Bitcoin - Steemit Crypto Academy Season 4 - Homework Post for Task 5

ozzarm (63)Beginner[1,2,3,4,5,6]in SteemitCryptoAcademy • 2 years ago (edited)

Hello Steemian!

In the fifth class of Beginners Level Introductory Courses that is taught by Professor @stream4u, we learnt about Bitcoin, Cryptocurrencies and Public Chain. As a student, we are given three questions for our assignment but we can choose one. Thus, I choose the question number 2 of the class to be my assignment. The question is:

What Is Bitcoin and what was the Aim Behind Bitcoin Invention? Is Cryptocurrency Good For A Business To accept As Payment? Why?

INTRODUCTION

Someone who is name Satoshi Sakamoto has contributed a lot to economy sector in current civilization, specifically in this millennial era. Satoshi Sakamoto introduced us sophisticated technology called Bitcoin. In fact, this person does not bring up only one technology to us but various cutting-edge technologies which already exist and make them more famous. They are cryptography and blockchain system where both of these also come with another innovation. Unfortunately, we never know the real identity of Satoshi Sakamoto.

At first, Bitcoin was only eminent among investors. However, because the advantages offered by Bitcoin are great, Bitcon's value has increased bit by bit, and even many cryptocurrencies companies have sprung up and competed with each other. Not only cryptocurrencies, but companies that provide a trading place are also increasing.

Question 2A
What is Bitcoin?

BITCOIN DEFINITION

Bitcoin is a type of virtual currency. Bitcoin is called a decentralized currency because Bitcoin does not use intermediary services such as banking institution. Bitcoin repels the idea of traditional banking system by having a unique feature. Its special feature is that it offers a peer-to-peer technology where the transaction only involves between two persons without any interference from intermediaries. Normally, transactions occured between the buyer and the seller.

In 2009, Bitcoin was invented by a someone with name Satoshi Nakamoto. No one knows the name is real or just a pseudonym since this person never shows up in person in front of mass media. Although Bitcoin is money in a form of digital, people treat Bitcoin as gold and real cash in the real world. Surveys found that the number of Bitcoins is very limited to only 21 million that circulated in the market.

Known as a decentralized currency, that is because Bitcoin uses a distributed ledger as its database where each data will be turned into blocks and distributed to other blocks.

How it works?

Cryptocurrencies are stored in a blockchain system that requires two keys which are a public key and a private key. Both of keys are considered the same as a wallet and are linked by a complex cryptographic algorithm, which can convert data into scramble letters that no one can read it.

If we look to a familiar situation, the private key functions like our account number at a conventional bank and the private key functions like a pin number to retrieve the money in the account.

Apart from blockchain and wallet, people can also generate Bitcoin by mining. Usually, miners have extraordinary computer skills because to generate Bitcoin from mining, there is a special device that only those who master in math can solve.

Question 2B
What Was The Aim Behind Bitcoin Invention?

THE AIM BEHIND BITCOIN INVENTION

According to the survey, the strongest reason for the invention of bitcoin is the global economic crisis that occurred around 2007-2008. However, there are also other reasons which I will describe below:

1. Global Economy Crisis

The beginning of the global economic crisis arose was when the credit that belong to United State was stuck. Initially, the property sector in America offered its people to take home loans using a subprime mortgage. Subprime mortgage is a home loan offered by the property sector that only used by people who have a bad credit track record or do not own credit. Despite all these, the credit crunch occurred because the US subprime mortgage securities budget was too risky and increasing significantly. Therefore, BNP Paribas (Europe Main Bank in Paris, France) considers the US subprime mortgage budget was too much and caused drain funds. Thus, they chose not to accept the request.

Due to the rise of subprime mortgages, the American property sector was asking for loans from conventional banks and investment institutions. In fact, arrears occurred and the property sector was unable to pay all of the loans. It affects the banking system and capital market liquidity because these companies do not have the capital to carry out their activities again and end up to bankruptcy.

This credit crunch also affected companies from other countries that have trading relations with the United State as a superpower country, which later they suffered a decline in economic growth. If economic growth in developed countries slows down, it is certain that developing countries will suffer twice more than them.

