Cryptocurrencies are disruptive economic innovation that have the potential to revolutionize the current economic structure and change how banks and financial institutions operate. Bitcoin is the most popular form of cryptocurrency that enables digital transactions between two parties without the need of an intermediary. Every transaction is digitally recorded in blocks which act like ledgers and once a block is filled a new block is created. All blocks are connected to each other using hashtags and a linear chronological sequence of these blocks forms a blockchain. Thus, every transaction is digitally recorded to keep security at a top notch level. Though the transactions are recorded, the information of the parties participating in the exchange is not revealed. The money can only be tracked when it is converted into cash. This public way of managing transactions has created the possibility of a huge revolution in the banking sector across the world. The economic power which lies with the governments and financial institutions is at stake which has made them wary of cryptocurrencies.
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5 Ways BitCoin is Impacting Banking, Finance and the Economies:
1. Power to the Dark Web:
Dark web is the section of the web that is not accessible through the search engine. What we are given access to is the surface web which is not even half of the existing internet. Dark web is accessible only through special software like Tor Browser which enables anonymous searching of the internet.
Dark web is the place where you can find assassins, weapons and a lot more illegal stuff. By using crypto currencies like Bitcoins people can make illegal transactions without giving any information about themselves. Cryptocurrencies like Bitcoins are a way to empower such transactions across the globe which will ultimately result in increased cyber crime.
As on 14th January 2015, Bitcoin was valued at $170 and as on 24th July 2017, it values at $2772. There have been many ups and downs in the value of Bitcoins and this scenario is likely to continue. Due to the extreme highs and lows BitCoins present a massive possibility for speculation. Just like trading in shares, trading in Bitcoins is massive and seeing the rise in traction around cryptocurrencies it is likely to grow further.
Another reason accounting to this is the increasing cost of investing in the stock markets. A share inor can cost around $150 while Bitcoins can be bought in fractions at a price as low as one-tenth of a cent. This makes it an easy target for speculative gains.
3. Politicization of Money:
Earlier all the monetary transactions were enabled through central banks (directly or indirectly). Now, with the evolution of Bitcoins, the scenario has changed. The power that was vested in the governments and central banks is shifting to the masses. This revolutionary change in transaction handling has the power to change the economic structure. To bring security and enable scrutiny, central banks and financial institutions maintain a record of all the transactions undertaken by the people. Now with digital currencies, this economic power can be challenged by people. This has led to the creation of a new autonomous body which can facilitate transactions. Ultimately if adopted on a large scale, Bitcoins can lead to the politicization of money.
4. Apprehension among the Central Banks:
There have been implications that Bitcoins can be used to secretly launder money outside the country. Central banks across the world have been wary of Bitcoins as an uncontrollable and unpredictable form of currency. Cryptocurrencies are leading to loopholes in the current bank’s data about the money transactions leading to inability to track economic activities. Crypto and Cyberspace has emerged as a power in itself thus bringing a check on the activities of the so powerful governments.
5. The Emergence of New Markets:
Cryptocurrencies have led to the emergence of new markets. Currencies like Bitcoin and Ethereum have opened gates for a new kind of market which unlike present money market is controlled by no one. Cyberspace will rise up as the managing body that will handle and maintain such disruptive markets. The near zero transaction cost (along with other characteristics) has made these currencies even superior to the traditional money we are accustomed to using. What can be surely stated is that it is just the beginning and the number of possibilities is endless.