Académique Documents
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I-Consult
The Consulting and Strategy Club
IIM Indore, Mumbai Campus
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“[Bitcoin] is a remarkable cryptographic
achievement… The ability to create something which
is not duplicable in the digital world has enormous
value…Lot’s of people will build businesses on top of
that.”- Eric Schmidt
“I think the internet is going to be one of the major
forces for reducing the role of government. The one
thing that’s missing but that will soon be developed, is
a reliable e-cash.”- Milton Friedman
Benefits
Better Security
Complex cryptographic algorithms and the magic of big numbers makes it
impossible to break this scheme. There is currently no transaction mechanism
that is currently more safe and secure than those that use cryptocurrency. It is
very less prone to attacks by hackers as a transaction after confirmation is
irreversible. No one can reverse it not even the bank or Satoshi or your miner.
Universal base
Global business entails exchange rate risks ether. Fortunately, with
cryptocurrencies like Bitcoin, that is a non-issue, as the digital currency is
universally recognized at a given value. This helps to save any fees associated
with exchanging money from one form to another as well as protects us from
risk of devaluation of home currency.
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“THE BLOCKCHAIN KEEPS EVERYONE HONEST, AND A WHOLE LAYER OF
BANKING BUREAUCRACY IS REMOVED, LOWERING COSTS.” — PAUL VIGNA
Cryptocurrency involves a decentralized peer-to-peer network to store ledger
accounts and hence does not involve any intermediary for the transaction to
take place eliminating the need for any third party delay and transaction fees.
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Next the transaction is validated which takes on an average 10 minutes.
The confirmation is done by miners who employ computers with
enormous amount of processing power in a cryptocurrency network.
Mining involves solving complex cryptographic problems (in bitcoin it is
based on SHA-256 algorithm) and the miner who does it first gets
rewarded with a specific number of cryptocurrencies.
After a transaction is confirmed by a miner, it can build a block and add
it to the blockchain. Every node has to add it to its database.
When a transaction is confirmed, it is set in stone. It is no longer forgeable,
it can‘t be reversed, it is part of an immutable record of historical
transactions: of the so-called blockchain.
Challenges to Bitcoins
Extreme Volatility
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just a formula, not backed by any tangible asset like infrastructure, fertile land
and skilled labour which will drive factors like inflation, interest rates,
government spending etc but by sheer demand. Though some vendors or
companies may accept cryptocurrency as payment options, for any government
to implement it may be a great challenge.
Besides these factors there are a lot more factors like 40% of Indian workforce
still does not have a bank account, which is a must for all the cryptocurrency
transaction. Transactions are manufactured by an anonymous group of
individuals called as miners, thus the typical middle class will always fear the
currency on the grounds of accountability.
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interest rates, but we cannot do it for cryptocurrency. Thus, the value of such
currencies varies by as much as 20 – 30 % if some important events occur.
Scams.
Some Hackers stole 72 million worth of bitcoins from a Hong Kong
exchange, Bitfinex. Following the price of bitcoin which went down by 20 %
immediately
Innovation.
In 2017, lightening protocol became successful which increased speed in
Block Chain methodology without compromising its speed, following which
the price of bitcoin sky-rocketed to the levels we know.