In order to truly understand the concept of the Bitcoin platform, it must first be explained. The very concept of the cyrypto-currency relies heavily upon its decentralized nature. Each Bitcoin is shared via peer-to-peer networking, free of central authority. The currency itself is essentially a fixed-value cryptographic object. These “objects” are typically mined by enterprising users (Kroll, Davey, & Felton, 2014). The very definitional nature of mining, under Bitcoin, is a process that involves adding transaction records to Bitcoin’s public ledger better known as a block chain. Each of these chains serve as proof that transactions have taken place. Each block in the chain must be verified by other connected nodes in order to be classified as usable currency (Kroll et al., 2014). Economist Robert Murphy offered a more simplified analogy to Bitcoin mining which is easy to understand:
“Imagine a community where the money is based on the integers running from 1, 2, 3... up through 21,000,000. At any given time, one person "owns" the number 8, while somebody else "owns" the number 34,323, and so on....
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...ial benefit of no “Charge-backs.” Each transaction that occurs cannot be reversed unless the new owner authorizes it (Onies, Daniele, & Olyinka, 2011).
While Bitcoin has its fair share of critics and proponents, the currency remains a hotly contested issue in financial circles. As more retailers begin to embrace the idea of a decentralized currency, skepticism intensifies. The economics of Bitcoin highlights both the pros and cons of using a digital currency in the modern age. What remains to be seen is if the crypto-currency will achieve a wider range of acceptance in the coming months and years. Assuming it does, what’s to stop Bitcoin or any other digital currency from taking over conventional payment systems? Like physical money, digital currency comes with its share of headaches. While the currency goes through growing pains it will only be a matter of time.
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