity to sustain the company’s longevity in the market.
Decentralization of cryptocurrencies has been achieved from the systems’ first enterprise growth in response to market dynamics. As a result of the ability to use blockchain technology in cryptocurrency to reduce rents, most investors prefer these systems, thereby establishing the autonomy of blockchain technology. The new financial architecture eliminates middle management and team member authority to make decisions and provide organizational solutions. By involving all stakeholders, the corporation can decentralize its activities, resulting in organizational growth and opportunity for the business (Indeed Editorial team, 2022). The success of Decentralization has been ensured by allowing middle-level managers and team members to focus solely on their areas of expertise, such as customer insights and business objectives.
Firms have successfully achieved Decentralization by establishing values and culture that serve as a foundation and guide for their stakeholders. This creates a strong culture in the workplace by restoring and reinforcing the company’s values, allowing the company to achieve Decentralization. By prioritizing openness in communication, cryptocurrency-related businesses have established a relationship between customers and staff to facilitate collaboration on business operations (Indeed Editorial team, 2022). This has allowed the company to create Decentralization.
Cryptocurrency-related businesses have achieved Decentralization due to the all-inclusive nature of their workforces. Diversity in thoughts and decision-making has resulted from the inclusiveness of employees. This is accomplished by interviewing employees, consumers, and stakeholders. This has enabled businesses to have a deeper understanding of particular issues, helping them to make well-informed choices. Employers are able to prioritize training that helps employees grasp their jobs, roles, and expectations due to the inclusiveness of their workforce (Indeed Editorial team, 2022). The training programs have provided employees with a deeper understanding of the firm’s culture and management, enabling them to meet company expectations and foster a healthy working culture (Indeed Editorial team, 2022). This has thus enabled cryptocurrency-related businesses to attain Decentralization.
Different cryptographic strategies, like hash functions and zero-knowledge protocols, have enabled businesses to achieve Decentralization. For instance, using key rotations in everyday operations has reduced the likelihood of data compromise. The frequent rotation of master keys on the firm’s key stakeholders enables the development of secure information that safeguards the information (Das et al., 2022). Thus, this aids the company in preventing data phishing and cybercrimes, enabling it to attain Decentralization.
Various network architectures have been developed to ensure the Decentralization of data ownership in cryptographic procedures. For instance, network design’s peer-to-peer (P2P) architecture provides data decentralization without using intermediaries. By distributing tasks among its nodes and peers, the network architecture enables the transfer of digital currency from user to user via blockchain integration (Alizadeh, 2021). Consequently, with the aid of a decentralized blockchain, p2p designs can achieve irreversible transactions. The network nodes are equipped with ledgers that distribute information. The nodes function by replication and ledger duplication. This aids in attaining Decentralization by decreasing trust costs and government support, as well as the need for agents, clerks, and other authorities such as assent officers. Each transaction’s consensus and immutability are not dependent on centralized entities such as governments (Alizadeh, 2021). Thus, this provides Internet of Things (IoT) systems with a security solution.
Using a distributed Hash table (DHT) permits businesses to store data using vital data-based pairs. The distributed hash table nodes constitute a decentralized collaborative structure. The created systems are fault-tolerant, allowing them to handle several information nodes. The capacity to support many nodes equips the systems with massive amounts of data in any desired format. The DHT nodes are easily removable and extensible, facilitating data rebalancing in system clusters. Interplanetary File Systems (IPFS) are decentralized and designed to store and combine data in a decentralized manner as part of cryptographic processes (Alizadeh, 2021). This helps the company discover difficulties and maintain data records that guarantee security.
In addition, it is claimed that Decentralization in hash functions is achieved by distributing the hashing algorithm across multiple network nodes, as opposed to having a centralized entity perform the hashing. This makes the hashing process more resistant to attacks, as an attacker must compromise multiple nodes to alter the hash output. Merkle tree is utilized in hash functions to decentralize them. Each node in a Merkle tree contains a hash of the data it is responsible for (Alizadeh, 2021). The tree’s root then contains a hash of Merkle trees are frequently employed in cryptocurrency systems because they enable efficient and secure verification of data (such as transaction histories) without requiring storage of the entire data set.
