By: Allyson Mendez
Bitcoin has made headline news since its debut in 2009. There has been a debate on whether bitcoin is the future of currency or if it’s just another passing fad. But first, what is bitcoin? Bitcoin is an anonymous cryptocurrency that is supposed to be used as a secure way of making purchases online. Bitcoin is neither backed by a bank, nor is it printed. Bitcoins are made by a high powered computer that uses a system of mathematical formulas to “mine” bitcoins and distribute them on a wide network (Agarwal). Mining is when bitcoin transactions are verified and are added to the block chain or record books (Agarwal). There is also has a hard cap at 21 million bitcoins in circulation as of right now (CNN). While in its early years Bitcoin was not taxed, many countries found that Bitcoin could make black market trading much easier to do. In the US, we tax bitcoin the same way that you would with any of your assets like property or other investments. The IRS has also made it mandatory for bitcoin users to keep a thorough record of every transaction made using bitcoin.
Bitcoin gives you quite a bit of freedom to do whatever you want to do with your money. For instance, there are no central authorities such as banks that could potentially hold your money or pile on extra fees. In addition, Bitcoin is also not held together by any borders or boundaries through things like currency exchanges. There is also no real restrictions or regulations on bitcoin. For example, In May 2011, 12-year-old Erik Finman was able to turn his $1,000 into a million dollars by the time he turned 18 years old. Finman took the money that he amassed and created his
own startup online tutoring program (coinreport). Bitcoin is also great if you’re looking for an anonymous way to store your money. Now that PayPal has begun transferring money into bitcoins, it has become even easier to purchase bitcoins. At what cost are you paying for control of your money and security of your identity with bitcoin?
There are a few drawbacks with bitcoin. For example, since bitcoin isn’t backed by any banks its value is constantly fluctuating with the ever changing market. According the Guardian newspaper, within the course of 2 years’ bitcoin went from costing $300 to a whopping $11,000, then dropped down to $10,000 in December 2017, and again dropped to $8,399 as of February 4th, 2018 (Partington). A big question that many people consider when buying into bitcoin is, what can I even buy with bitcoin? While many people who buy bitcoins often use them like stock and sit on them until they become more valuable, there are very few places that accept bitcoin as a form of payment. As of 2018, most of the stores that will accept bitcoin are online retailers and small online businesses. Subway, Xbox, Reddit, Overstock are a few of the familiar businesses that have begun accepting bitcoins (Utermohlen). Another issue with bitcoin is that people don’t really know too much about it beyond the fact that it’s a type of online currency. Bitcoin is also still a relatively new technology and can be considered underdeveloped. In an article done by Time Magazine, Yale economist Robert Shiller spoke about bitcoin saying it “has no value at all unless there is some common consensus that it has value” and later went on to say that bitcoin “might totally collapse and be forgotten” (Tuttle).
There you have it: both sides of the bitcoin. There are upsides to bitcoin that beat physical money, and there are aspects that make bitcoin a risk. Whether you believe that bitcoin and other cryptocurrencies are the “currency of the future” or not, it is still valuable to look at both sides and weigh the pros and cons. When people become more aware of different currencies and investments,
and they can or cannot do for you, the more control you have over your money and how it’s being spent.