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Bitcoin Digital Currency: Advantages and Disadvantages Case Study


Introduction

Over time, there has been a rising demand for digital platforms that enable businesses and individuals to make payments in an efficient and free manner. The advent of bitcoins, a digital peer-to-peer currency, proved to be a solution to the rising demand. Since its inception in 2008, bitcoins have enjoyed a gradual growth in the market and especially in the gaming industry. It is paramount to assert that both the business entities and consumers enjoy the benefits of bitcoins. Benefits of bitcoins such as swiftness, security, and decentralization are not only felt by business entities but also by individuals buying products and services using the currency. While several countries in the world were reluctant to accept bitcoins into their systems, some are slowly realizing the role that the currency plays in its economy and are accepting their use. Notably, while the currency has several advantages, it also has disadvantages that come with its use. Anonymity, competence in computer technology, fraud, and absence of a chargeback pose as drawbacks that affect the overall performance of bitcoins. It is within this backdrop that the study assesses the inception and use of bitcoin currency in businesses and online gaming.

Discussion

History and Company Background

The Bitcoin industry emerged in 2009 after a group of programmers developed a currency that utilizes codes and mathematical formulas. Satoshi Nakamoto is one of the founders of the currency and is the pioneer of bitcoin transactions. Nakamoto then handed over the business to Gavin Andresen who propelled the business to its current niche in the market (Richter, Kraus & Bouncken, 2015). After its inception, the currency did not enjoy an immediate acceptance from merchants and individuals, but over time it started gaining popularity. The main drivers that helped the currency to succeed and enjoy its present popularity include online gaming. Due to the bureaucracies and delays associated with several online payment systems that did not guarantee payment, bitcoins, which has no chargeback, became the option for online gamers and businesses. As such, the currency slowly became a popular medium of exchange in the online gaming industry. After its acceptance in the gaming industry, business organizations began assessing the benefits linked to the currency and increasingly started using it as a form of payment.

It is paramount to explain that the first bitcoin transaction that took place after the development of the currency involved Nakamoto and Hal Finney who participated in the transaction after downloading the currency software. Thereafter, the currency continued experiencing increasing transactions. It is vital to explicate that the core objective of bitcoin manufacturers was to develop a currency that facilitates maximum profits in a transaction. Turpin (2014) states that due to its minimum transaction charges and peer-to-peer mode of operation, buyers and sellers can do their businesses without worrying about the amount of money charged by intermediaries. The current dynamic and ever-changing consumers who compare the value of their money with the returns are other factors that led to the rise in bitcoin use. One of the major aspects that need to be defined is the fact that bitcoin uses a web of programmers who ensure that transactions are swift and fair. The web, which incorporates several internet users, is not subject to breakdowns because a failure of operation in one server does not affect the others from operating.

The decision to Include Bitcoin Payment/Develop a Game

The decision to include bitcoin payment in the list of online payment systems lies in the benefits associated with its use. The numerous benefits that people enjoy when they use bitcoin as a medium of exchange form the central factor that determines its use in business and online games. Some of the benefits that include speed make the currency very effective especially for online gamers and business entities. According to Bouoiyour and Selmi (2016), the absence of intermediaries in bitcoin transactions and the involvement of parties to a business is a milestone that amplifies its position in the currency platform. Another benefit that determines the decision to use bitcoin as a method of payment revolves around the minimal details used in account development. Unlike several online payment systems that need personal details before opening an account, individuals can operate bitcoin accounts without using their names or disclosing their details. The relevance of anonymity emanates from the fact that hackers can sometimes access personal information requested by online payment systems and engage in unwarranted activities that affect the subject of individuals. Due to its ability to accept account creation using names that may not be authentic, bitcoins dictates the decision to use the currency as a payment method.

Consequently, the development of online games using bitcoin is very effective and less costly. The little expenditure incurred when establishing a game using bitcoin takes effect because of factors like minimal transaction charges, the absence of intermediaries, and convenience. Factually, the transaction fees incurred when using bitcoins as a medium of exchange are minimal about other online platforms of payment. On the other hand, bitcoin use eliminates intermediaries that are common in other online platforms such as PayPal, a phenomenon that augments the decision to use the currency in-game development (Tschorsch & Scheuermann, 2015). When using bitcoins, payments take place minutes after a transaction. Therefore, instead of using other online platforms of payment that force one to wait after making a transaction, people decide to use bitcoins. A combination of the merits amplifies the decision to develop a game using bitcoins.