Numerous information-protection features, such as the usage of anonymous usernames and user profiles, ensure adequate security for a user’s personal information. Zero-knowledge protocols, which allow data to be shared without revealing any information about it, provide a more flexible approach (Alizadeh, 2021). This is accomplished by allowing two parties to share data without decryption, making it more efficient than homomorphic encryption.
In addition, because zero-knowledge protocols are decentralized, they do not necessitate data storage in a centralized location. Secure Sockets Layer (SSL) and Transport Layer Security (TLS) provide data security for the zero-knowledge protocol (Alizadeh, 2021). SSL and TLS provide confidentiality and data integrity between communication applications. They prevent man-in-the-middle attacks and eavesdropping, tampering, and forgery of the communication’s content. SSL and TLS use asymmetric encryption methods to generate a secret key that is exchanged between two parties. Asymmetric encryption makes use of a pair of public and private keys. Only the corresponding private key can decrypt anything encrypted with the public key. This ensures that neither party has access to the secret key. Message authentication codes (MAC) are utilized by the two applications to ensure data integrity. A MAC algorithm computes a hash value using a secret key (Alizadeh, 2021). The hash is used to ensure the integrity of the message. In addition, SSL and TLS use digital certificates to validate the server and client’s identities. This enables cryptographic processes to safeguard data, thereby facilitating Decentralization.
Additionally, zero knowledge ensures data decentralization by guaranteeing appropriate data storage on computers, hard disk drives, or servers. Data is saved in a file that separates the data and stores it on many servers, requiring the development of a signature containing information about each component (Alizadeh, 2021). The zero-knowledge protocol ensures that the signature is stored in a location distinct from where the data parts are stored and that the signature can be reconstructed using a data verification checklist.
Conclusion
In addition, Decentralization in blockchain initiatives has enabled firms to resist censorship and fraud, enhance security and better privacy. Firms consider using tradeoff systems that make them more resilient and secure. Firms have utilized Decentralization by adopting policies and strategies like hash functions and zero-knowledge protocols. These strategies have enabled firms to establish and develop secured systems that protect their data against data phishing and cybercrimes.
References
Alizadeh, M. (2021). Blockchain and distributed hash table technology in decentralized systems. Doctoral dissertation, Luleå University of Technology.
Smith, N. Bitcoin in history of money. Altus investment management, pp. 1–33.
Appendix
In numerous ways, my contribution to the group discussion was enormous. First, I ensured that I arrived on time at the discussion location and followed up with the other members to ensure they managed their time well. I was always the first to introduce the group and review what we discussed in the prior reading. I ensured that all members completed their assignments and had the necessary materials for discussion. I always insisted that our team read all materials to ensure they were well-informed, and if needed, they would conduct additional research on the topic. I urged my teammates to seek clarification from other students and teachers in certain situations. This allowed us to maximize the group discussion preceding the presentation. Facing a variety of instructors helped me gain confidence. I ensured that everyone contributed to the conversation. I challenged every group member to offer a pertinent opinion on the subject of our research. Our discussion included asking questions, which enabled me to seek clarification and actively participate in any discussion to obtain all necessary information.
As it was a group discussion preceding our presentation, all members were instructed to maintain focus. This allowed me to remain focused on the discussion so that others could benefit from it. In addition, I remained attentive to what my peers were saying. This allowed us to detect errors such as inadequate content mastery. I have learned that the most efficient approach to learning is to take brief notes on what people say for future reference. I only expressed my opinion at the appropriate time, and this taught me that it is proper to allow others the time and opportunity to express their views. I always instructed my team members to pose questions that prompted further investigation.
