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Comparison of the resources and capabilities required to mine cryptocurrency by small home users and large commercial factories

Discuss about the Strategic Management for International Financial Management.

The trend of commerce on the internet has now turned to heavily rely on the financial institutions, therefore serving as the third party during the electronic payment processes. Though the system works well for most of the transactions, it still suffers from the deep-rooted weakness of trust based models. The weakness of confidence based model occurs in cases where there is no reversing of transactions which results to mediating disputes among the organizations (Ansoff, 2014). The resolutions of disputes lead to increase the cost of operations, the process that limits the threshold transactions size and more so reducing the possibility of small and friendly deals. On the other hand, the broader cost of transactions results in the inability to make none-reversible payment to cater for non-reversible services.

For the success and the need for trust, the stakeholders should be aware of their client’s expectations and collect relevant information concerning the services they need. Though the uncertainties such as fraud tend to exits, there must be a trusted party to make the payment over the communication channel (Birkinshaw, 2004). To do away with the third or the trusted party, the introduction of an electronic system that typically relies on cryptographic is ideal. The system would enable a transaction between two people without the need of the third party. To protect sellers and buyers from frauds, the implementation of common escrow mechanism is acceptable (Jeyarathmm, 2008). The system works through the server that works by generating the computations proof sequential order of all transactions. The calculation system is more reliable and secure so long as certain nodes control more CPU power as compared to any cooperating group of the attacker nodes.

For local and an average small-scale home user bitcoin miner, it would be a bit hard to regain the cost of mining the hardware and that of electricity. In this situation, the profit margin for the home miners is highly unlikely. The situation can improve in future if measures such as ASIS mining hardware innovation clench and reach the point of diminishing the returns. On the contrary, cheap cost of electricity and sustainable power solutions makes the mining of Bitcoin to be profitable to all individual including the small-scale miners across the globe but favors mostly large commercial factories (Sadler, 2004). Through decentralization of Bitcoin network, would guarantee the improvement of hardening process that works against the legislative risk.

The costs and viability of mining bitcoin

Gold rush refers to early days of mining bitcoin. Bitcoin, the invention by scientist Satoshi Nakamoto open the perimeter of not only freedom but also the profit margins, hence the peer to peer electronic cash transfer (Appannaiah, Narayana Reddy, and Ramanath, 2009). The actively interested individual like cryptographers and cypherpunks were the first make their claims in bitcoin, hence referred to as the technically minded librarians and also the group of people called assorted hackers.

For casual and an average home bitcoin miner, it would be a bit hard to regain the cost of mining the hardware and that of electricity. In this situation, the profit margin for the home miners is highly unlikely. The situation can improve in future if measures such as ASIS mining hardware innovation clench and reach the point of diminishing the returns. With hopefully cheap and sustainable power solutions, the mining of Bitcoin would be profitable to all individual including the small-scale miners across the globe (Blackstone, n.d.). Through decentralization of Bitcoin network, would guarantee the improvement of hardening process that works against the legislative risk.

The hidden technology behind Bitcoin and the boom in the cryptocurrency are increasingly becoming the threat to the central banks. The executes of a major central bank were happily watching the progressive movement of the cryptocurrency through trial and error safely acknowledging the cryptocurrency making insignificance comparison of approximately $5trillion of circulation of day to day current currency market. But as of late, the executives have turned their eyes to ever-increasing depraved technology (BRIGHAM, 2018). The risk of using cryptocurrency would be that they are acting too late both the pitfalls as well as the great opportunity that’s is brought by digital coinage-to the point that’s central banks no longer in position to treat the cyber currencies as toys to joke around within the sandbox.

The threat is widespread to the point that even the chief advisor responsible for China Banking and Regular commission as well as the distinguished individuals of Asian Global Institute at Hong Kong University (Financial management, 2014). The people acknowledge that it’s the right time for them to realize that real merchants and barbarians are standing at the gate restless. The best-known digital currency-Bitcoin together with its peers has to pose fear and threat to the already established monetary system through conveniently circumventing it (Brigham and Ehrhardt, 2017). As the regulatory factor, money fully depends on the sets of an author by positive start for credibility, with central bank being classically managing the price value and its quantity as well. With the introduction of cryptocurrency, all the author by a statement about money system become dormant and instead turn to rely on powerful technology, which is un-hackable hence guaranteeing its value.

