Alternative Money: Why more and more countries recognize cryptocurrency?

Author : Serhiy Tutov

Source : 112 Ukraine

Bitcoin is a threat to any currency:  it cannot replenish the coffers of any state, anonymity makes it impossible to control monetary transactions
10:21, 12 January 2017

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XXI century is called the communication or information era. The basis of the communication society is the so-called networked economy, or the economy of direct peer connections. In this environment, any physical and legal persons can contact with anyone else on the exchange of ideas, teamwork, trade, or just for fun, and at minimal cost. The traditional economy is now using modern technologies and information resources, which until recently were not launched at all.

Money has always been called the blood of the economy, when they cease to circulate, the organism dies. They have emerged as an alternative to barter and became the measure of value of all goods produced by a man. To date, the money of all states are called fiduciary. Each state has declared its currency legal. Historically, all the money were provided with some goods - such as gold or silver, but today they are provided solely by trust in the state.

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It happened that the credibility of the state system has been constantly tested. The society is looking for possible ways of its existence, and in this way luck coexists with errors. So, in 2008, the world was confronted with a new and unplanned miscalculation, and occured under the influence of another crisis. Instantly the US Federal Reserve announced its "quantitative easing" program. The program proscribed that the government bought up illiquid assets, primarily the American ones, through the issuance of new dollars. This was done at a speed of 100 billion world most reliable money per month. This program was divided into three periods and ended October 29, 2014, when the Americans finished third wave of expansion of its securities with the image of presidents. Everyone can easily calculate how the world prices have fallen, after the flow of the unsubstantiated US dollars into the world economy.

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Everyone remembers the dollar price of UAH 8, but associating its current cost only with our domestic problems is not correct. Ukraine is the country, hanging out on the periphery of the global economy. We always suffer from the problems and hardships of the world's decision-making centers. The concept, formulated by apologists of the modern social order, the "shadow economy," sounds very strange on this background. People are trying to survive on their own, creating a product and benefits, without the knowledge of the ponderous machine of the state.

Internet technologies have created a new economic reality, which required a different, “not tainted” blood. The idea of cryptographic money, which existed for a long time, have materialized today. Cryptocurrency works in the absence of any internal or external administrator, which allows the transactions without taking all the bank or state conditions and limitations into account. Now there are thousands of different kinds of cryptocurrency, but let us consider one of them.

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The first fully completed logical operation with Bitcoin was held in January 2009. There was a new word created, which described the process of obtaining Bitcoin - mining. It is expected that the release of Bitcoin to be completed by 2040 - by that time, the volume of Bitcoins will reach 21 million units. Hundreds of thousands of miners produce Bitcoins worldwide. Moreover, the creation of each coin is paid by the same Bitcoins.

The process of release of any cryptocurrency is strictly fixed in an opened e-book accounting, which was called blokchain or digital database for data storage. All transactions are recorded in chronological order and are available for anyone. This innovative technology is interesting because the databases are not controlled by a separate organization, and shared between all users on the network. This means that no one has ownership of the information.

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Blokchain can dismantle all the hierarchical institutions of power and replace them with new, decentralized ones. More than $ 1 billion  of venture capital investments from around the world were invested in this technology.

During its existence, the price of Bitcoin has been changing. Today one virtual coin is worth $ 1,000. The first purchase for the Bitcoin was made in May 2010, then two pizzas costed 10 thousand coins, but a month later, this amount of Bitcoins was equivalent to 600. There was a market on which Bitcoin exchange rate has grown rapidly - 6 cents per unit in July, up 50 cents in November, while the total market size was estimated at US $ 1 million. In February 2011, the rate of one coin was equated to the dollar. In April of that year, the aggregate amount of Bitcoin market exceeded $ 10 million. During 2016 Bitcoin price has increased by 123%, easily surpassing all assets, including shares (Standard & Poor`s 500 index rose by 9.5%), crude oil (up to 45%), and natural gas (59%). For the second consecutive year, digital currency is ahead of all other assets in terms of profitability. In 2015, Bitcoin price has risen by 35%.

In 2011, Bitcoin has experienced a series of hacker attacks, a serious blow to the rate of the virtual currency. First, one of the users claimed that he stole 25 thousand of coins, which was $ 375 thousand. In a few days, open data exchange framework was broken, and 60 thousands usernames and passwords became public. The same day, hackers took over the account of one of the administrators of the site, reduced the rate of Bitcoin from $ 17 to 1 cent per unit and tried to buy a few thousand coins. Exchange was closed for a week, and as a result all prices have been restored. After that Bitcoin was considered an alternative to traditional currencies.

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The legal status of the cryptocurrency is different in different countries, although none of the countries has officially marked it, securing it by the legislation. In those countries, where they are allowed officially, they are treated as a commodity or investment assets for the respective tax. In Japan, Bitcoin is legal, in Germany it is called a monetary unit of account. In China and Russia Bitcoin is banned, which does not prevent the Chinese users to be world leaders in the field of mining due to the presence of the largest production capacities. In Switzerland, the legislation considers Bitcoin as a normal foreign currency. The Ukrainian government also tried to be involved in the cryptocurrency: in November 2016, the NBU has forbidden circulation Bitcoin in our country, referring to the possibility of its use and the threat of terrorists using it to launder money. Meanwhile Canada has set first ATM machine for the world Internet exchange.

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Cryptocurrency, of course, is a threat to any currency: Bitcoin cannot replenish the coffers of any state, anonymity makes it impossible to control monetary transactions. In addition, the country can freely withdraw money. The world can build economy on electronic money, but we must begin with changes in the current economic practice. Internet money can respond quickly to any sensible initiatives.

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