The traditional money transfer systems have lots of drawbacks. Need to pay to a intermediaries, the transactions being not transparent, when it's not possible to know the real amount you will have to pay including the commission fees and all the conversions. Also there is no assurance of the payment to go through smoothly.
The intermediary is an insituation, which guarantees the payment to be successful. Both parties trust this institution. Buyer is sure his money will be credited to seller's account. Seller is sure the money sent will be fully delivered to his account.
Still, what if the assurance can be guaranteed with no intermediary? By purely technical means? Absolutely transparent open source ones... What if you could have the chance to check everything on your own? It specialists asked such a question to themselves and they created crypto-currencies, the most popular of which is Bitcoin.
So what is crypto-currency?
First of all let's try to figure out what the cryptocurrency is. According to the he definition of one world company that fights money laundering cryptocurrency is a gully convertible decentralized currency based on mathematical principles and secured with the help encrypted methods, which is it uses cryptography with the purpose to create distributed, decentralized and secured informational economy.
To make it simpler it's a sort of network distributed between users, like torrents, used for downloading data. The only difference is that instead of data transaction blocks are distributed within and in order to verify their validity mathematical confirmation should be used.
Well of course the number of bitcoins is crucial. Noone can simply print them. There is no emission centre. Money is earned within the entire network. Making a comparison with torrent networks, you "earn" by uploading movies and other data to public access, while bitcoins can be mined - calculating the hash rate of the current transaction block. Moreover any person can do that. The one who is faster, takes the cash.
Mining gets more and more complicated now, when entire teams of specialists with powerful engines are involved. Much simpler is to buy bitcoins on virtual online exchangers. The bitcoin exchange rate is determined there as well.
All system is open. It's a real Open Source. Everyone can check it, the entire chain of transaction blocks, since every following block is connected with the last one. All network members have equal rights, all algorithms, all source codes and interaction protocols are absolutely open and available for anyone willing to analyze them.
Anonymity Problem
The opponents of crypto-currencies legalization quite often advance an argument saying it is impossible to identify the owner of the crypto-currency wallet. They say with the help of bitcoins money earned illegally can be transmitted. For instance it can be used for giving bribes, or to pay for drugs or even to provide funding of anti-governmental and terrorist organizations.
The supporters say the payment transactions anonymity is a great benefit. Not every customer may wish to pay with the credit card for specific medical services knowing the payment information along with the purpose of payment will be sent to the bank. Not every person may wish to let others know about the bank account or e-wallet status. It can be dangerous. Not just for misappropriators of public funds, who steal millions from the state. For an old pensioner who saves pension funds it can be useful not to become a victim of fraudsters.
Apart from that even making electronic fund transfers it is not that difficult to remain anonymous payer or payee. So, following simple common sense in case being cautious about criminal transactions, cash funds should be prohibited at all. They are most dangerous in terms of supporting black and criminal economy. So, why do the opponents lay claims to bitcoin?
Bitcoin Pros and Cons
The pros are evident. Apart from anonymity, which is not a problem for lots of people, client gets all the transactions transparent and saves a lot, removing the intermediary from the process.
Another advantage is the absence of all possible regulators. If you send the money they will be delivered. And you will be sure, your transfer to those suffered during the earthquake or any other tragedy will be delivered exactly to the account you indicated, and it won't be stuck somewhere on the account of the financial official.
Absence of the emission centre is another advantage. Bitcoin mining is transparent and clearly regulated. There can't be more of them than defined. No one can simply turn on the printing presses to compensate losses of the economy policy run.
At the same time all the advantages above can be treated as the disadvantages by governmental officials. We have already discussed the anonymity issue. There are still other things. So far Bitcoin is not deemed to be a real competitor to national currencies, however in the future it has a potential to become one. Opportunity to enable the printing presses is one of the biggest privileges of the official government. It is not much tolerated by ordinary citizens, who lose their savings as the result.
Then again, using bitcoin as the source of assets formation is hardly a wise solution. Absence of regulators can lead to significant fluctuation of its rate. Unlike the real stock exchanges, there are no limits here, which stop the trades when the rate changes sweepingly. Panic can take place as well as active market manipulation by the speculators. At the same time using bitcoin as the means of payment and making money transfers it can work well.
What about the international transfers? When country A makes payment to country B, the first one to know about the payment is the president of the country C, most often it's the USA, for they take control of the international money transfer system SWIFT. In case countries A and B don't like that, why not to use the crypto-currency for the mutual payments? In that case anonymity can become a big advantage for the governments as well
Another thing to discuss... right now the entire world economy is based on USD. The majority are not keen on that. There will always be some discontents in case when the currency of a different country will be used as the basic currency, no matter if it's euro, yuan or yen. Crypto-currencies can eventually become a sort of a compromise, suitable for both parties. In that case the problem of emitting world currency will not be settled by a group of banker, who are in charge of US Federaal Reserve System.
It's hard to imagine that would happen soon. But Internet used to be something fantastic as well. In any case one should "keep his eyes on the ball" and track the situation.
Informational technologies change our life like a shot. We can pretend nothing is happening and live in the same old way. We can never notice another djinn out of the bottle, who is capable of turning the world upside down. We can try to prohibit the changes in the official way with the help of official authorities.
However things will never be the same again. Crypto-currencies are real! We must now hide and prohibit them, making the legal business work violating law. Withins several years we shall complain, saying we are in nowhere in this industry.
We need to analyze this issue and thing on how to live with that: how to count the crypto-currency transactions in the statement of affairs, how to credit taxes, how to inform the funds receiver. We need not to ignore the reality of contemporary times, changing sweepingly and try to realize what is good and what is bad about the new call. If done, we can figure out the djinn is not that terrible and if we treat him right, he can make the world much better!