The threat of cryptocurrencies to hard currency banks

More individuals are adopting this system of bitcoin and therefore if the government would not intervene, then central bank could witness massive erosion regarding their regulatory act of money supply. The ever growing business concerning bitcoin would outshine the central bank, and if appropriate measures are not taken, the central bank would be forced to join them. To remedy the situation, the principal bank of various states has put up strategies which include the launching of the joint research project which tailored ways using the distributed ledgers. The main aim of the technology is to replace the cryptocurrencies for purposes of market infrastructure (Knott, 2004). On the other hand, the Dutch government has come up with their cryptocurrency that is used for ideally internally circulation purposes, to enable them to discover its operations.

The Dutch central bank has come up with their cryptocurrency for internal distribution only, to comprehend how the cryptocurrency mode works. Additionally, the former chairman of the U.S. Federal Reserve -Ben Bernanke, the form is in support of the cryptocurrency as the largest and digital currency of this era (Foundations of financial management, 2016). Furthermore, Russia has also eyed on the blockchain program and hence categorized as the second biggest after China regarding digitalizing currency.

Dating back from the time the cryptocurrency existed that is in 2009, the new technology propels by virtual currency, and its nature makes anonymous in criminal cases that arise from various organizations (Madura, 2018). It’s of concern for law enforcers in any organizations to come up with regulations and rules to monitor the operations of cryptocurrency unless otherwise, the crime rate would be more likely to happen. Through research, it was found that the cryptocurrency work through decentralization of public ledger system, widely termed as the Blockchain.Furthermore, the majority of cryptocurrency work by running the system created by highly trained but unknown individual. Typically, the blockchain operates just the way electronic signature key-that is the hash codes of cryptography is printed on public ledger system. Once the coin in cryptocurrency is created through the process of mining on computer node, the series of complex mathematical computation, a calculation is performed (Pandey, 2015). The process of computing is termed as proof of work, the original signature together with hash coded of the coin is fed on the public ledger on the first node after which is transmitted to all the node in the network system of the block. Upon the completing the transmission process of a block to respective nodes, they verify that the transaction is valid, after which a copy is printed on the public ledger account.

The criminal cases on usages of cryptocurrency

Although the secret electronic signatures of individual user are contained the coin, there is no identifiable personal details and information. From the wide array of view, this the cryptocurrency system would allow individual to see all the transactions that one has conducted through the electronic signature. However, the system would not allow identifying from who the exact location where the operations emanated from or where it’s terminated.

Looking at future scenarios incorporating the cryptocurrencies the Global Public Policy Institute would create room for future where terrorism devolves back to populist movements and employs decentralized hierarchy heavily influenced by online interactions (PRASANNA CHANDRA., 2011). The hope for tomorrow concerning cryptocurrencies could allow groups conveniently transfer money between supporters and single or between the small group operatives as well as being used as means of buying and selling software used in cyberterrorism attacks and support physical terrorist attacks as well.

Cryptocurrency is currently categorized as the system that works to exploit a massive vulnerability on the globe regarding financial. However, the legal systems and law enforcement organizations are constantly on through research to acquire the knowledge and tools to eradicate the illicit use of cryptocurrency (Bensoussan and Fleisher, 2008). Furthermore, the law enforcement agencies and regulators posit that cryptocurrencies are in their early stage of infancy, with intense and massive changes in their operation, in trading aspect and foundational technology aspect are reported to have realized radical change.  This rapid change cryptocurrencies would facilitate its capacity to configure its stability or to attain its mature state, which means that there would be the unpredictable moving target to track and hit.

The collaboration with which China and Japan have encouraged the very efficient system of currency has significantly contributed to their significant success digital money circulation. Furthermore, cryptocurrencies have become well known and of great value. More so, people could have depended upon them in some years back. The value of a bitcoin has highly risen and even exceeding some billions of the currencies.

