The Future Of Bitcoin: Potential And Challenges

Bitcoin as a Protocol

Question:

Discuss about the Analysis and fundamental value of Bitcoin.

There is no degree of certainty in relation to the future of bitcoin. Most of the people contemporarily agree that the future of bitcoin is bright. There are not a few caveats present in the statement. This section of the paper throws  light upon the question related to the future of Bitcoin.  As a protocol bitcoin itself is going to evolve. The simple fact that it is first a protocol is forgotten by many people and the money part is the initial app provided through it.  It can be compared to HTTP as which is predominantly written for Netscape Browser. At its time it was very good but then it was dethroned when other browsers took the mantle.  The application of similar analogy can be done in relation to the future of Bitcoin.  There are chances that it can be by other kind of crypto currencies such as Litecoin or Dogecoin and they may prevail in the future.  The buying process in relation to bitcoin may hamper its future and with the current process being continued its future does not look much bright. The buying process of crypto currency is going to be more streamlined, making it easy to purchase and therefore the complex purchase procedure is certainly going to hamper the future of Bitcoin.  There are high chances that regulations are going to be imposed in most of the countries on companies which indulge in the process of trading bitcoin into the local currency. According to Barkatullah and Hanke (2017) it can easily be predicted that more and more exchange companies are going to mushroom and there is going to be significant rise in the price of bitcoin as depicted from the graph in appendix 1.

Figure 1- Bitcoin Compared to US Dollars

Source: (Iqoption.com 2018)

It has been provided by (Iqoption.com 2018) that unless and until the buyers keep asking or pressuring the merchants to accept Bitcoin, the merchants would be obvious in relation to its demands. It is rightly expected that when people would walk into any store and ask that they are going to accept crypto currency or not the stores are going to say no. however when ten other buyers go to the same store and ask the same question to the sellers that whether they are going to accept Bitcoin or not the answer of the stores may change and they may think about accepting bitcoin as a currency in the future. 

Possible Alternatives to Bitcoin

Bitcoin would be loved to be adopted by most of the developed world where there is unavailability of instantaneous person-to-person payment methods. The barriers itself act as the regulators of the future of Bitcoin. For instance where it comes to the future of Bitcoin in a country as India there are no exchange in India. The situation is same when it comes to Bangladesh, GCC, Pakistan , Thailand (although few players are there who are selling Bitcoin in Thailand) and northern Africa. A significantly large population does not have any access of purchasing Bitcoin which may have a considerable adverse impact on the future sustainability of Bitcoin. As the population is not able to purchase the currency there is no question arising in relation to its trade in the future. However if there is a change in all this as predicted by Eyal et al. (2016) in the coming years it may considerably enhance the sustainability of Bitcoin in the future Market.

Freecodecamp.org (2018) has predicted in relation to Bitcoin that volatility is going to be minimized. Although there is a significant doubt in relation to its disappearance, at large the public is very sensitive to anything which is depicted through media in relation to Bitcoin. Therefore the media has a significant role to play in relation to the future of Bitcoin in the economy. Arbitrage in relation to Bitcoin is now negligence but it is going to increase considerably. As soon as a few authoritative anchor users start to accept Bitcoin the movement is going to pick up speed. There are already several speculations that market hotshots like starbucks are planning to accept Bitcoin in the coming years.

Apart from certain loopholes, the technology of Bitcoin is quite high and the price value of the system is increasing in nature. However, no one can give a definite explanation regarding the future of Bitcoin. Bitcoin is a protocol and the money transaction is just a part of it (Extance 2015). However, everyone wants to place it as a process of exchange. This idea will underestimate the real definition of the system. It has been observed that most of the retailers are using the system as their exchange and money transaction process. That helps the system to increase the price value and therefore, the volatile mentality of the system can be resolved (Luther 2015). 

However, it is impossible to abolish the volatile nature totally. Many countries have taken the system as an alternative of payment and that will widen the future market capacity of Bitcoin. There is an ongoing controversy over Bitcoin’s status as an asset or a currency. In spite of that, many developing countries are adopting Bitcoin as their alternative currency (Cheah and Fry 2015). The chance of huge monetary crash is low under this system and therefore, the investors or users are feeling safe to transact their money in it. Further, the personal information of the users is remained in a hidden condition and it is not easy to trace out the transactional records. Bitcoin is based on decentralised system and therefore, the users can control their own money without any interference of the central banks. It has been observed that this process enhance the quantity of transactional rate on daily basis (Van Alstyne 2014). Therefore, it can be assumed that the future of Bitcoin is quite bright as the modern retailers are showing their interest on the crypto currency system.

