payment process basically charge fees to perform secure and safe transaction on customer’s behalf, which is not there in case of Bitcoin transaction and if there exist some fee, it is very low as compared to banks charges. Besides this, Bitcoin also provide alternative mode of payment to the user other than cash, credit or debit cards, or any other form of electronic payment. It provides security, transparency to transaction and to counterfeiting. No one can steal them as bitcoins doesn’t exist physically. Digital nature makes them easier to carry than cash, which could be beneficial to various economies where most of the transactions are carried out in form cash which again leads to less counterfeiting and less corruption.
The biggest problem with existing currencies is that they lose out their value with time because of government interference. Today, there are approx 11 million bitcoin in the system which is increasing every four year in geometric progression at 50% rate. The Bitcoin system is designed in such a way that maximum of 21 million bitcoins will ever be released which lower the possibility of bitcoins being inflated i.e. low inflation risk. As already discussed, Bitcoin anonymous transactions make them untraceable.
What are disadvantages of Bitcoin?
Since these bitcoin are still in nascent stage, people are not able to digest the idea of virtual currency, its safety & security. It is still in development stage, many governments do not levy tax to Bitcoin transactions but this behaviour may change in future which may make Bitcoin transactions more costly than other transaction. And Bitcoin may lose edge over other currencies which might result in crashing it value.
Though bitcoin is gaining popularity across the globe still these are not widely acceptable, people are still shy off accepting payment in bitcoin. Bitcoin transactions are untraceable, which is making it vulnerable to smugglers and to other illegal activities. With no central authority or processing agency, the payment once made is irreversible.
In an economy like ours (developing or under developed) where one bitcoin cost around 50000 INR or more, people find it difficult to buy their general stuff. Many believe that this virtual currency will further widen the gap between rich and poor. Rich are getting richer with increase in value of bitcoin and poor is getting even poorer as they can’t get hold of bitcoin.
Future scope
Well, at this point of time I am not sure of future of newly developed digital currency. Many experts believe Bitcoin as currency of new era while on the flip side many believe it gives boost to illegal activities.
If we talk about India, RBI already issued a warning that Bitcoin usage is unsafe due to potential money laundering and cyber security risks. While on the other hand, many corporate join bitcoin brigade to lobby for digital currency.
It will be interesting to see, how this new currency behave and how the world respond to it.
Ajit Singh
Symbiosis Institute of Management Studies
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PARADIGM Nourishing the Intellect