Also, the currencies have reflected the great potential in its viable and reliability hence increasing capacity to be adopted by banking institutions (PRASANNA CHANDRA., 2011). The making of the street has encouraged the mode using cryptocurrency systems in years to come, which would enable the onset of payments using bitcoins and the countries like New York has been licensed to trade. However, some sad information concerning cryptocurrencies has come up as well, such as leakage of information leading to robbery case in the process of currency exchange the tuning of millions.

Nevertheless, cryptocurrencies can be stable than the native currency in the two countries although they are not independent. Somehow the way they are much far from it, prices can be raised as many drops are not frequent, and public opinions can be valuable. The illustration by Mark Cuban issues perfectly as he searched in the Twitter, knowing that Bitcoin was not a currency, its value dropped at a high rate (Pandey, 2015). Recently, Ethereum also lost his 4 billion of money value when a sad story came that Vitalik Buterin, who was his founder died in a road accident Cryptocurrency as apparently risen and they can no longer be ignored as it is new and the major system in the world. But the biggest question to be asked is what will the whole world adopt this system of currency and the system of finance?

Bitcoin cash saw its value surge immediately following its inception and was thus ranked as number three in the market capitalization that stood at 8 billion dollars following a report by the coin market cap. However, two currencies are ahead of Bitcoin cash with regards to market capitalization, and these are Bitcoin and Ethereum. The sharp rise of Bitcoin Cash as a cryptocurrency due to the larger capacity it offers regarding commanding a large block as compared to the Bitcoin in the first phase of trade. However, it is critical to note that investments in crypto coins and tokens are a speculative affair and that the market is unregulated. Any person willing to enter into such a venture should be prepared to lose either the whole investment. As planned by the backers on August 1, the launch of   Bitcoin came well ahead of the stipulated time. There are high expectations and hopes for the Bitcoin cash in future in light of generating more interest for the miners and investors.

Ethereum is a computing network that operates on a universal basis and operates as dictated by Ethereum software. According to Ethereum network, it was programmed to finish some computing jobs with a connection where every computer in the network is completing the task ensuring that the task has been performed accurately and precisely. Most of the tasks involve money. The creator of Ethereum compared it to a smartphone that has an app and thus operates as per the apps in it. The apps in Ethereum are known as Dapps run by a decentralized connection of computers.

The Ethereum network developed its virtual currency known as ether. Ether is the currency that is needed for paying the other computers in the network in completing some tasks. It is a network that uses Ether in paying the power of computing for the connected computers. 

Bitcoin is an emerging currency that was developed in 2009 by Satoshi Nakamoto. There are no middlemen and no banks in the transactions. With Bitcoin, no names get mentioned in transactions, and many merchants are beginning to accept it as a medium of conducting their businesses. Bitcoins are gain familiarity in the international market as it was cheap and is not restricted to any regulations as opposed to other currencies. Small companies also prefer Bitcoins as there are no fees charged compared to a credit card. For some people, Bitcoins have become a lucrative business where people purchase them and keep them hoping their value will go up and thus sell them.  

Schermerhorn describes the five forces model as one that involves intense competition and rivalry in an industry that is comprised of firms and may lead to implications. The competition in this industry involves the Bitcoin monetary system versus the monetary systems that follow the traditional approach.

The existence of a competitive force that is compelling may be termed as an opportunity as it reduces the profit margin. The presence of a force that is weak may be perceived as an opportunity since it will create more room for profit making to an organization. The Porter’s five forces strengths are dynamic and thus will change depending on the prevailing conditions. It is the role of the managers to understand how the changes may be manipulated in offering opportunities and thus develop strategies to address the opportunities.

The entry of a new player in the market involves threats generated by new competitors joining the market. For many decades, the traditional money market has been a dominant player in the money market and the central banking mechanism has been playing a vital role in the banking sector. Bitcoin monetary system is providing a platform in the money market that is unique among its competitors thus maintaining its rank.

The supplier with regards to Porter’s model involves the bargaining command from different aspects. It includes the agencies that generate currencies into the system. Also, customers form the buyers’ bargaining power. The customers also provide a platform for opportunities for the two monetary systems to compete. The substitute, in this case, is Bitcoin. However, as noted the system is aiming to move away from traditional money and thus poses a threat to the traditional monetary system.