Challenges for Bitcoin Adoption

However, the future of block chain technology and internet is associated with the future of Bitcoin (Paglier 2014). Bitcoin is a popular transaction site based on decentralised payment system. The site has earned its reputation as the user can transfer their fund on international basis and they have to pay small amount of fees for that. The whole theory of Bitcoin is based on the crypto currency system and it is the first crypto currency-based transaction system in the world and the rating rate of the system is very high. Therefore, it easily earns trust of the investors and that make the future of Bitcoin strong. The modern world is quite depended on the internet and smart network-based system and therefore, it can be predicted that Bitcoin will easily get an increment in their market.

On the other hand, the block chain technology helps the system to be more efficient and trust worthy in the market. It helps to exclude the power or interference of the central clearance house. It prevents the double spending process (Eyal et al. 2016).  

However, certain challenges are cropped up in the transaction process of Bitcoin due to the absence of any regulatory authority. There is huge scope of money laundering and tax evasion can take place. It has been recorded in the history of Bitcoin that the many illegal activities have been included under the shadow of Bitcoin and in the year 2015, the site of Bitcoin was hacked and the company has to face huge amount of monetary dilemma due to this. Additionally, every users of the site is stranger to each other as the personal information of the users is hidden in nature (Sasson et al. 2014). Therefore, they do not even know to whom or from whom they are collecting or transacting money. Further, there is no controlling authority and that makes the site more risky to the users. 

It has also been observed that the value price of Bitcoin is too unstable and the price value can be fall down at any time. Therefore, if any user invests his money in Bitcoin for its huge price value, he may face huge loss if the value falls.

The system of crypto currency is unknown to many people and could not be handled by any novice users. The user should be well trained and should have enough knowledge on the system.

The Role of Media in Bitcoin's Future

In the words of Starry Peng, the success of Bitcoin will help to point out the future of the crypto currency system and it can be stated that the growing popularity of the system can change the view of money transaction by 2020. However, the loopholes of the system should be removed with highest priority. Whether Bitcoin is money or a token is controversial in nature (Van 2014). However, it is true that Bitcoin has created significant role in the history of finance and the growing nature of the price value of the system has indicated the strong future of Bitcoin.  

Where more and more corporations will start to offer bitcoin in form of a payment alternative, other organizations who are awaiting in the shadows would be ready to take the opportunity and jump onto the bandwagon. This change reaction which is significantly important for the survival of bitcoin in the future is going to determine its future in the economy. However it has to be noted that many organizations are waiting for such reaction to be triggered so that they are able to take timely advantage.   There is a significant doubt over the question whether the price of Bitcoin in the coming two to three years is going to be more than $5000. The expectations which the bitcoin holders have that the price is going to reach about $25000- $30000 is not going to be worthy and profitable. This may lead to too much of speculative money to enter the system which will eventually force the regulators to come down hard on Bitcoin.  The future of bitcoin also depends upon its acceptance as an alternative currency in the developing countries.  It is possible that the currency may out rightly be banned. According to Alqassem and Svetinovic (2014) regulators operating within the developing countries have a considerably myopic vision when it comes to alternative currencies. The obtuse undertaking is very likely to cast a showed over the legal future of Bitcoin in the developing world.  Through market capitalization it is indicated in a certain manner that Bitcoin has now become too big an agency to collapse. Thus it is likely to have a sustainable future by the measure of its own self. 

In addition there is going to be regular featuring of Bitcoin in the remittance world. One of the most significant sign of its success would be the report of world band in relation to remittance figure of bitcoin platform. However the debatable question in relation to this is how is the situation going to be achieved. There is no current evidence to back this situation.  There are chances that snap payments through the use of Bitcoin for freelances and websites may be enabled. This suggest that there may be emergence of payment platforms like Bitpay.

Thus it can be stated that there is no concrete evidence which would be able to appropriately predict the future of bitcoin. On one hand it has the potential of becoming a global currency and on the other hand it may also be dethroned by some of its competitors. However given the brand bitcoin has become it is most likely that the future holds more positives than negatives in relation to the currency. 

Reference

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Extance, A., 2015. The future of cryptocurrencies: Bitcoin and beyond. Nature News, 526(7571), p.21.

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