bitcoins

1. Do you think bitcoins are approaching being unethical monetary instruments without technically carrying a value similar to real money?

 

Economists define money as an instrument that acts as a store of value, can be used as a medium of exchange, and is a unit of account. Arguably, bitcoin meets all three conditions. One can acquire bitcoin and keep them, and one bitcoin will still be worth one bitcoin, just like a dollar will be worth a dollar. Although in only select stores, bitcoins act as a medium of exchange. Lastly, bitcoins are fungible; one can price products in them, and also, one bitcoin is worth the same across the world. This feature makes bitcoin a unit of account. However, there are some technical differences between bitcoins and fiat currency.

 

Cryptocurrencies’ relationship with conventional currencies is a complicated one. Bitcoin aims to disrupt the traditional way to deal with money; therefore, Bitcoin vs. traditional currency is a natural conflict. The money took several forms throughout human history. There was barter, tangible items such as crystals or rocks, metals, paper money, banknotes, non-decentralized digital currency, and eventually decentralized digital currencies such as bitcoin.

 

With time, people established some desirable characteristics of money.  For money to  convenient and useful, it should:

• Be divisible — for other applications, may be split into smaller pieces like charging a specific sum or micro-payments.
• Be un-consumable — only for value exchange.
• Be portable — it is easy to carry around.
• Be durable — will not start to break down or depreciate over time or under other circumstances.
• Safe — no counterfeiting.
• Easily exchangeable
• Rare — not replicable without limit.
• Fungible — each piece is of equal value to its counterpart.
• Identifiable-it is known as a form of exchange and acknowledged as such.

Bitcoin’s principal distinction from conventional currencies is that no one regulates Bitcoin because it is decentralized. It allows Bitcoin to be an autonomous peer-to-peer money network that can operate independently of the wishes of anyone. It relies on the network participants ‘combined computing power, each of which is equal to each other no one is more or less important than the others. Furthermore, it reduces the expense of using the network by reducing preferably fees and transaction times, which banks need to remain in business.

Nobody will control personal money, and the transactions that she sends or receive. Fiat currencies, on the other hand, depend on centralized institutions such as central banks, banks, governments, payment processors such as VISA or Mastercard, as well as other intermediaries. These companies evaluate all transactions. Consequently, this evaluation also involves in-depth monitoring and information-sharing.

Another significant distinction is that Bitcoin is independent, unlike fiat. Bitcoin is unbacked; thus, there is no link between its value to any economic or political condition, and it may operate independently of the conventional system.

Further, Bitcoin is adding a new programmable element. In the future, digital signatures or other systems will only process transactions after meeting some conditions. This functionality will allow new applications built on top of bitcoins, such as reputation management programs, insurance contracts, or the like. No third-party interference will be needed to execute these contracts. Essentially it adds a new dimension to the conventional money concept.

Most people will cite the lack of backing as a significant difference between fiat currency and bitcoins. That is not necessarily true: while Bitcoin does not have something tangible to back it up, nor does the dollar. Historically, most currencies had metal backing, usually gold or silver, up until 1971. Moreover, this is no longer the case. Additionally, one can argue that the amount of energy used in mining is a form of backing.

Unlike conventional currencies, Bitcoin has no central authority claiming to back the currency. Further is prone to deflation due to artificial scarcity, as central banks can print more money at any time. It also has all transactions registered on an unchangeable public database indefinitely. Additionally, blockchain requires transaction fees charged to miners, which serve as paying government taxes, except cases of evasion exist in the case of taxes. At the same time,  a transfer is incomplete without blockchain fees. Indeed bitcoins are approaching to be monetary instruments without technically carrying a value similar to real money.

 

 

2. If bitcoins are used to buy drugs, firearms, or other products that are considered illegal in the country in which the bitcoins are being used, does that make bitcoins unethical?

 

No. Some of the most common ethical concerns against bitcoin are the inherent anonymity of those using the currency. That allows illegal activity to prevail in ways other currencies do not. The extent of anonymity of those who use bitcoin is not absolute, however. First of all, transactions using bitcoin are public on the blockchain with the participants in those transactions known by their bitcoin address, which serves as an alias. Therefore, anonymity ends once connected to a particular address. Mapping the IP addresses and analyzing the data made accessible through the blockchain makes linking possible.

 

 

Moreover, if an individual decides to purchase bitcoin using another currency or convert their bitcoin to another currency, they would need to use a system that needs their bank account and increasingly standardized types of personal identification to be used to verify their identity. That means the use of bitcoin is not entirely anonymous while a person can take more steps to increase the degree of anonymity when using bitcoin; these procedures are often not swift or straightforward.

 

Those using bitcoin for illicit activity have been traced and arrested, with one of the most notable being Ross Ulbricht. Founder of an online auction place, Silk Road, that only recognizes bitcoin as a form of payment, trafficking drugs, and many other illicit goods.

