Bitcoin: Is it the future of currency?

From the time I start writing this article to the time I finish it, the fluctuating price of the digital currency ‘bitcoin’ would have most likely risen or fallen appreciably.

How does this digital currency work, and from where has it emerged? It is said that it was started by an anonymous group with a Japanese name in 2007, who set the standards and computing algorithms for its “production”.

I will leave the details about its founding and focus now on the question as to why has it emerged? Bitcoins came into existence because of it is a currency that is not controlled by any state or central bank. It mainly relies on an old economic standard called “artificial scarcity” which is used to protect it from unauthorized access or control over the system.

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Therefore, if a hacker is able to produce the currency in the millions its value would automatically come to nought, as there is only a fixed amount in which the currency is produced. Like gold, the power of the bitcoin lies in its scarcity.

The criticism of this currency by international financial institutions ranges from it being a ‘fraudulent’ form of currency to being a completely ‘ridiculous’ medium of exchange. On the other hand; many experts see it as the future of currency and believe if it continues it could threaten the use of state currencies, even replace them.

The criticism of this currency by international financial institutions ranges from it being a ‘fraudulent’ form of currency to being a completely ‘ridiculous’ medium of exchange

Rashid bin Mohammed Al-Fawzan

‘Petro’ currency

Meanwhile, Venezuela has decided to issue its own crypto-currency under the name ‘Petro’. There are also other new, more innovative currencies such as ‘ethereum’ that are showing growth. Venezuela has shown interest in developing this form of currency to evade the ill effects of economic boycott.

Thus, many countries suffering from economic blockade might show interest in such crypto-currencies. Such currencies may also be used economically dubious transactions, be it weapons trade, drug dealing, money laundering…etc. These are some of the adverse effects related to these virtual mediums of exchange? There is also the danger of these currencies causing inflation?

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There are a host of other questions that need satisfactory answers. What are the reasons behind the significant growth of the Bitcoin currency?

Why are big financial powers like the US and Europe watching these currencies operate, without them trying to stop them? Should it be left to market forces, which might arguably make its own corrections?

Certainly this seems to recipe for financial disasters as there appears no legitimate economic basis for supporting such systems. This also seems to be a safe haven for people involved in price manipulation and all kinds of speculative activities.

Major industrial countries could face a grave challenge in the future because of these crypto-currencies and the reality or illusion of such technological innovation will blow up soon?

This article is also available in Arabic.
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Rashid bin Mohammed Al-Fawzan is a Saudi Arabian writer and commentator.

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Last Update: Wednesday, 20 May 2020 KSA 09:50 - GMT 06:50
Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.
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