Question

What are some advantages and disadvantages for utilizing Bitcoin? Would you suggest utilizing Bitcoin as a means of payment for your group’s e-commerce solution? Why or why not? What are some security concerns you have regarding Bitcoin? Considering that the value of Bitcoin fluctuates (sometimes rapidly), what impact can this have on the financial stability of a small company?

Answer 1

Bitcoin is a cryptocurrency which is a decentralized digital currency relative value of which is controlled solely by forces of demand and supply with no control of any centralized authority. Although Bitcoin was founded in 2009, worldwide popularity of this asset began only fee years back. Recently multiple countries have allowed trading of this asset within the country allowing businesses to accept Bitcoin for trade. Although now Bitcoin popularity is not yet reached throughout the world, in few years it could reach all the countries. Also the systems like Bitcoin exchanges etc are not fully safe and are sometimes subject to hacking etc. Thus the technology surrounding Bitcoin wallets and exchanges need to be made more robust to instill more faith in the minds of market participants to extend the use of Bitcoin to trade and e commerce.

Some pros and cons of Bitcoin as of today are:

Pros

1. Increasing wide spread acceptance for Global oayment

2 Concept of a Global currency

3. International teade related transactions easier than other currencies without fear of currency risk and without need for hedging

4. Low transaction cost

5  More anonymity & privacy

6  Independence from political pressure and agendas

Cons

1. Not yet worldwide acceptance

2. Bitcoin wallets and exchanges are subject to hacking and malware attacks

3. High price volatility

4 Unsupervision may lead to blank market activities

5. Can be easily replaced by another cryptocurrency

A company trading in Bitcoin should be ready to accept the huge fluctuations in Bitcoin value. The movement in Bitcoin has also been quite erratic and influenced by multiple factors around the Globe making it difficult to predict or ascertain the movement. Bitcoin hedging tools are also limited as of now. So for a small company, as of today, the volatility is too large and not worth the benefit if trading is not its core business.