Consequently, this taught me the importance of seeking clarification when necessary. As we were preparing for a presentation, I challenged every member to take advantage of his or her chance to speak; thus, giving every member a chance to speak helped some members gain confidence during the presentation. Therefore, it is prudent to allow everyone to speak.
We consulted with peers from different groups to assess their progress and gauge our own. Consequently, I learned the significance of comparing my results to those of others. We consistently met to discuss the most critical aspects of our research topic. This allowed us to create a schedule that guided our research and presentation efforts. In addition, I urged my group members to look sharp and dress appropriately for the presentation.
Consequently, this taught me that cleanliness of the body is crucial when serving others. In addition, I urged my team members to arrive early on the day of the presentation so that we could adapt to the environment. Consequently, this taught me that punctuality is a crucial aspect of life.
In addition, I offered my ideas clearly and concisely and was open to other people’s ideas. I was respectful of everyone’s opinions, which made me reach a conclusion that everyone agreed on. After the discussion was over, I thanked everyone for their participation and took notes on any decisions that were made. By following these guidelines, I was an active and valuable participant in our group discussion.
Bitcoin trading has been on the rise in the recent past, besides there being no bank in any country that uses it as a medium currency. It is governed by demand and supply laws in business like any other commercial activity. From the video, profit, and loss occur depending on the amount of interest charged as a transaction fee (Ramzan, 2013). There is proof of having conducted an endeavor that is recorded as a digital signature. It charges a certain amount of cost that is used later in determining the remaining number of bitcoins. The discussion elucidates the important factors to consider when choosing to buy bitcoins and an investment.
The law of supply and demand applies to the cryptocurrency sector since it relies on the rate of interest charged in the market. It also depends on the available bitcoins to be bought on the online trading platform. In business activities, when orders for goods or services increase, their costs go up. This is because customers for that item will multiply and force the marketplace to flood and could run short of raw materials if it involves production (Čuljak et al., 2022). This happens to bitcoin trading, whereby the relationship between need and availability determines the fees of the coin.
In the marketplace, producers can increase the amount of production when demand is high to make increased profits. The same applies when there are low levels of need for an item or service. This makes manufacturers reduce the size of manufacture to suit wants in the market (Othman et al., 2019). This is, however, not possible in cryptocurrency since there is a limited number of digital currencies in the bazaar.
A friend who intends to begin conducting business in cryptocurrency would enjoy several benefits. Therefore, I would recommend buying Bitcoin to a friend as a worthwhile investment. Transactions in Bitcoin are very fast, unlike in fiat currencies which could take days or weeks for a deal to be completed. No one would like to have a slow agreement process since if it is fast, it means more profit is amassed. According to Ramzan (2013), peer-to-peer money also offers free negotiation fees to both parties conducting business. Thus, one is only charged a small amount of money for miners who complete the process.
Bitcoin businesses offer a high level of privacy to owners and traders. Many people do not like to be known publicly and love their profit-making activities to remain a secret. In a credit card transaction, details of a customer are needed, unlike in these virtual coins making it a better choice. Cryptocurrency is decentralized and offers a trading forum that cannot be interfered with by any government (Gwartney et al., 2021). This makes it impossible to impose taxation on the dealings since no country owns the online enterprise.
Moreover, cryptocurrency is free from the recently increased cyberattacks that prove hard to contain. This is because this online business forum is posted in an open ledger with digital signatures being used to keep records. It is also free from inflation, unlike other trading activities that can be interfered with by demand and supply. This is because there is a finite number of coins in the market. One has no reason to worry about increases and decreases in prices, and therefore it is advisable to purchase a Bitcoin and get involved in this endeavor.
Nowadays, the Internet creates numerous opportunities for people, who decide to purchase or sell goods and services or develop a new business online. It does not take much time to surf the web, choose a product or service, and make a purchase. People enjoy the existing variety of options and their personal freedoms. At the same time, they want to make sure that their business development meets the standards and lead to profits and incomes.