 

Bitcoin does not establish utter electronic lawlessness where law enforcement agencies are unable to enforce the law, contrary to common belief. Alternatively, the cryptocurrency needs a change from preventive regulation to reactive regulation. When the other currencies are used for purchases online, they usually do so via 3rd-party payment systems like Mastercard or Paypal. Those that use these companies are far more easily recognizable than those who use bitcoin, and governments may also control the providers. These third-party providers can deny suspicious payments or payments that are part of illegal transactions. It means that the federal authorities exercise a degree of vigilance concerning online criminal transactions, which in the case of bitcoin, is something that it cannot do.

 

Instead, law enforcement may respond upon an illegal transaction. Law enforcement is helpless in this way to prevent the law from being violated, but it also retains a degree of authority to enforce the law after a violation. That creates more significant levels of individual freedom in certain respects. Nevertheless, because of the great ease of engaging in illegal transactions in the first place, it causes considerable difficulties for law enforcement.

 

While using bitcoin for buying and selling does not automatically equate to a lawless market, some dread it will take a substantial level of engagement between the federal government and related agencies to make sure that oversight is imposed to reduce the risk of using bitcoin to finance unethical activities. Even so, the level of online preventive enforcement present with other forms of currency may still not be available with bitcoins.

 

This concern is pertinent to the issue of child pornography, where there is a growing trend to use bitcoin to buy such material. Bitcoin exchanges have done so far good work, and some of the biggest exchanges with the Internet Watch Project, an organization whose aim is to minimize the prevalence of child pornography on the internet, have been identified in order to find ways of preventing the use of bitcoin for such activities.

 

Bitcoin has a variety of beneficial applications, both existing and future. However, in ways that standard currencies cannot, Bitcoin can also be used for immoral purposes. Before we get to take advantage of Bitcoin while reducing negative uses, authorities must be diligent in collaborating with the technology and the entities, which accept bitcoins. If efforts are productive, Bitcoin can become a currency capable of improving our lives ‘use and benefit of currency.

 

3. Do you think the bitcoin system is “evil” as Paul Krugman suggests? Is it similar to Ponzi scheme?

 

This argument offers a valuable starting point for an assessment of bitcoin’s ethics, if only for its apparent mistake. Bitcoin is a volume of coding that is not autonomous but can only be used by conscious beings. It can certainly be used for immoral purposes, however, to say that this makes bitcoins  “evil” is like declaring every other form of exchange evil because it can and is often used for immoral activities. Bitcoin is amoral in its existence, that is, indifferent towards morality the same way a coffee table or desk is amoral. It is the use of the currency, which should be considered when evaluating the morality of bitcoins. Thus, we can note, as opposed to other monies, how bitcoin facilitate unethical or ethical activities.

 

While bypassing a central money transfer mechanism does not help fight fraud, it also ensures that funds transferred for legitimate purposes in authoritarian countries where payment providers are under pressure still reaches the intended party. The financing of Wikileaks is an example where governments are pressurizing third parties ‘payment services.   Once this group began releasing secret information of the United States government, several citizens felt obligated to make donations to the foundation, as they wanted more accountability of the US administration. Even though this was very appropriate, companies refused to accept payments to the foundation due to overwhelming pressure from the US government.

 

Using bitcoin for such transfers limits a government from exerting undue pressure.  US citizens used bitcoin payments to contribute to the Wikileaks foundation and circumvent the blockading of donations levied by authorities. In this case, it helped discourage governments from interfering with their citizens’ actions of liberty. The cryptocurrency helps boost the individual rights and organizations that challenge the power of the federal government by making it more difficult for authorities to prevent organized constitutional protests. Such decentralization of control will contribute to expanding society’s democracy.

 

On the other hand, despite authorities taking down some illegal online deep webs, criminals still favor Bitcoin. Recently, a report showed a record high in the use of the currency for unlawful activities.  According to data released by a company that monitors every Bitcoin transaction,  and helps to function as an advisor to many governments, the amount of cryptocurrencies spent on popular darknet platforms where one can buy credit or debit card details and a wide variety of illicit drugs through Bitcoin has increased sixty percent.

 

The continued rise in illicit buying and selling highlights the challenges that Bitcoin has encountered as an offshoot for reprobates, even as the institutions of Wall Street are beginning to purchase bitcoins and sell them.  The continued success of Bitcoin-driven criminal activity also points to the challenges facing authorities to curb the new forms of fraud that have been facilitated by the cryptocurrency.

 

 

Bitcoin was a pivotal contributor to the recent surge of ransomware attacks. Hackers encrypt or steal files and refuse to release them until they receive bitcoins. The currency remains prominent with cryptocurrency investors, and illegal transactions represent merely 1% of all bitcoin exchanges. However, the percentage represents a doubling from the previous year. According to Chainalysis, criminal activity emerged as one of the few aspects of the Bitcoin economy impervious to price change.

