The Use of Cryptocurrency
Briefly describe what crypt currencies are, what their benefits and downsides are to users, and other members of society.
A cryptocurrency refers to a virtual or digital currency that is secured through the process of cryptography, which makes it almost impossible to double-spend or counterfeit. Most of the existing cryptocurrencies are decentralized systems that rely on blockchain technology. One of the defining characteristics of crypto is the fact that they are never provided through the central authority, which renders them to be theoretically immune to government manipulation or interference.
The essential advantage of using cryptocurrencies is that they are an easy way of making and transferring funds directly from one party to another without requiring trusted third party assistance such as credit card companies or banking institutions (Zimková, 2017). The money transfers in cryptocurrency systems are secured through the use of private keys and public keys, as well as a varied form of incentive structures such as stake or proof of work. Don't use plagiarised sources.Get your custom essay just from $11/page
Cryptocurrencies offer instant money transfer and 24-hour access. It is possible to purchase or spend via cryptocurrencies, regardless of the distance between the buyer and the seller, as it does not even require the use of computers (Zimková, 2017). Since everything in cryptocurrency can be managed using mobile devices, even people with very little knowledge regarding technology can still access funds and make real-time decisions.
On the other hand, cryptocurrencies are suitable for holding illegal activities such as tax evasion and money laundering (Dierksmeier & Seele, 2018). Their anonymity nature makes them inevitable to be adopted by the criminal administration. The dark web, as well as the black market, are significant users of cryptocurrency as they can use a large sum of money in any part of the world without any authority interference (Phillip & Peiris, 2018). Moreover, cryptocurrency lack security that can help in tracking funds in case of loss.
Explain whether there are or are not benefits to having a cryptocurrency issued by a government entity such as a central bank. How does these compare to the benefits of privately issued crypto assets?
Cryptocurrencies issued or backed by the government provides citizens with security and confidence to transact, which may act as a boost to trade and investments. Moreover, the reliance on traditional banking, as well as financial systems, reduces as people aspire to join transactions in elements such as dash, bitcoin, ethereum, or any other authorized form of online money transfer within the authority to prevent the indulgence of intermediaries and commissions. On the other hand, privately owned crypto lack privacy features for the public. Private crypto cannot be traced or linked to transactions hence affects the end-users in case of fraud.
Cryptocurrencies issued by government may lose their intrinsic anonymity and privacy (Phillip & Peiris, 2018). These may occur through the government’s tendency of compulsively tracking data in terms of transaction amounts, customer identity, negotiation currency, imposition of taxes, and among others. Some government may create exercise regulation which could block the dynamics of their ecosystem within cryptocurrency, transforming it into a particular type of extension to the existing tradition financial institutions. The government regulations may prompt the decentralized nature of cryptocurrencies. On the contrary, privately issued cryptocurrencies use several stealth tactics, which is challenging to break even a single or all. Therefore, it is possible to transact without acknowledging customer identities, incurring huge taxes, and many others.
Are their technological constraints or issues related to cryptocurrencies that might be holding them back at present? If so, what are these, and how/when might these constraints be relaxed? Is there are role for the government to help facilitate this (how/why)?
The risk associated with trading with cryptocurrency is the most thrilling element to consider before making any transaction. Since Cryptocurrencies are highly subject to breaches related to cybersecurity, they are likely to fall in the hackers’ hands. Several cases have emerged where ICOS get breaches causing investor to lose hundreds of millions in summer alone. One of the attacks led to the loss of at least $473 million by one investor.
The government can mitigate the vast losses from cryptocurrency activities by issuing citizens with their regulated systems. In this case, governments can continuously do maintenance of security infrastructure and setting up enhance cybersecurity measures that go beyond the ones in the traditional banking institutions.
The western governments have massively enhanced the enforcements which regulate anti-money laundering. Aside from impacting fundraising, the step has hugely decreased the ability of terrorists to utilize formal banking, typically, money transfer services in the form of mobile payment systems, digital transfers, and prepaid instruments (de Lis & Gouveia, 2018). The element serves as one of the mitigation measures that the government deploys to assist in preventing considerable losses in online money services.
Do you foresee cash disappearing from use in the near future? Does this require cryptocurrencies to take the place of cash? Explain.
Yes. Indeed the cash will disappear as forge ahead to several numbers of generations and enhance the level of technology adoption. Today, the electronic form of payment has significantly increased. Not only do debit and credit cards exist, but there exist direct deposits, online payments, and bank transfers. In addition, there are systems such as Zelle, which enables one to transfer money instantly via text or email. The substantial utilization of cash transfers has been a dominant plague to investors since it is widely associated with criminal activities such as drug trafficking. The disappearance of cash may significantly impair illegal activities which are an element that may prompt the use of digital cash transfer
Even though the disappearance of cash transfer, it’s evident in the future, it does not entirely require the use of cryptocurrencies. This form of money transfer is also an important structure to help in the disappearance of cash transfer methods. Just like any other form of transaction utilized today, cryptocurrency will also attract society if there are regulations to reduce its adverse impacts.