Business velocity is the factor that contributes to the growth of business considerably (Cohn, 2015, par. 1). However, it is necessary to understand that online operations have a number of peculiarities and obligations, and one of them is the necessity to choose a proper payment method (Reed & Walden, 2013, p. 201).
Online, mobile, and electronic payment systems vary considerably and have to meet the requirements of business developers in a no-matter-what industry (Cohn, 2015, par. 1). Besides, it is expected that humanity and the creation of cognitive systems online could augment human decisions and promote opportunities for a successful business (Wang, 2015, p. 151).
Situation
The development of a new business is the opportunity to create an idea and promote it in the most appropriate way. People have to take into consideration a number of issues such as the choice of a platform, the conditions under which the cooperation with customers is possible, organizational culture, and the goals that have to be achieved. Online businesses are based on the relations developed by online communities that could be located in different geographical places (Morabito, 2014, p. 126).
Online payments are the activities that have to be established in such communities in order to make sure that employees could get their salaries, customers could make payments, and managers could organize the required portion of financial operations. It is very important for a company to choose a payment method online and make sure the choice has enough grounds and explanations.
Importance of Choice
Today, online users have access to a variety of online payment systems (Reed & Walden, 2013, p. 201). It is hard to make the right choice in a short period of time. Therefore, analytical reports and comparisons should be promoted. In this report, the peculiar features of two online payment systems, PayPal and Bitcoin, will be compared and explained in terms of security, customer satisfaction, popularity, pricing policies, and technological issues in order to clarify which system is best for the development of new business online.
This report will be divided into several sections so that the discussion of the platforms and features of PayPal and Bitcoin could help to create a solid basis for these companies’ comparison and recommendations for online business developers.
Paypal
History
PayPal is a famous American company that aims at operating an online payment system and money transfers around the whole world. It was founded in 1998 and became a significant part of the digital payments revolution (PayPal about Who we are, n.d., para. 1). Nowadays, it is available for the citizens of more than 202 countries who could make their payments in more than 100 currencies (PayPal about Who we are, n.d., para. 2). One of the main beliefs of the company is the pride that their customers could be provided with more control of their money and the opportunities to participate in the global economy fully (PayPal about: Responsible practices, n.d., para. 1).
Platforms
PayPal operates an open and secure payment platform on the basis of which businesses could transact with customers online via mobile devices and other technological tools available at stores (PayPal about Who we are, n.d., para. 1). In 2015, PayPal informed about the intentions to open a new mobile P2P (peer-to-peer) platform with the help of which peers could use the link and send fast transfers with ease (Toplin & Heggestuen, 2015, par. 1).
Another well-known platform used by the company is PayPal’s Braintree payments platform that promotes security capabilities and avoidance of frictions. Besides, PayPal aims at modernizing its IT infrastructure to change the existing platform and introduce a new service-oriented architecture and development on the basis of API (application programming interface) and SDK (software development kit) (Claburn, 2015, par. 6).
Services
In addition to the fact that PayPal helps customers to send, receive, and control their money in various currencies, a number of additional services and opportunities should be listed (PayPal about Who we are, n.d., par. 2):
Financial transactions that are possible between more than 202 countries;
Student accounts within the frames of which students could use their debit cards and control their money;
Fundraising and online donations are supported by the company;
Debit and credit cards are offered to customers,
The possibilities to create different accounts for different purposes (Premier, Business, Student).
Features
PayPal is a very competitive company worldwide. It is one of the first banking networks in the list used by business development and ordinary clients who want to gain control over their financial operations. The main features of the chosen online payment system are (PayPal about: Who we are, n.d., par. 2):
25 currencies;
Encryption that keeps all transactions guarded;
24/7 monitoring;
Credit cards’ acceptance;
Online invoicing;
Global payments;
Free joint, and
Clear fee system.