2. The Drop of Comodity Prices and Global Recession

Naturally, the countries in the world influence each other due to their international relation. It is not saying that international relation between countries is bad, but whatever happens massively in a country will affect other countries, such as the global economic crisis. As result, developed countries that have relations with the US were affected by the US subprime mortgage.

Due to the bankruptcy of investment institutions, the risk profile of liquidity savings and loans rocketed and economic activity slowed, the stock market and prices of commodities such as oil had also declined. To cover losses, the company will cut their costs. For example, work termination. If people have no income then they will save their money. If the number of saving in each household increases, then the economic movement will decrease and here a recession happened.

The recession is not only happened in US but also other countries that have international relation with United State, specifically in economic sector. Hence, it caused global recession.

The matters continued to the situation where The Federal Reserve Central Bank of the United State lowered their interest rates so that people intend to take credit again.

3. The Drop of Dollar Value and People Trust Issue

When economic activity declined, the export trade performance of the US oppressed. This case was detrimental to importing countries. This stage of the matters leads to the weakening of the dollar's value because people begin to distrust dollar currency and the conventional financial system. In light of the failures of the US conventional financial system, people also started to question the effectiveness of the banking system.

The emergence of doubts in respects of the banking system prompted the inventors, especially Satoshi Nakamoto, to develop a new technology in which a spectrum of trust is not required but transparency is all needed.

4. Promotes Cryptography

In an article that Satoshi Nakamoto wrote on A Peer-To-Peer Electronic Cash System, he explained that financial transactions require evidence not trust. This proof system can be created using cryptography. At the same time, cryptography also has the advantage that people who do not have rights over the assets cannot change and manipulate the data.

In addition, the existence of a third party requires more transaction costs and the transaction should only be carried out by the two people involved without any intermediary. Even though people do not trust Satoshi Nakamoto, Bitcoin activities in cryptography can still function as it should. All in all, Bitcoin invented to overcome the issues which are found in banking system.

Queston 2C
Is Cryptocurrency Good For A Business To accept As Payment? Why?

BITCOIN AS PAYMENT

There are two different perspectives regarding the recognition of Bitcoin as payment to do business. The first group is those who support Bitcoin as payment and the second group is the contradiction.

First, the dominent reason for Bitcoin supporters to use Bitcoin as payment is to avoid problems caused by third parties, including governments. Investors never have intention to depend on any party in carrying out their business activities. Plus, without a third party in the business transactions they does, the transaction process will be faster and cheaper. This issue will also cut their spending budget.

Again, if we accept bitcoin as a medium of exchange, then there is no need to think about the risk of trust issues that will arise because all transaction data is recorded correctly in the blockchain system. Security is also maintained. Today, even some countries have legalized payments using Bitcoin in their transactions.

Second, the groups that deny the idea of Bitcoin as payment. Basically, people find it difficult to use bitcoin as a transaction tool because government regulations and the country's central bank do not approve of the idea. Although there are several countries that have legalized bitcoin as a payment tool, many countries are still against this policy.

One of the reasons is that there is no institution that is responsible on Bitcoin, if something goes wrong. Furthermore, to prevent a risk of terrorism funds and other money crimes in the black market because cryptocurrencies are free to use by anyone and permissionless. Plus, the volatility of cryptocurrencies is still at the peak. More than that, it is because the government is worried that the banking sector may collapse.

In short, I reckon not only in the blockchain system that we can find black market but in the banking system we also have risk to deal with hackers and manipulation that have been conducted by several irresponsible gang in the institution itself. Discussing about volatility, it can be solved if the government support the policy.

CONCLUSION

Everyone has the right to voice opinion. Moreover, the emergence of Bitcoin does bring convenience to anyone who uses it. If the number of Bitcoin users continues to grow, human civilization will adjust the circumstances by itself. Nothing will be able to withstand human changes that is as dynamic as the changes of the stock market.

In fact, there is one condition that bothers me if everything is done digitally. It is where electricity and technology cannot be used in the entire world as they used to be. Thus, it is suggested to exchange digital assets into real assets like gold or land but not real money when we are capable for it.

REFERENCES

Thank you all the professors who enlighten all the students in Steemit Crypto Academy through their guidance and knowledge. Your support always helps us present and future.

Signed.
@ozzarm

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