Ever since the first medium of exchange for goods or services, currency has evolved into three different stages. The first stage is the analog stage where currency was transferred only as fast as humans could transport it. The second stage is the digital age which started around the 1980’s when money became transferable across the world easily, though banks and governments held the key to the safe. Now we are entering the third stage called the programmable stage which is where money is all done in one supercomputer server with no middle man financial institution holding the key to the safe (Narula).  Digital currency like bitcoin is going to be the future currency of the world. 

Bitcoin was introduced to the markets on January 3, 2008 by a programmer under the alias of atoshi Nakamoto (Wikipedia). Bitcoin is a decentralized crypto-currency which means, in laymen’s terms, that it has no central authority governing it and that its users have total anonymity while using it. What makes bitcoin so great is that it’s a peer to peer network with no intermediary governing the currency, so to keep the system legitimate it has a series of nodes that verify every transaction whenever a bitcoin has been exchanged. Now what keeps the currency entirely anonymous is that it uses what’s called cryptography. “Cryptography is the branch of mathematics that lets us create mathematical proofs that provide high levels of security.” (Bitcoin.com) Cryptography is not a new idea to the currency world because banks have been using them in their transactions ever since the first online transaction took place. In particular to bitcoin though, cryptography is used to make it impossible for thieves to steal any of your bitcoins from your wallet or for someone to track your transaction history. Cryptography is the glue that holds this whole thing together because without it then you would need a central authority governing it to prevent people from making fake bitcoins and to prevent them from stealing your bitcoins from your wallet. The last big picture information that you need to understanding is mining. “Bitcoin mining is the process of making computer hardware do mathematical calculations for the Bitcoin network to confirm transactions and increase security.” (Bitcoin.com) To reward the bitcoin miners for the services that they provide, they do receive transaction fees and sometimes newly created bitcoins. It does need to be noted though that not all bitcoin miners make a profit and that it’s a very hard way to earn bitcoins/money. What this definition leaves off is the amount of computing power needed to be a miner. To be an effective and competitive miner you need to own a $100,000 computer that has multiple servers and a lot of time on your hands because breaking up the block chains to collect the bitcoins and to confirm these transactions takes a lot of time. 

A big counterargument is that bitcoin is too complicated for the common citizen to understand and that it would just make their lives even harder, which when thought about for more than ten seconds you start to realize how flawed this argument is for two reasons. First off, the modern banking system of today already confuses the average citizen with all their long contracts, weird terms, and ridiculous fees. For example, the average American pays 290$ each year in bank fees. (Bresiger) While when using bitcoin, the fee possible is an optional one which will be at most a 2% transaction fee that goes toward the miners for confirming your transaction. Second off digital currency will do nothing more than benefit the average citizen in every way possible. 

  We need banks because they serve a crucial purpose in our modern world in that they serve as place for people to store their money in to earn interest, where people can receive money through loans to start their own financial futures, and provide people with easy access to their money via debit and credit cards. However, loaning out money has already been branched out to the internet’s domain with websites like the lending club and prosper where anyone can post a loan request and people will crowdfund the loan with the promise of a payback in the future. Also, as was seen when the 2008 housing bubble burst, banks are not good at verifying who is trustworthy to receive a loan so the argument that we need an intermediary to keep control of the money flow is invalid. The other feature of storing money for the interest is a joke with the average annual interest rate being .06% in 2016. (Sarreal, 2) The easiness of using your money in your bank account to pay for things with you debit card is where most people think that digital currency currently falls short but they couldn’t be more wrong. Digital currency will make this convenience even more convenient. Instead of having to have to pay with a debit card, you just pay with you phone. Using apps like Breadwallet on your iPhone you can then pay for things with your bitcoin wallet. All you must do is download it and then link the two accounts and then when you pay for things the store just has to scan the Q.R. code on the screen of the phone. (Pouliot, 3)