Usage
A number of online companies worldwide use the PayPal payments system in order to promote their financial operations and cooperate with people from different countries (PayPal about: Who we are, n.d., par. 1). The best examples of the companies are Amazon, Overstock, and Facebook. Though the Internet provides much information about poor examples of PayPal cooperation with different companies, the fact that this company is chosen by such online giants cannot be neglected. The companies find PayPal as an appropriate payment method because potential customers do not face many difficulties to create an account, keep it for free, and use it any time required.
Bitcoin
History
Bitcoin is a new network that promotes the development of a payment system online and the control of digital money from different parts of the world (Bitcoin: Frequently asked questions, n.d. par. 1). The system was introduced by Satoshi Nakamoto in 2009 (Bitcoin: Frequently asked questions, n.d. par. 2). Still, the founder left the company in 2010 and did not leave much personal or technological information so that the company was improved and developed by the current workers of Bitcoin. The popularity of the organization and its current success could be used as the main evidence of corporate culture and the loyalty of its employees.
Platform
Bitcoin is famous due to its P2P platform and the ability to fast transactions. For a certain period of time (from 2011 to 2013), the site was used in order to release new versions of the software that is known as Bitcoin Core (About bitcoin.org, n.d. par. 2). After 2013, the site was redesigned with a number of pages and additional software available to the company’s clients. Today, the site of the company is an independent project with a number of co-owners. Still, a number of discussions and investigations occur to prove if Bitcoin should be defined as a platform or as the currency (Duivestein & Savalle, 2014, par. 1).
Services
The services offered by Bitcoin include the necessity to inform customers about the protection importance, provide clear explanations of the company’s properties and limitations, invite experts to develop Bitcoin at different levels, and improve its accessibility (About bitcoin.org, n.d. par. 6). Clients of Bitcoin get such opportunities as:
Mobile payments;
Control over money;
International payments,
Cooperation of people worldwide.
Bitcoin is also known as the first cryptocurrency that could be used by people regardless of their geographical locations or income levels. Its market value is impressive indeed because of people’s intentions to create their business under new conditions.
Features
The features of the company include a list of positive aspects of the work with Bitcoin. The main advantages of the company are as follows (Bitcoin: Frequently asked questions, n.d. par. 11):
Payment freedoms;
Abilities to choose fees;
A low level of risks for merchants;
Security and control,
Transparency.
The reason why many people want to choose Bitcoin among other payment methods is the possibility to enjoy personal freedoms and destroy all possible boundaries and bureaucratic cases when customers have to stay dependent on the activities of other people (About bitcoin.org, n.d. par. 5). Bitcoin customers are free to control their money and choose the transactions which are more convenient and beneficial for people in regards to their personal situations.
Usage
Nowadays, there are many companies that decide to accept Bitcoin as their main payment method. Overstock is the company that chooses PayPal for its payment method. Still, this company does not stop on using one system. Therefore, Overstock could be mentioned as the company that uses Bitcoin in order to sell its tickets at lower prices because of the existing overstocking. Microsoft is another company that could be used as an example of how to use Bitcoin.
This company offers its customers to buy content with the help of Bitcoin services and consider their Xbox and Windows options. Finally, Tesla could be mentioned in the list of users (Tomasicchio, 2016, par. 2). This organization is focused on car selling. Tesla’s customers and partners could use Bitcoin as the way to pay for the services and establish a new system of payment.
Comparison
In the table below, it is possible to find a brief comparison of two online payment systems, PayPal and Bitcoin, and clarify the company’s positive and negative features in order to make the final choice.
Table One: Paypal and Bitcoin Comparison.
PayPal
Bitcoin
Pros:
Brand name;
Reputation for more than 10 years (PayPal about: Who we are, n.d., par. 1);
Easy setup;
Customer awareness of the company;
No necessity to create PayPal accounts to transit money to another PayPal account, and
Integration with different shopping cards systems.
