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Bitcoin will strengthen the economy

I. Supporting Arguments

A. Bitcoin paved the way for digital currency to thrive in a tired economy

Bitcoin, the first decentralized digital currency, was launched in 2009 and has
since, gone on to be relatively successful in the world of finance. It experienced
rapid growth and is now accepted by over 82,000 merchants and has been the
precedent for a multitude of other cryptocurrencies. In only seven years, Bitcoin
has produced over 15,000,000 coins, worth over $5 billion. In such little time,
this self-sustaining currency has grown at an exponential rate considering it was
a completely new concept with no actual financial backing. It is a more complete
system than the current dollar bound economy that the United States maintains.
Crytocurrency expert, Michael Casey, says that Bitcoin is one of the most
powerful financial innovations in the past 500 years. It has the potential to
rejuvenate the nation’s economy through its ability to sustain itself without
government regulation or interference. The supply is fixed through mathematics
and algorithms rather than aimless discoveries of tangible rarities like gold or
silver.

B. Bitcoin has the potential overhaul an outdated payment system

The way our current payment system works can be illustrated through the
following example: purchasing an article of clothing from a department store.
When using a credit card, you simply swipe your card and carry on your way.
However despite this transaction seemingly lasting only a few seconds, it can
often take up to three days for the money to actually be decucted from your
bank account. That is because when a card is swiped, the financial system goes
to work. Your transaction travels on a journey through several mediums
including but not limited to a billing processor, the credit card company, the
department store’s bank and your own bank. In addition to this daunting
monetary course, the merchant must also pay a small fee for the transaction
(usually 2%-3%). However with Bitcoin, these steps are completely eliminated as
well as the transaction fee. When paying with Bitcoin, the transfer of funds can
be as little as seconds and generally no more than an hour; and because Bitcoin
is self-sustaining and requires no more than the systems on which it is built,
there is no transaction fee. Bitcoin has the power to revolutionize the way we
pay for things. All of the steps for processing a credit card swipe are costly and
inefficient. Eliminating them all together can put more money in the pockets of
consumers and therefore more money to spend.
C. Bitcoin is independent of government regulation and control

As mention previously, Bitcoin is an autonomous digital currency which requires


absolutely no help from the government in any way. In the past few years the
Federal Reserve has printed incredibly large sums money to finance government
expenditures. Currently, around twenty-nine cents of every dollar of federal
spending is printed by the Federal Reserve. They are creating more money in
order to cover vast debts. This hollow stimulation leaves the economy in a sort
of perpetual free fall in that it must completely rely on this system to sustain
itself. When it needs money, it prints it. When it runs out due to expenditures
and interest rates, it prints more; rinse and repeat. Bitcoin doesn’t need approval
from politicians and it surely does not require printing presses. Bitcoin is an open
sourced program and it creates more of itself through peer “mining”. Basically,
miners are individual and competing computer systems capable which have
been setup to run the Bitcoin program. Coins are “minted” when transaction
data, in the form of an amount, is absorbed by the computers which then run
complex algorithms through their own established networks. Miners are then
compensated for their time and efforts. Anyone can run and mine Bitcoins so
there is no need for oversight as to when more coins are required.

II. Counter Arguments

A. Bitcoin is insecure and susceptible to hacking

There have been several documented and high profile cases of Bitcoin and
comparable crytocurrencies being hacked and having large numbers of
deposited coins stolen. In September of 2015, 5,000 BTC totaling close to $1
million were stolen from BitPay, a Bitcoin payment processor. In addition to the
attack and loss of coins, insurance companies are refusing to cover the losses
citing indirect losses caused through hacking. This is a growing concern of many
skeptics of Bitcoins not only because of the clear fact that they can be stolen but
that insurance companies may not recognize and reimburse losses.

