Jan 26th 2015
Do you know what Bitcoin is? Bitcoin is not a real material which people can touch, but it can be used as real money. Wikipedia defines Bitcoin a payment system invented by Satoshi Nakamoto, which can be transacted directly to sellers by consumers without a central repository or single administrator like the US Treasury.
Wall Street Journal published the Saturday essay about Bitcoin because many economists believe it represents the future of money and global finance. WSJ emphasizes its technology although many critics argue that Bitcoin cannot be survived. “…Bitcoin is much more than a currency. It is a radically new, decentralized system for managing the way societies exchange value…. one of the most powerful innovations in finance in 500 years” (WSJ). Furthermore, Bitcoin has a lot of advantages so that many people expect that it could substitute the existing currency system as well as solve the current fiscal problems.
First of all, Bitcoin is more efficient and less expensive than the existing system (WSJ). “Bitcoin payments are currently processed with either no fees or extremely small fees. Users may include fees with transactions to receive priority processing, which results in faster confirmation of transactions by the network. … can be offered for much lower fees than with PayPal or credit card networks” (bitcoin). Moreover, Bitcoin users are in full control of their transactions with security because they don’t include their personal information to the transaction. So, merchants don’t need to worry about fraud or fraudulent charge-backs and customers are protected from leaking their information (bitcoin).
However, still many people are worried about Bitcoin because of its menu cost, the centralization problem and bad actors. First, it’s hard to convince people use Bitcoin instead of various fiscal methods like credit cards and cash. Most people are unwilling to take their time and efforts to learn “new” things unless there are huge benefits. Additionally, some people say that Bitcoin is the first decentralized digital currency which means it supplies itself while many others disagree with the statement. It is true that in theory the supply of Bitcoin is generated by a computer system, not by the Fed or any other centralized institution. In other words, “money supply” (Bitcoin supply, clearly) cannot be determined by a government. However, there are possibilities that the system could be hacked (coindesk).
Everything has advantages and disadvantages. Although some economists think that Bitcoin is already dead (for example, many people even don’t know what Bitcoin is), I think it can be a good substitute for the current financial system. Bitcoin market will be expanded when its system becomes as stable as credit cards payment does. If the security is guaranteed, other problems Bitcoin has are trivial. “Like any young technology, Bitcoin is a work in progress, but its groundbreaking core software program is constantly being improved. It is open-source and copyright-free, and thus accessible to anyone who wants to peer inside it, copy it, suggest improvements or create applications for it” (WSJ).