Please type down (easy for me to copy and paste) your response (thoughts) after
ID: 1137013 • Letter: P
Question
Please type down (easy for me to copy and paste) your response (thoughts) after your reading the following paragraphs. (2 paragraphs, min 5 sentences for each paragraph)
Businesses and brands are slowly adapting to the concept of cryptocurrencies and bitcoins as they develop their own currency to offer their customers. Cryptocurrencies is the emerging digital currency which is completely decentralized meaning cutting the middlemen in a transaction, such as; Banks, credit-card companies, governments etc. Simultaneously, it appears that people have developed a distrust towards these aforementioned institutions. Leaving us with the question; will our currencies and economic system as we know it today slowly dissolve in the emergence of "cryptocurrencies" and "bitcoins"? Why/Why not? And if so, how will banks and their role in society change in the future? This discussion video is a few years old, what has changed if anything?
About the discussion video:
So a more challenging question is one that I was asked, actually, by one of our writers a couple of weeks ago, and I didn't know the answer: What's the world's best performing currency? It's actually Bitcoin. Now, for those of you who may not be familiar, Bitcoin is a crypto-currency, a virtual currency, synthetic currency. It was founded in 2008 by this anonymous programmer using a pseudonym Satoshi Nakamoto. No one knows who or what he is. He's almost like the Banksy of the Internet.
And I'm probably not going to do it proper service here, but my interpretation of how it works is that Bitcoins are released through this process of mining. So there's a network of computers that are challenged to solve a very complex mathematical problem and the person that manages to solve it first gets the Bitcoins. And the Bitcoins are released, they're put into a public ledger called the Blockchain, and then they float, so they become a currency, and completely decentralized, that's the sort of scary thing about this, which is why it's so popular. So it's not run by the authorities or the state. It's actually managed by the network. And the reason that it's proved very successful is it's private, it's anonymous, it's fast, and it's cheap. And you do get to the point where there's some wild fluctuations with Bitcoin. So in one level it went from something like 13 dollars to 266, literally in the space of four months, and then crashed and lost half of its value in six hours. And it's currently around that kind of 110 dollar mark in value.
And we did a survey that backs up the fact that, you know, 45 percent of people in this very crucial demographic in the U.S. were saying that they're comfortable using an independent or branded currency. So that's getting really interesting here, a really interesting dynamic going on. And you think, corporations should start taking their assets and thinking of them in a different way and trading them.And you think, is it much of a leap? It seems farfetched, but when you think about it, in America in 1860, there were 1,600 corporations issuing banknotes. There were 8,000 kinds of notes in America. And the only thing that stopped that, the government controlled four percent of the supply, and the only thing that stopped it was the Civil War breaking out, and the government suddenly wanted to take control of the money. So government, money, war, nothing changes there, then.
Explanation / Answer
Although the cryptocurrencies are anonymous and they eliminate middlemen but the fact is that they are uncertain. History suggests that an economy requires a certain amount of confidence which comes with clarity and certainty. The example post civil war elimination of the 1600 corporation issuing notes illustrates the need of government and regulations, thus the certainty.
However, it's also true that people are showing a tendency to or a desire to have currency with lesser regulation and therefore are against the idea of having middlemen in the transactions. Satoshi Nakamoto, the anonymous programmer of Bitcoin, also put forth in his/her paper the growing tendency for decentralized currency and which can serve to privacy as well.
But it is still difficult to say whether these cryptocurrencies will dissolve the current currency we are having. Many economists including Raghuram Rajan warned against going blindly towards cryptocurrencies. We need to have more research in that particular domain. Privacy, fastness of currencies are important but what people throughout the past seeks the most is certainty and avoid the opposite i.e. uncertainty. The economy grows with people's confidence and to have that in the cryptocurrencies we need to have deeper research in that domain.