The Two Sides of the Same Bitcoin
The KAIST Herald attempts to elucidate the wonders and dangers of the famed cryptocurrency. In doing so, we aim to take on two possible stances: a pro-transition faction ready to embrace the promising technology in revolutionizing finance as we know it and a more hesitant school calling for better regulation and monitoring of Bitcoin before its full-scale dissemination.
With the recent digitization of education, careers, and communication, it may only be a matter of time before the digitization of currency follows suit. Bitcoin, with its newness and an eye-catching title of “digital gold”, has surfaced from the depths after the WannaCry ransomware attack this May, instigating much discussion about the positives and negatives of its normalized use. Skepticism aside, it is still worthwhile to point out the relevant advantages Bitcoin has to offer to consumers in particular. As the first of its kind, Bitcoin may at the very least serve as an innovative exemplar for future development of cryptocurrencies and digital payments.
Bitcoin first and foremost promises high security. It is not subject to inflation, and Bitcoin addresses are secured by complicated mathematical algorithms and cryptography. More specifically, transaction records are saved through blockchains — a form of distributed ledger technology — in the consumer’s computer, and thus they are safe from being stolen by hackers. Moreover, Bitcoins can only be reached through direct physical access on a consumer’s computer containing the ownership address, making them much harder to steal than conventional currencies that simply require a few authentication details for access. The cyber-insurance market being boosted by the popularity of Bitcoin can provide an additional shield against financial loss.
Another of Bitcoin’s charms is the protection of privacy. There is no need for the dealer to disclose any of their personal information to complete transactions, as the Bitcoin addresses that are used are anonymous and change with every transaction. This rules out the risk of identity and credit card information theft. Furthermore, no third party can identify or intercept Bitcoin transactions, and thus they do not have access to personal financial data as they do with standard currency systems. Although there is concern that such user anonymity fuels illegal activity, current banking systems involving credit cards widely surpass Bitcoin in terms of financial crime rates. Along the same line, the irreversibility of transactions is not only a feature of Bitcoin, but also a feature of wire transfers and cash.
The minimal transaction fees associated with Bitcoin further render it an appropriate means of payment in the trend of globalization. A dealer can send and receive Bitcoins at essentially zero or a very low price because there is no involvement of intermediary institutions or governments. There are also no foreign transaction or exchange fees associated with Bitcoin, offering a convenient advantage, especially during travel when exchange costs can add up to a fair amount. The large scope of freedom in Bitcoin payments is another advantageous aspect since transactions are possible anywhere and anytime, and transfers take only a short period of time as there are no delays from authorization requirements. Therefore, Bitcoin can be considerably useful to consumers as a new, additional option in global transactions.
Surely, and as with all things, Bitcoin is not without its flaws. Bitcoin has seen large fluctuations in value and investments are of a high risk, high return nature. Most people are still unfamiliar with Bitcoin and many tend to see it mostly as an asset to cybercriminals or a means of tax evasion. However, it may in fact be beneficial that we are aware of the setbacks of Bitcoin so that we can place regulatory frameworks and develop consumer services accordingly instead of blindly praising an allegedly perfect invention with hidden dangers. Upon the dawn of the digital era, it may be natural, or perhaps inevitable, that corresponding virtual currencies are adopted and used by all: digital money for a digital age.