B. Bitcoin does keep detailed records of purchases possibly resulting in security


threats

The way Bitcoin processes payments is that transaction data is absorbed to an


accounting system run on an intricate network of mining computers and
recorded in a transparent public ledger called a blockchain ledger. It keeps only
balances and transfers but does not include detailed information such as the
location of the transaction, the person, and other information that a bank or
centralized institution normally would. This is potentially dangerous because it
makes it difficult or nigh impossible to track the purchase of illegal items such as
drugs or weapons. Vast sums of money can be transferred anywhere at anytime
using Bitcoin and there is barely any record of it. Obviously, cash can still be used
to make such purchases but bitcoin eliminates the need for to carry wads of
physical dollars when you can have millions of essentially untraceable dollars in
the palm of your hand.

C. Bitcoin will diminish the workforce surrounding the world of finance

Should Bitcoin continue on and pave the way for the success of cryptocurrencies,
it could have a profound effect on jobs based around finance. Normal payment
transactions necessitate banks, credit card companies, processors, lawyers and
accountants. Bitcoin on the other hand, does away with all of the
aforementioned mediums and there could render some jobs obsolete. With the
capability to slash trillions of dollars in financial fees, Bitcoin also carries the
potential to destroy a large portion of the jobs market. The economy, namely
major credit card companies would suffer greatly from transaction fees. In turn,
they may have to lower interest rates to attract people to sign up for new credit
cards which may then bring about another financial crisis.

III. Rebuttals

A. Bitcoin is virtually invulnerable to attack

It is true that there are many documented cases of Bitcoin payment processors
getting hacked and having large amounts of coins stolen, however that is the
result of the institutions themselves, not Bitcoin itself. In nearly all of Bitcoin
hacks, a centralized hub of deposited Bitcoins was targeted. It is very easy to
house your Bitcoins in a manner that is unhackable. It is not necessary for one to
store digital currency in a central hub, that is at discretion the of the owner.
Bitcoins are stored in “wallets” and it is possible for a wallet to a single USB drive
or even on a piece of paper. You do not need to have your bitcoins connected to
the internet or in a centralized location in order to have access to them. The
other reason for its near invulnerability is the fact that is is run on literally
thousands upon thousands of independent computers. It is simply not possible
to hack every system at once in order to obtain secure data.

B. Bitcoin’s privacy and anonymity are one of the most gratifying benefits for its
users

While true that Bitcoin does not maintain a record of detailed information
regarding payments and transactions, it does so in an effort to protect its users.
Banks and credit card companies keep ledgers and databases in-house on single
groups of security laden servers. While these do appear safe, they are vulnerable
to hacking and cyber attacks. What is even more concerning is that the sensitive
information of people is essentially in one central location making hacking easier
than Bitcoin. Hacks most often occur from within but with Bitcoin, there are no
people within only those who use it. As mentioned previously, Bitcoin is run on
thousands of computers and is impossible to hack. In addition to this, Bitcoin
does not record the personal information of the user, only that the transaction
occurred and an amount was transferred. This protects grants the user
invisibility from credit card companies and other financial institutions who use
personal information such as locations of places shopped, your name, social
security information and credit car numbers. It allows the user to fly under the
radar, not necessarily for illegal reasons but for personal reasons. The fact that
the little information that is collected is distributed over many computers grants
the user even more privacy.

C. Bitcoin will eliminate unnecessary jobs and create new opportunities within the
realm of digital currencies

Bitcoin and other digital currencies will do away with obsolete jobs such as
payment processors and other intermediaries. While it is possible for Bitcoin to
have a negative impact on the jobs market, in order to rise from the ashes, the
current system of payment must first be burned. With the loss of potentially
thousands of jobs in what we will call traditional payment, far more will sprout.
The prevalence of Bitcoin brings with it the need for Bitcoin ATM machine
designers, software engineers, digital currency coders and Bitcoin brokers. All of
these jobs would be intrinsic in an economy based around Bitcoin.
Bitcoin will Strengthen the Economy

City College of San Francisco; Macro Economics


CRN 38777; TR 9:40-11 AM HC 214
April 17, 2016
Professor McKeever
Kyle A Bowes; W10344325

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