Is Digital Currency Disrupting the Financial System?
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Bitcoin is the world’s first digital currency. It allows individuals to transfer funds without the need for a bank or other middleman. Transactions are verified by a private computer network. Companies find digital currency valuable because it has no overhead compared to accepting other forms of payment. By 2020, the market is expected to grow 7.26% from 2015.
Four reports explain the technology behind Bitcoin, the top players in the niche market and how recent regulations can affect the market. To learn more, consult IDC’s report Bitcoin Primer, Frost & Sullivan’s report Seg22 Bitcoin, Global Industry Analysts’ report Bitcoin Market and Mordor Intelligence’s report Global Bitcoin Technology Market.
According to Bitcoin’s website, this is how the digital currency works:
- A Bitcoin wallet is installed on a computer or mobile device
- A Bitcoin address is assigned to the wallet. A user shares this address whenever they want to transfer funds.
- The network uses the block chain, a public ledger that confirms transactions.
- Transactions include a mathematical signature that confirms the owner of the wallet. These are called “private keys”.
- Transactions are put into a block that then must be verified. This is called “mining,” and a system is in place to prevent this confirmation process from being tampered.
The European Union had been considering regulating Bitcoin. However, in April, the EU decided to wait before imposing any legislation. Part of the reason behind the wait is that the technology behind how Bitcoin works is not fully understood by most people and regulation this early in the process might do more harm than good, according to News BTC.
The ruling verifies what the European Court of Justice has said on numerous occasions, that Bitcoin has the same tax concessions and privileges as other foreign currencies.
Bitcoin should reach $500 in value in the near future, according to CoinDesk’s USD Bitcoin Price Index as reported by the International Business Times. In December 2013, Bitcoin peaked at $1,200. Still, if Bitcoin reaches $500, it will be the first time in about 18 months.
Why is Bitcoin seeing a rise in price? CoinDesk is unsure, but speculates it may have to do with a new computer code called Segregated Witness that would create a new block chain with larger blocks. The code was announced in December and would speed up the time involved in verifying transactions. As more people use Bitcoin, the wait time has increased to 40 minutes.
Two other potential reasons include mining and video games. In July, the number of Bitcoin a user can mine will be reduced 50% to 12.5 per block, which would make it harder to mine Bitcoins. Meanwhile, game developer Valve will allow Bitcoin as a payment option for its game network.
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