Bitcoin’s exchange rate
Bitcoin exchange rate is determined by the consensus of the users, and there is no ultimate value for the anchor. In other words, to avoid any confusion and in order to meet the inflation or deflation in the currency, the exchange follows its own rules of devaluation or appreciation.
Due to this the new universal currency is still in the early stages of growth, and there is a lot of volatility in the exchange rate. In May 2013, senior Bitcoin developer Garzik, told the U.S.
“Computer World” reporter that as Bitcoin demand exceeds supply, and the market is weak and small, it is obvious that the exchange rate volatility will continue for a couple of more years.
National currency substitution
Bitcoin users have expressed their willingness to pay taxes, but the national authorities have not yet introduced appropriate measures.
For example, in January 2014, the U.S. Internal Revenue Service (IRS) issued a statement to the National Journal that said: “The IRS has realized that there is a relatively large potential tax compliance risk through virtual currency, but the IRS is still going on with its research in virtual currency and is still trying to find ways for making the users pay taxes.”
Like all currencies, Bitcoin has also been used for illegal transactions, leading to it becoming an instrument of crime.
Bitcoin accused as a Ponzi scam
Bitcoin has been accused of being similar to any “Ponzi scheme” as Bitcoin exchange rates continue to rise, and the early miners of Bitcoin can profit easily.
After a long discussion, it is proved that the allegations are not true. For example, the European Central Bank carefully studied the analysis report of this virtual currency and denied all allegations that it is a “Ponzi scheme”.
In late August 2012, the owner of the Bitcoin Savings and Trust site shut it down, leaving behind about $ 5.6 million in alleged debt.
At the same time he was also accused of operating a Ponzi scheme. In September 2012, the U.S. Securities and Exchange Commission began investigating the case.
In the United States, an anonymous Web site of the Silk Road trade that was dominated by the self-proclaimed black Amazon Amazon.com which said that Bitcoin is its unique transaction currency.
In 2011, New York Senator Charles Schumer and others sent a letter to the U.S. Drug Administration, accusing the Silk Road of using Bitcoin money for the money laundering purposes.
And TOR, like Bitcoin is legitimate in using the technique like the Silk Road site, leading to the law enforcement agencies causing a lot of problems.
However, the core member of Bitcoin development Jeff Garzik said that although the identity of the parties are anonymous, law enforcement agencies can still use advanced network analysis techniques, and study transactions d
isclosed by the block chain to track individual Bitcoin users. In November 2013, the Silk Road was closed down the by the U.S. government.
In January 2014, the United States Department of Justice announced Bitcoin trading station operator Robert • Fayi La (Robert Faiella) and Charlie Shrem have been formally accused of involvement in money laundering, drug trafficking, and helping Silk Road convert $ 1,000,000 into Bitcoin.
Due to the legal implications and the severe stance of the authorities, the FBI forcibly shut down the online black market operators “Silk Road” and seized 144,000 Bitcoins worth about $28.5 million.
However, when compared to the other countries, the U.S. government has been quite friendly towards Bitcoin. The Chinese government has passed a new regulation limiting the transaction between the RMB and Bitcoin.
The European Banking Authority has warned that Bitcoin lacks enough protection for its consumers. Bitcoin can be stolen, and technically it is impossible to obtain any compensation.
Differences in the electronic money
Electronic money uses the traditional central server to manage technical programs, and as the data is stored centrally, it is prone to external attacks, and can be destroyed.
Bitcoin uses peer-network management technology, and through a global user base, the programs and data are distributed individually to each node in the entire network.
Bitcoin accounts are anonymous, however as the transaction history is completely open, anyone putting in enough time and manpower to go through the transaction chain, can in principle, track the real name of the user.
Bitcoin stock is limited and the issuance is limited, while the traditional issuance of electronic money is unlimited. This feature allows users to hold stocks of Bitcoin of greater value.
Bitcoin code is open, while the traditional electronic money codes are closed. Businesses, consumers, investors and service providers, can play around a set of open-source system to create a set of very rich services and financial systems.
Bitcoin’s value depends on the amount of users, while the traditional electronic money institutions rely on authoritative legal tender endorsement.
With government approval, the use of and participation in Bitcoin by individuals and organizations will increase, leading to increased Bitcoin market transactions.
Due to this Bitcoin has a huge appreciation potential. As the current number of people using Bitcoin is limited to a few thousands, and as there are billions of people using the Internet, there is a lot of room for growth, and this is currently the most important reason for strong confidence among Bitcoin holders. However, if you reduce the number of Bitcoin users, there will be a fall in its value.
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