A crypto-currency is based on Bitcoin which the work of Satoshi Nakamoto through various improvement such as a two-tier incentivized network which is known as Masternode network. Masternode network include PrivateSend which for increasing fungibility and InstantSend allows instant transaction confirmation without a centralized authority. Crypto-currency is a Bitcoin that emerge as a popular medium of exchange and it is the first digital currency that attract a substantial number of users. In the beginning 2009, Bitcoin has been rapidly growing in mainstream adoption and merchant the usage. The main issue with the acceptance of Bitcoin in Point Of Sale (POS) situation is the time which require to wait for the network to confirm the transaction mode is valid and the company’s payment have to created methods to allow vendors to take zero-confirmation transaction but these type of solutions will utilize a trusted counterparty to mediate the transaction outside the protocol.
Bitcoin provides pseudonymous transactions in a public ledger through one to one relationship between the sender and receiver. This pseudonymous will provide a permanent record of all transactions that taken place on the network. Bitcoin also known in academic which provide a low level of privacy. But through this limitation type, people still entrust their financial history to it’s blockchain. The first privacy centric cryptographic currency known as Dash which based on the work of Satoshi Nakamoto.
Bitcoin has the potential to be used as an intermediary currency between dominant and other currency that maybe useful for remittances. Rather than using companies like Western Union, a Filipino worker in New York might use a service that transfer US Dollars into bitcoins and enable a family member in the Philipines to “withdraw” on the other side. To make this work, it need to be a liquid market for both dollars-to-bitcoins and bitcoins-to-pesos such as in Kenya is BitPesa. This may assume the user has access to a bank account but struggle with the cost and difficulty of international transfers or e-commerce system. But it is possible to focus on the Bitcoin system as a type of decentralized bank itself. For example, if a person has a personal computer or mobile phone that can be used to download a Bitcoin wallet, they can obtain a public key that represents their account on the global system which can build up savings. International remittances are under stress in various ways such as in Somalia the Hawala systems have been under threat of being shut down due to concerns on the part of banks and states that they are financing terrorists. Remittances are vital element of the Somalian economy but Dahabshiil provide the crucial service have been targeted for exclusion by banks in places like United Kingdom which has the large Somalian population. Bitcoin can be used to bypass such as banks to form an alternative remittance channel.
The main benefit of crypto-currency use to make it easier to transfer funds between two parties in a transaction which these transaction are facilitated through the use of public and private keys for security purposes. These fund transfers are done with a minimal processing fees, allow user to avoid the step fees charged by the most online bank transaction methods. The threat of hacking is the biggest threat of crypto-currency systems of payments Many countries have started to accept Bitcoin as a valid currency especially countries that aim to get rid of cash which approach to crypto-currency.
These are the advantages of Crypto-currency. First, to open code for mining crypto-currency which Bitcoin applies the same algorithms that used in online banking. The difference of Internet banking is the disclosure of information about the users. All the information in the Bitcoin network is shared but no data about the recipient or the sender of the coins which no access to the personal information of the owner’s wallet. Second, no inflation which the maximum number of coins is strictly limited by 21 million Bitcoins. Because there is no possibility for development of inflation in the system as the political forces nor corporations able to change this order. Third, peer to peer crypto-currency network in such networks there is no master server which is responsible for all operations. All installed by users program-wallets are part of a bitcoin network. Each client stores a record of all committed transactions and the number of bitcoins in each wallet. The transaction are made by hundreds of distributed servers. Neither banks or taxes nor governments can control the exchange of money. Fourth, there is no boundaries which the payments made in this systems are impossible to cancel which the coins cannot be faked, copied or spent twice. These capabilities guarantee the integrity of the entire system. Which every month the number of online shops, resources and companies to accept Bitcoin is expanding. Lastly, the most important thing there is no chance to use some personal data for fraud because nowadays majority people purchase are made by credit cards which are unreliable. There is a form to fill on the websites and customers are required to enter the following data such as enter the card number, date of expiration and the cvc code which hard to come up with less secure way to make a payment. So, the credit card are often to be stolen. BTC transactions do not require disclosure of any personal data instead it will use two keys which is private and public key. The public key are available to all such as the address of BTC wallet but the private key only to the owner which all the transaction needs to be signed by interacting private keys and apply a mathematical function which creates evidence that the transaction is performed by the owner.
Besides, these are the disadvantages of the crypto-currency. First, there are the strong volatility which almost all of the ups and downs of the BTC value depend directly on the declared statements of the governments of different countries. This volatility creates the problem in the short term. Hence, large risks of investing in crypto-currency that should be consider in the medium and the long term which there is no guarantee in case of any bankruptcy because it is difficult to predict.
As a conclusion, Bitcoin and other crypto-currency have the potential to replace traditional ad new payment methods but to achieve that way and become a dominant power in global system oof payments, they must provide distinctive incremental value, to address and overcome a number of critical challenges such as formal regulatory issues which unlikely to happen in a short term period. In other solution, banks should look closely at the technology underlying these crypto-currency as a potential generic new way to transfer ownership of value in the long term.