Bitcoin: The Internets Cash

Since its inception in 2009 Bitcoin has become a widespread means of

payment on the Internet. Bitcoin is a cryptocurrency. The nature of Bitcoin is
appealing to some because it does away with the need of a centralized entity to
govern the circulation of money; instead the public governs it. Another key feature
of Bitcoin is that it provides a level of anonymity that only cash can surmount. Users
have a personal wallet addresses that identifies them. The only way to identify the
user of the wallet is to find the IP address of the wallet user and trace them back to
the location where they connected to the Internet. As Bitcoin grows in popularity, it
needs to be examined fully whether that it is a viable solution on a worldwide scale,
if the currency will have a lasting economic impact on the world and address
whether legal matters will lead to the downfall of the currency.
In 2008, a person or group of people by the name of Satoshi Nakamoto
published a paper on a new type of currency, a currency that exists only on the
Internet. But unlike its predecessors, like DigiCash and the Chaum-Fiat-Naor
scheme, that failed, Bitcoin introduced new ways to safeguard against the fatal flaws
of the other cryptocurrencies (Drainville,5).
Bitcoin functions without a third party intermediary facilitating the
transactions of the person sending the money and the person receiving money.
Instead, these transactions are verified by a system of nodes that examine the
legitimacy of the money being sent by identifying the blocks being sent. Blocks
contain the electronic signatures that identify the users who have used the Bitcoin
in transactions before. The blocks are traced all the way back to the creation of the

Bitcoin, confirming the legitimacy of the money being exchanged. Once that is
confirmed, a new block is formed, containing the signatures of both the new and old
owners, and is placed within a public ledger, therefore the person holding the
money is accountable to the public if they try to commit fraud within the system
(Nakamoto, 1-8).
Since the beginning of Bitcoin, it has evolved into a more viable option of
trading currency for goods. The fact that Bitcoin exists on the Internet makes it
vastly better as a global exchange of funds. That coupled along with the fact that
there are relatively no transaction fees makes it a good option for people who need
to send money to people in other countries in a timely, efficient manner without
having to deal with having to pay large fees for wiring money (Van Alstyne, 30).
Bitcoin has already shown that it can be used as a safeguard when other currencies
begin to face inflation. In 2012, Iran faced an inflation crisis in their country. The
value of their money was rapidly decreasing. People began trading their Iranian
currency for USD because of its relative stability. Once USD in Iran became hard to
come by, people began looking for other options. One of those options was Bitcoin
(Ly, 594). In addition to having a more stable currency, the Iranians who traded for
Bitcoin now had an easy way to send money out of the country and receive money
from within. Due to the decentralized nature of the currency, Bitcoin can be moved
with ease compared to wiring money or transferring money through banks.
Instead of banks regulating the creation and inflation value of Bitcoin, it is
done by the public in a process called Bitcoin mining. In this process, miners use
their computers to verify the transactions of other users making sure it is a

legitimate transaction. One the transaction is verified; the user who completed the
verification gets a small amount of Bitcoin, thus a new Bitcoin is created. Miners
take the place of financial regulatory bodies that create currency and control its
value, allowing Bitcoin to be free from a single entity that controls the system.
In countries that have easy access to the Internet and cheap electronic
devices, having a digital currency makes sense. But in 2014, only 40 percent of the
worldwide population uses the Internet (ICT, 5). This means, if a universal digital
currency were to be in use today, the majority of the global population would have
no way to access it. But as the percent of the population that has access to the
Internet continues to rise, a universal digital currency might begin to make sense.
For example, take Apple Pay, the newest invention by Apple that is trying to
revolutionize the way the commercial industry exchanges money. Apple is trying to
have it so people no longer need a plastic card to pay for goods; they think it should
be done on an Apple device. The appealing aspect to this new invention is the
security measures that come with it. It is hybridization between Bitcoin and a credit
card. If Apple Pay succeeds, it may pave the way to a future where currencies is
more secure and digital, just as Bitcoin is today.