Many experts think that the value of bitcoin is inflated and that it is sure to burst just like the dotcom bubble and the housing market. To address this question we must first answer what a bubble is: “a run-up in the price of an asset that is not justified by the fundamental supply and demand factors for the asset. Bubbles can occur in any traded commodity or financial instrument.” (Conerly, 2) So basically a bubble occurs when people believe that an asset like the housing market, for example, is worth more than it really is so they keep on investing in it, until one day they all realize the true value of the housing market is far below then what they thought it was worth. So, they all want to sell their investments now but no one is going to want to buy that asset because it’s not worth what was previously thought. This argument can be fought against with two pieces of evidence. The first being that currency is not an asset, it doesn’t have any ultimate use. Money can be exchanged between individuals for it’s entire existence without ever being used to buy something. Unlike the housing market where the value of it is found by conducting calculations on multiple variables, the only value of currency is what we believe it is. “Money, however, need not have any ultimate use. It may only ever passed around from person to person, without ever being consumed. A stock is valued by the sum of its interest-adjusted dividends. A bond is valued by its redemption value adjusted by the interest rate and the risk of default. A commodity is valued by the value of the goods it can be used to produce. However, for money, there is no independent quantity to provide a reality check. All money is like a bubble that never bursts.” (Krawisz, 1). The U.S. dollar is just a piece of paper that the U.S. treasury says is worth this much and we the people believe it. The whole system is reliant on the people who use it to believe that it is worth what they say it is. The second piece of evidence that proves that bitcoin is not a bubble burst waiting to happen is the act of appraising bitcoin. Currency started out with being used by physical materials like gold and silver. They did this because these materials have actual physical value to them. For example, silver can be used to make weapons or steel and it can be used as a medium of exchange to buy things with. Seeing if these goods are a bubble or not requires you to look at both factors and decide if it is or not. So, if someone was to just use silver to make weapons then the price of silver would be far less because it would lose one of it’s main purposes. Though if someone was to buy up a lot of silver and then just store it you would expect the price of silver to go up dramatically which would cause the usefulness of it as a weapon to go down. However, this would cause the usefulness of it being a medium of exchange to go up. Thus if silver’s exchange value continued to rise while the commodity value continued to decline then it would have the resemblance of a bubble crash but not an actual crash occurring. Now we can apply this complicated thinking to pattern to a much easier subject, bitcoin. Bitcoin has no use besides a medium of exchange so the fact that there is a surge in its price is evidence that the price of bitcoin is it’s medium exchange price. When talking about silver you must find the balance between the it’s medium of exchange value and its usefulness value but with bitcoin there is only its medium exchange value. A bubble will burst once people realize that they have been investing way past the true value of what they are investing in. But since bitcoin is only a medium of exchange it goes higher in price only because it becomes a better medium of exchange. (Krawisz, 1) “Each step-in Bitcoin's growth follows a similar pattern of investment in the coin, improving Bitcoin's liquidity, creating more opportunity for its use as a medium of exchange, followed by investment in Bitcoin's infrastructure, thus realizing those opportunities.” (Krawisz, 2). Since bitcoin is just a medium of exchange as more people invest in it, it only gets stronger because that just means that more people believe in it and there are more things that are improving it to make it a better medium of exchange. 

 It is thought that digital currency is just for criminals because business’s will never accept it as a form of payment. But it is quite the contrary, if a business adopted digital currency as a form of payment then it would be nothing but a win for them because of three big reasons. The first being that when a customer pays with bitcoin the company doesn’t have pay any bank fees for that transaction. A typical online business only makes about 5% profit margins so a 2.5% transaction fee just to receive payment is a steep cost when instead that money could be used to expand the business or just anywhere else to help the company. (Anderson, 3) The second reason is that digital currency has no nationality behind it so it will open more markets to medium to small sized online business’s. The logic behind this is that these medium to small size businesses usually don’t offer their products internationally because they don’t make enough foreign business to make it profitable to accept foreign currency. The third being that there is no credit card fraud possible when accepting digital currency as a payment. Credit card fraud is a prevalent issue in today’s world that banks will accuse a transaction of being fraud at the slightest impulse to avoid them losing money. As a result, businesses lost about 5-10% of their orders that they wouldn’t lose in the first place if they accepted digital currency. The fourth being the high level of security that comes with accepting digital currency as a form of payment. Back in 2014 the chain store Target was hacked and 70 million customers had their information taken from them. Target was the one who was blamed because of its low security firewalls protecting its customer’s information;  if they just accepted digital currency then none of that would happen. (Anderson, 1)

We use the currency of today because our government says that its worth this amount of value and since we trust our government we believe in that value. Now, the big catch with digital currency is that governments will never accept any digital currency because they don’t control it. It is worth noting that this is a difficult question to answer because digital currency is such a young subject so the process of government’s adopting it is probably two decades away at least. This process is thought to be so far away because as of right now the I.R.S classifies bitcoin as a property not as a currency. But none the less, digital currency being adopted by any developed government is slim to none for the near future. Though for developing countries the prospect of adopting digital currency as their own currency doesn’t seem so far off. If you were to talk to the average citizen of a developing country and ask them if they would prefer a type of currency that had no government corruption involved, a relatively steady market value, and the ability to exchange over borders with ease then they would accept it. To use Zimbabwe as an example, government corruption has messed up their currencies so badly that Zimbabwe is on its eighth new type of currency. The government of Zimbabwe continues to take loans from other foreign governments and banks to pay for infrastructure and for personal use but when they have to pay back those loans they just print off more money which causes massive hyperinflation. The best example of this is that the government recently printed off a 100 trillion Zimbabwe dollar note. (D’Anconia) The real victims of this gross misuse of economics are the people of Zimbabwe who are trying to buy a loaf of bread with a 100 million dollar note

Digital currency in today’s world can be compared to the television in the 1940’s where only the elite used it and where only the cool kids on your block had one. But in the next 20 years, every household in the country had one and it became commonplace. Digital currency is this generation’s television: in 20 years every household will be paid with and paying their bills with digital currency. 

  