In fact, taking into consideration the evaluation of two famous online payment systems and the analysis of their pros and cons, it is hard to understand which company could bring more benefits to the developers of new business online. The presence of positive and negative aspects of the work of two companies may confuse potential customers and provide regular customers with new opportunities. At the same time, the differences and similarities of the systems prove that both of them are powerful and effective indeed. The existing discussions and comparisons help to clarify the reasons for people’s choices, and the idea that PayPal should think about the idea of warming up to Bitcoin is one of the best alternatives for many people (Mac, 2014, par. 1).
However, the task of this analysis report is to investigate the services, features, and platforms of two different companies and clarify what system could be more effective for business developers. Regarding such facts that PayPal’s brand and reputation could say a lot about the company (PayPal about: Who we are, n.d., par. 1), PayPal services have been already offered to the citizens in more than 200 countries, and not much time is required to create an account and use it with ease, PayPal could win the battle.
However, such a choice is appropriate for those people, who think about starting a new business and promoting new services to people. In case the company has already achieved success and recognition, the idea to use Bitcoin seems to be more effective in comparison with the opportunities offered by PayPal because of a chance to try a new currency system and promote anonymity and protection.
Conclusion
In general, online payment systems undergo considerable changes and improvements during the last several years. There are many companies that try to offer their services and prove the urgency of their ideas. At the same time, the existing competition in the sphere of online business makes companies think about their future and develop the approaches that could attract people’s attention. PayPal and Bitcoin are two powerful online payment systems.
Their developers have made contributions to online business and show opportunities for people from different parts of the world. Regarding the current recommendations, PayPal is defined as a good opportunity for those who start their business and want to make payments under safe and clear conditions that are used by the company. Financial operations are important in all organizations, and PayPal is the leader in providing people with the services to succeed in such types of operations.
Bitcoin is becoming more popular in the modern world. Some predict that this cryptocurrency will replace money in the future. However, at present, the use of Bitcoin is associated with numerous concerns related to accounting information systems. One of these problems is the lack of transparency. One of the elements of accounting information systems is data related to organizations and their activities. This paper includes a brief discussion of this issue as well as a recommendation aimed at adding more transparency. The link between Bitcoin and reputable banks is a key element of this strategy.
Introduction
Bitcoin is one of the most famous cryptocurrencies in the modern world. Some see it as a revolution in the world of money since it is not based on any physical object and is completely digital (Raiborn & Sivitanides, 2014). Others argue that this cryptocurrency is a major fraud or that another financial bubble will lead to financial losses. Many Bitcoin enthusiasts claim that it is the currency of the future. However, recent research has determined that Bitcoin use is not growing as fast as other alternative payment methods. For example, mPesa is one of the fastest-growing payment systems in Kenya. The adoption of Bitcoin is twenty times slower than mPesa use (Böhme, Christin, Edelman, & Moore, 2015). Irrespective of these views, Bitcoin is now used in many settings. Therefore, many businesses and policymakers have begun discussing possible ways to update accounting systems to ensure the safe use of the new cryptocurrency. This paper addresses one of the issues related to the use of Bitcoin in terms of accounting information systems (AIS).
Major Peculiarities of AIS
An Accounting Information System “collects, records, stores, and processes accounting and other data to produce information for decision-makers” (Romney & Steinbart, 2015, p. 36). An AIS includes six components: people, data, procedures, software, information technology infrastructure, and internal controls. All these elements are equally important for the effective functioning of the system, and Bitcoin use is associated with certain concerns in many of these areas. For example, it is unclear how to classify this asset or at which point it is necessary to value bitcoins.
This paper will focus on one of these elements. Data on companies and their activities are an important aspect of an AIS, as this information is valuable for partners, investors, regulatory bodies, and the public (Raiborn & Sivitanides, 2014). In the modern world, this information can have a significant impact on business activities as well as the development of the global market. For example, the case of Enron suggests that improper management of this information or the lack of such data can result in a substantial financial crisis affecting many businesses and even countries. Bitcoin is often regarded as a platform for illegal activities, as users’ privacy prevents third parties from receiving information about each other.