It is augmented that the traditional monetary system is the most lucrative currency sector. Suppliers of this sector are bountiful and undifferentiated. They entail employers, institutions, and enterprises. Buyers hail from the different sectors of the economy.

The entrance of new players in the market seems to create technological implications that are termed as a threat. The advancements in technology provide room for new entrants that bring along a new technology raising the bar in the market. Rivalry here is between the Bitcoin and the traditional money. According to the custom, the money system involves physical transfers of cash among the customers. On the other hand, the Bitcoin aims at currency transfers over the internet in what is referred as virtual currency. It is, therefore, true that the operations of this technology are real over time. Much pressure has been impounded on traditional money system to cut down its charges to remain relevant.

The political analysis involves the support of the government for a particular innovation from any regulatory authority. It is the political environment that formulation of policies and regulations that provide a favorable environment for good performance. The political environment encourages the operation of Bitcoin and other firms in the industry. However, regulations are continuously increasing their war on cybercrime, and thus threaten the operations of the business in the monetary industry.

Economic analysis entails on the benefits that innovation has in generating monetary gains. It is fundamental to note that the business environment entirely depends on the economic atmosphere in the country. The U.S economy and the global economy, in general, seem to be recovering and is, therefore, a good indicator for the Bitcoin with the heightened levels of economic activities.

An analysis of the social, cultural aspects entails the implications that a project will have on the society. Technological frameworks refer to the mechanisms that have been employed in incubating an idea. Legality here refers to the support that a government awards to a project and the compliance with the environment and also sustainability.

A huge problem lies ahead over the implications that the technology has on a monetary system with regards to transactions conducted over the internet. The internet is thus a subject of concern for the firms that pave the way for such transactions taking place.

The environmental forces at play may be overwhelming due to the sophisticated nature of the industry. The hurdle is separating the fundamental factors from the less important ones. Elements that seem to relate to each other seem to pose greater implications. Based on the analysis, many opportunities lay ahead with regards to the Bitcoin money system that is the virtual fund transfer over the web. Thus accords the customers the opportunity to purchase items without using real cash.

Pestle analysis is used in identifying the macro-environment affecting the business and the ones that are likely to impact the business in future. One of the main motives of PESTLE is to identify some factors that are likely to have significant implications for the organization.

List of References

Ansoff, H. (2014). Strategic management. [Place of publication not identified]: Palgrave Macmillan.

Appannaiah, H., Narayana Reddy, P. and Ramanath, H. (2009). Strategic management. Mumbai [India]: Himalaya Pub. House.

Birkinshaw, J. (2004). Strategic management. Northampton, MA: Edward Elgar Pub.

Blackstone, W. (n.d.). Commentaries on the laws of England.

BRIGHAM, E. (2018). FUNDAMENTALS OF FINANCIAL MANAGEMENT. [S.l.]: SOUTH-WESTERN.

Brigham, E. and Ehrhardt, M. (2017). Financial management. Boston (MA): Cengage Learning.

Financial management. (2014). London: BPP Learning Media.

Foundations of financial management. (2016). [Place of publication not identified]: Mcgraw-Hill.

Jeyarathmm, M. (2008). Strategic Management. New Delhi: Himalaya Pub. House.

Knott, G. (2004). Financial management. Basingstoke: Palgrave Macmillan.

Madura, J. (2013). International financial management. US: Cengage Learning Custom Publication.

Pandey, I. (2015). Financial management. New Delhi: Vikas Publishing House PVT LTD.

PRASANNA CHANDRA. (2011). Financial Management. Tata McGraw Hill Education Pvt. Ltd.

Sadler, P. (2004). Strategic management. New-Delhi: Koganpage India Prt. Ltd.

Belanger, F. and Van Slyke, C. (2011). Information systems. Hoboken, N.J.: Wiley.

Belloc, H. (2007). On. Freeport, N.Y.: Books for Libraries Press.

Bensoussan, B. and Fleisher, C. (2008). Analysis without paralysis. Upper Saddle River, N.J.: FT Press.

Dess, G. (2012). Strategic management. New York: McGraw-Hill/Irwin.

Onsman, H. (2004). Management powertools. Sydney: McGraw-Hill.

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