Bitcoin Analysis

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This paper analyzes the ongoing issues of Bitcoin and examines to what extent Bitcoin would serve as an alternative to conventional currency. After describing the historical background of Bitcoin in terms of monetary standards and its mechanism, two different views on Bitcoin as an emerging currency are discussed. Despite its huge potentials and innovative features, it shows that Bitcoin is still in its ongoing process of development. In conclusion, it demonstrates that it would take some time for the Bitcoin to be developed enough and also the thorough evaluation is needed from the public until it matures and becomes stabilized.
1. Introduction
First designed and introduced by Satoshi Nakamoto in 2008, Bitcoin is a decentralized, anonymous,
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In ancient times without currency, people directly bartered their possessions with others based on their needs. However, the barter system soon turned out to be an inefficient system since it was nearly impossible to measure objectively the values of different properties (Ritter, 1995). Ever since people had realized the need for an object as a means of payment in order to facilitate their transactions, they began to introduce the monetary system. From the period of commodity standards to the fiat standards, the form and the structure of currency has been developed over…show more content…
Satoshi Nakamoto, a pseudonym as an unknown developer of Bitcoin system, once stated in the open forum that:
The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. (P2P Foundation, 2009)
Bitcoin was designed by Nakamoto by applying an algorithmic scheme as an electronic currency in the way that the production of bitcoins to be controlled not by the government or any central institutions but the cryptographic rules and the participants of Bitcoin system known as miners who solve the crypto puzzles (Barber, Boyen, Shi, & Uzun, 2012). Participants in the Bitcoin open-source compete with each other by using their computer power to derive a solution to the mathematical problems generated from the cryptographic rules which require considerable computational efforts. According to Reid and Harrigan (2013), this whole process is referred to as mining which involves the verification of transactions and the issuance of the Bitcoin. The effort of processing is directly related to the reinforcement of security and integrity of the Bitcoin system itself as well. The more the users devoted to the problems, the stronger the Bitcoin system becomes against outside attackers (Barber, et al.,

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