Bitcoin Issue Related to AIS
The modern business world is characterized by various regulations aimed at eliminating illegal activities. Therefore transactions related to such activities as terrorism, drug and human trafficking, and the like are forbidden, and banks have various instruments to ensure that money is not linked to any unlawful businesses. Banks verify the identity of each customer, which makes it relatively easy to identify the origins of funds and the destinations of transactions. As far as Bitcoin is concerned, no verification instruments exist. Regulatory authorities still have no tools to ensure the transparency of Bitcoin transactions, which are abused by various criminal groups.
One of the illustrations of these unlawful activities is the operations of Silk Road, a “marketplace for drugs and other contraband” (Böhme et al., 2015, p. 223). Silk Road customers used bitcoins to sell and buy narcotics in different countries. Gambling is another industry benefiting from the use of Bitcoin. Böhme et al. (2015) note that gambling games such as Satoshi Dice utilize Bitcoin. The degree of the problem can be illustrated by the earnings reported by this service. In 2012, it earned over 30,000 bitcoins, or $403,000. Moreover, this gambling game accounted for almost 80% of Bitcoin transactions during several months.
Although transaction security is ensured by the use of sophisticated software, user identities, as well as the origin of funds, can be difficult (or even impossible) to identify (Raiborn & Sivitanides, 2014). Simkin, Norman, and Rose (2014) state that the viability of a new currency is defined by people’s desire to use it. If the currency is used by a small group of people or in a limited number of settings (for example, for criminal activity), such a currency is likely to cease to exist soon. As was mentioned above, Bitcoin is still used by a small number of people. This cryptocurrency is also widely used to finance illegal activities. Therefore its viability is rather questionable. It is possible that regulatory authorities may forbid Bitcoin transactions. Bitcoin supporters emphasize that they have a right to the privacy that is granted by the new cryptocurrency.
Recommendations
Many researchers note that Bitcoin has a reason to exist and even has some advantages, such as the ability to trace all transactions. However, it is essential to ensure the ethical behavior of the users of this cryptocurrency. Identity verification procedures should be introduced. The privacy of Bitcoin users should be restricted, which will deter drug traffickers, terrorists, and other criminal groups. The verification procedures can be similar to the ones already existing. Such documents as identity cards and financial data should be included in Bitcoin accounts. It is possible to use the verification procedures of reputable banks. For instance, bitcoin wallets can be linked to people’s accounts in their banks. It is important to make sure that some of this information can be available to other Bitcoin users. Peer verification will not be effective as existing users’ identities may be faked. Each Bitcoin user should be able to see if their partners are verified by a bank. In order to ensure both confidentiality and anonymity, it would be possible to create a verification group or a bitcoin community consisting of different banks. Thus users would be able to see that their potential partner’s identity is verified in the system, but the exact verifier would still be unknown.
Conclusion
On balance, it is necessary to observe that the increasing use of Bitcoin calls for changes in accounting information systems. One of the most pressing issues is related to the verification of Bitcoin users. It must be acknowledged that a significant number of bitcoins are used to fund illegal activity. Terrorists, drug traffickers, and other criminal groups use this cryptocurrency. In order to address this issue and prevent such major crises as the Enron-related scandal, it is important to develop an effective verification procedure. Bitcoin wallets should be tied to their customers’ bank accounts. This approach can add a certain degree of transparency that is needed in Bitcoin transactions.
References
Böhme, R., Christin, N., Edelman, B., & Moore, T. (2015). Bitcoin: Economics, technology, and governance. Journal of Economic Perspectives, 29(2), 213-238.
Raiborn, C., & Sivitanides, M. (2014). Accounting issues related to bitcoins. Journal of Corporate Accounting & Finance, 26(2), 25-34.
Romney, M. B., & Steinbart, P. J. (2015). Accounting information systems (13th ed.). Harlow, England: Pearson.
Simkin, M. G., Norman, C. S., & Rose, J. M. (2014). Core concepts of accounting information systems (13th ed.). Danvers, MA: John Wiley & Sons.