Marketing Strategies and User Base Establishment

Fundamentally, user base establishment and marketing strategies have a close relationship. The relationship between the process of establishing a user base and marketing strategies takes effect because a good strategy leads to a well-developed user base. Bouoiyour and Selmi (2016) allude that regardless of its slow takeoff, the bitcoin industry understood the challenges faced by online gamers and business entities that received payment using online systems. As such, the company capitalized on the weaknesses demonstrated by other online systems of payment and created a strategy that advanced its position in the market. Speed, convenience, elimination of bureaucracy, decentralization, and continuous service are among the components utilized by the bitcoin industry in the development of their strategy. Through the strategy, the bitcoin industry was in a better position to win the market share and outsmart its competitors.

Bitcoin’s market share has been rising gradually. However, the recent turn of events changed its position in the market. Market speculation, a global shift towards virtual currency and online payment, Brexit, and fluctuations witnessed in various economies of the world are some of the factors that propelled bitcoin to the topmost niche in the market. In the early parts of 2017, bitcoin’s market share rose to hit the highest levels ever witnessed since its inception. According to Turpin (2014), the gradual rise of bitcoins has taken about a decade. Conversely, the recent development in the bitcoin industry was not gradual but spontaneous. The demand for the currency hit high levels and experts project a continued rise. Although bitcoin is enjoying increasing prospects, the drawbacks associated with anonymity have affected its image. Drug peddlers and fraudsters are using the system to sell their products because the system does not require personal details. In effect, the bitcoin industry has become a safe place for drug dealers who transact their businesses without the fear of being discovered.

Conclusion

The increasing demand for an effective online payment system initiated the development of bitcoins. Notably, the demand transpired because contemporary consumers want a platform that enables them to purchase products and services without changing their schedules. As such, the inception of bitcoin that is effective and less costly proved to be a solution for not only the consumers of online games and other products but also businesses. Since its inception in 2008, the currency has continued rising and recently hit the highest levels in comparison to other online systems of payment. It is important to explain that although bitcoin is projected to increase in use and popularity, much has to be done by its developers. The risk of fraud, anonymity, and absence of a chargeback are drawbacks that limit its performance.

In effect, bitcoin stakeholders need to improve on factors that can hamper the progress of the currency. Fundamentally, the relevance of improving the currency emanates from the fact that the modern consumer will continue demanding virtual currencies and online systems of payments. The increasing demand for online payments that are effective and fast is one of the factors that necessitate improvements in the bitcoin sector. Although bitcoins are among the most successful currencies in the online payment sector, the stakeholders in the company need to understand that the contemporary market is ever-changing and subject to unexpected dynamics. Competition, changing legislations, and fluctuations in consumer purchasing power are some of the components that should be under a keen watch of the company. By ensuring that they are in tandem with the components, the currency sustains its growth and popularity.

References

Bouoiyour, J., & Selmi, R. (2016). Bitcoin: a beginning of a new phase?. Economics Bulletin, 36(3), 1430-1440.

Richter, C., Kraus, S., & Bouncken, R. (2015). Virtual currencies like bitcoin as a paradigm shift in the field of transactions. The international business & economics research journal, 14(4), 415-575.

Tschorsch, F., & Scheuermann, B. (2015). Bitcoin and beyond: A technical survey on decentralized digital currencies. IEEE communications surveys & tutorials, 18(3), 2084-2123.

Turpin, J. (2014). Bitcoin: The economic case for a global, virtual currency operating in an unexplored legal framework. Indiana journal of global legal studies, 21(1), 335-368.

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IvyPanda. (2020, November 17). Bitcoin Digital Currency: Advantages and Disadvantages. Retrieved from https://ivypanda.com/essays/bitcoin-digital-currency-advantages-and-disadvantages/

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"Bitcoin Digital Currency: Advantages and Disadvantages." IvyPanda, 17 Nov. 2020, ivypanda.com/essays/bitcoin-digital-currency-advantages-and-disadvantages/.

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IvyPanda. "Bitcoin Digital Currency: Advantages and Disadvantages." November 17, 2020. https://ivypanda.com/essays/bitcoin-digital-currency-advantages-and-disadvantages/.

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IvyPanda. 2020. "Bitcoin Digital Currency: Advantages and Disadvantages." November 17, 2020. https://ivypanda.com/essays/bitcoin-digital-currency-advantages-and-disadvantages/.

References

IvyPanda. (2020) 'Bitcoin Digital Currency: Advantages and Disadvantages'. 17 November.

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