 

The data from Chainalysis is likely to underestimate the number of Bitcoin transactions that are associated with criminal activities because some of the ransomware, tax avoidance, and money laundering activities can never be detected. Many people who buy Bitcoin on legal trade are commonly thought to do so to contravene national laws.

 

On Krugman’s other claim, the cryptocurrency industry was, and continues to be vulnerable to Ponzi schemes. Something built on decentralized technology is difficult to stop and control, and as a result, can give birth to such schemes, but Bitcoin as a currency is not a Ponzi scheme or similar to one.

 

Unlike a Ponzi scheme which promises unusual returns, or asks people to recruit others for substantial monthly earnings, Bitcoin is simply a store of value and a medium of exchange. Often, Ponzi scheme founders end up running away with huge chunks of money. However, Satoshi Nakamoto, the Bitcoin founder, never scurried with many bitcoins. One may also contend that he possessed millions of bitcoins; he never stole from anyone or made them an unlawful manner. Instead, like any other bitcoin miner, he ran complete node and Bitcoin blocks, to be credited with the block rewards, to get new bitcoins.

 

Bitcoin, as a system, is therefore not “evil,” as Krugman suggested, instead it is the use of the cryptocurrency. Although the currency is more favorable for criminals to conduct their “evil” transactions, this does not qualify the currency as evil. Additionally, there are some organizations, i.e., Wikileaks Foundation, that are highly constitutional, but undue pressure from the government may stop funding to these organizations. In this case, the use of bitcoin funding becomes a necessary instrument. Moreover, Bitcoin fails to qualify as a Ponzi scheme. The common characteristics of Ponzi schemes are not evident in Bitcoin or blockchain technology as a whole.

 

 

4. Do you think that bitcoins were created as a weapon intended to damage central banking and money-issuing banks?

 

In its very nature, Bitcoin seems well placed to destroy central banks. Bitcoin is a digital currency that, as supporters of Bitcoin have said, “uses peer-to-peer technology to work with no central authority or banks.” Like all other financial problems, centralized banks have compelling reasons for and against the issue and its possible replacements. The Federal Reserve and other central banks can raise or decrease interest rates and generate or remove money to achieve these objectives.

 

Central banks may also allow more manipulation attempts to revamp the economy. These initiatives may include the acquisition of bonds to generate demand for securities. Higher demand contributes to lower interest rates, as the bank provides ready and able buyers would not require borrowers to pay a higher rate.

 

The attempts made by central banks to lead economies on the road to recovery are fraught with risk. Inflation may become an issue if interest rates are too low. The economy will slow down because costs are increasing, and customers cannot afford to purchase the things they want. If the price is too high, it stifles the credit, and thus hinder the economy.

 

The volatility of the national and global economies lay the foundations for the claim that these economies are too unpredictable for central banks to control efficiently. This claim can support Bitcoin’s peer-to-peer currency implementation, which removes central banks and their complicated schemes.

 

Moreover, since their establishment, modern central banks have faced criticism. Furthermore, there are broad and varied causes of discontent. Notably, many people are extremely troubled by the idea of monopoly control. Also, it is much more disturbing to have an autonomous, secret body with the power to control an economy. Many (including economists and policymakers) think that central banks make errors that have huge impacts on people’s lives.

 

 

The claim that central banks are no longer necessary is plausible in an era in which technology has allowed customers to exchange without having to have a central authority. A more comprehensive study of the banking systems across the world support this argument. Citations of the Great Recession and other scandals show this discontent. In particular, bankers in Greece and other nations have caused tremendous distress.

 

 

Another way Bitcoin may have greater personal freedom than centrally-controlled government-supported currencies is how the currency behaves amid inflation. Supercomputers used in bitcoin mining, generate additional and will generate significant new coins until it reaches the threshold. With the threshold, false inflation is practically impossible. This function distinguishes from fiat currencies, which often are inflation-printed, and which governments sometimes use them to address fiscal problems.

 

In attempts to prioritize wealth over individuals, organizations such as the International Monetary Fund are culprits. At the grassroots level, banking institutions receive billions by serving as intermediaries for individual transactions. The abolition of the banking system in this setting is an enticing idea for many.

 

Many with a more idealistic view of bitcoin could also argue that, because governments print money to help fund war’s high financial costs, bitcoin could be a useful currency to prevent governments from joining armed conflicts. Thus could be used as a weapon.

 

Today, central banks are the primary mechanism used for controlling national economies throughout countries. These institutions have monopoly control, but without a contest, they will not lose their power. Although Bitcoin and other cryptocurrencies have raised substantial interest, they lack governmental support. Therefore, bitcoin does not stand a chance to kill central banks or other money issuing banks unless they become fully recognized and supported by the government.

 

That stated, Bitcoin is watched and analyzed by central banks all over the world. Since the processing of metal coins is costly, central banks are more likely than ever to launch their cryptocurrencies.