.jpg) |
| © Anykeen | Dreamstime Stock Photos & Stock Free Images |
By Phillip Yu
Bitcoin is a
peer-to-peer network-based electronic currency created in 2009 by an unknown individual
under the alias Satoshi Nakamoto. Bitcoin owners store bitcoins on “digital
wallets” and can transfer funds to others without the assistance of a central
governing agency or a bank. The processes of acquiring, managing and trading
bitcoins are largely anonymous. Some people use bitcoins as an alternative
currency while others acquire bitcoins as an investment much like stock, hoping
for value appreciation in the future. Currently, there are several marketplaces
that allow people to buy and sell bitcoins, with Japan’s Mt. Gox being the largest.
Theoretically, bitcoins have tremendous
potential positive impacts on international trade. First, international transactions
can become cheaper since bitcoins are currently unregulated, thus avoiding many
transaction costs. In addition, since bitcoins are not officially tied to any
particular state, political risk is relatively low. Further, bitcoins are less
susceptible to inflation, since bitcoin protocol demands a finite number of outstanding
coins. Lastly, the fact that the bitcoin is a single, consistent currency
eliminates the hassle and expense of exchanging currencies.
Despite accounting for a range of
positive theoretical benefits, the mysterious anonymity surrounding Bitcoin and
its connections to illegal dealings have garnered a great deal of controversy
and concern.
