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Bitcoin and the Global Economy

July 15, 2020

It is clear as day, that such cryptocurrency as Bitcoin becomes more and more acknowledged and important around the globe. Professionals will completely support this statement because Bitcoin has achieved the best performance among even real currencies. Of course, some associate it with various illegal activities like narcotics or money laundering. Usually, such activities go through the online black market. Among the most popular ones is Silk Road & Alphabay.  

Why cryptocurrencies?

Many of us have heard about cryptocurrency, however, not many of us what it is and how it does work. So, cryptocurrency is a virtual currency that exists as an exchange medium. Cryptocurrencies do not have their name just for fun. All digital currencies make use of cryptography. This way they verify and protect all transactions while developing new coins. Due to their high level of security, it takes a lot of power to mine coins, however, the transactions go quite easy if you have the correct key. 

Except for cryptocurrencies, there are also entries in a stable and not-so-anonymous database that no person can alter. These entries are well-known blockchain.  Moreover, blockchain has a certain level of publicity and should be verified by a huge number of nodes. As a result, the forgery of coins becomes an impossible task. However, monitoring all the transactions between private individual wallets and accounts. 

Influence of Bitcoin on Industries and Banks

Bank - Bitcoin
Bank – Bitcoin

If you think cryptocurrency has nothing to do with central banking, you need to rethink your opinions.  The Bank International Settlements (BIS) and other big central banks feel a threat from digital currencies.  Experts especially fear bitcoin that may change the way big banks have control over the global economy and even issuing currencies around the globe. 

Some banks only keep an eye on the situation with bitcoin. Others are already working on turning their paper currencies into digital ones. Among these daring banks that are not afraid to get to know the possibilities of new types of currencies are the central banks of Ecuador and Canada. 

Not only banks but also many other industries have met various changes thanks to Bitcoin. In recent years many industries have decided to accept cryptocurrencies and especially Bitcoin as a type of payment. However, such innovation relates mostly to companies that have an online business. For instance, WordPress, a provider of complex, private and professional services for blogs,  accepts payments in Bitcoin. Among other examples comes out Cheapname and Steam. In reality, there are many more companies that work with virtual currencies. 

Another great achievement is slow but steady recognition in the real world. Among these companies are Virgin Galactic and Tesla that accepts bitcoin as a method for payment. This is not surprising because these companies always strive to work with the latest technologies humanity holds. 

Bitcoin impact on politics

Bitcoin net

When currencies take part in the work of industries, the same situation usually goes with politics. Bitcoin is no different. However, in the case of Bitcoin, such interest from politics is mostly since none of the politicians or governments can keep it in check. Originally, bitcoin as cryptocurrency was created for the needs of individuals and not governments.  

With time states and regular people, hostility towards this cryptocurrency has changed, this has come with the realization that bitcoin works only on code, making it off-limits to any frauds.  However, in the end, countries react differently to such kind on the currency. Among these reactions are:

  • European Central Bank: Vitor Constancio, former Vice President, thinks of Bitcoin as of a “tulip”. This is a straight reference to an economic boom in the Netherlands back in the 17th century. He is still skeptical about it.  
  • United States Federal Reserve: Jerome Powell, Chairman in United States Federal Reserve, is convinced that Bitcoin still has a lot of risks and technical problems. For now, bitcoin and other cryptocurrencies can not be part of a global society.
  • Bank of Japan: The bank and government still doubt the work of cryptocurrencies and thus do not create any place for them on the market. 
  • People Bank of China: Although it strongly believes that nowadays are good conditions to work with cryptocurrencies, the central bank still needs to be sure it will have total control over it in the country. 
  • Bank of England: Mark Carney, Governor of the Bank of England, considers digital currencies as a big step forward on the financial field. This central bank is one of the few followers of this technology. 
  • The Venezuelan government:  They have gone even further. Due to certain restrictions, they decided to create their cryptocurrency. It is called petro and presumably supported by a market of crude oil. Many resources state this digital currency has brought a lot of income to the country, the United States of America still doubt these statistics. 

For now, digital currency still does not work to the fullest around the globe, however, it is the only question of time. The current situation shows that not every human knows about cryptocurrencies and how they work. Some experts are sure that in the future the situation may look completely different as more and more companies allow payments with cryptocurrencies. 

How Bitcoins influence the future of humanity

These days more and more companies opt for online payments. It is quick and without extra effort. Bitcoin is not included in every online payment, however, in comparison with other currencies, it can bring more security and convenience with encrypted transactions and no additional fees. 

The biggest opportunity for bitcoin and other virtual currencies could become international money transfers from people who work abroad. If we talk about nowadays situations. To receive such transfer, the money themselves go through several mediums like wire traffic, several banks, and exchanges of currencies. As a result, people lose a certain percent from the original sum that was transferred. 

Statistics from Businessweek show that common fee for transfer services is 9% from the whole sum, additionally goes conversion into another currency. That will cost an additional 5%. For example, Western Union gets 16% of the profit from transferring. Such services include security and legitimacy of transactions and the latest technologies that are used for remittance. Contrary to Western Union, Bitcoin can do all these transactions for free.

So, with many advantages, the influence of Bitcoin is likely to broaden in various industries. This will happen not today but in the nearest future, for sure. 

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