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Running head: CRYPTOCURRENCY AND BUSINESS GROWTH 1

Cryptocurrency and Business Growth

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CRYPTOCURRENCY AND BUSINESS GROWTH 2

Table of Contents

Introduction ..................................................................................................................................... 3

Images for Cryptocurrency ............................................................................................................. 4

The History of Cryptocurrency ....................................................................................................... 4

Trends in the use of Cryptocurrency ............................................................................................... 5

There is a constant entry of new players in the cryptocurrency business. .................................. 5

More Agencies and Governments are showing support for cryptocurrency. .............................. 6

Increased focus on the blockchain .............................................................................................. 6

An end to the annoyance of the traditional remitting manner ..................................................... 7

A threat to data access ................................................................................................................. 7

Application in Business .................................................................................................................. 8

Advantages of cryptocurrency ...................................................................................................... 10

Disadvantages of cryptocurrency .................................................................................................. 11

Conclusion .................................................................................................................................... 11

References ..................................................................................................................................... 12

CRYPTOCURRENCY AND BUSINESS GROWTH 3

Introduction

Cryptocurrency is the newest form of digital transactions. It is a form of digital money

transfer which stands out as having two critical properties that revolve around security and

anonymity. Cryptocurrency has changed the world’s view of business transactions. It ensures

that a safe communication can be formed between two parties that are having a business

transaction where one party cannot suppress the other via reversals or disputing a completed

transaction. A basic definition of cryptocurrency would revolve the use of currency where the

transactions are handled by the use of internet cryptography (Narayanan et al., 2014). Legible

information regarding a business transaction is translated using a code that is secure and which

cannot be cracked maliciously. The basic concept of cryptocurrency is the use of the internet to

make cash transfers after purchases in a secure manner where both parties; the seller and the

buyer have mutual trust. Cryptocurrency is currently in use in various business models ranging

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from the banking sector to the manufacturing industry. It stands out as important for business

growth seeing that business matters are held securely and anonymously.

Images for Cryptocurrency

The History of Cryptocurrency

The application of the concept of cryptocurrency dates back to the Second World War

just after the inception of the computer. Cryptocurrency arises from cryptography which was a

secure manner of communication. After the Second World War, nations found it inevitable to

hold secure communication (Harwick, 2015). This is because; previous models of

communication by the use of telephone lines among other communication models were insecure

and could not be trusted. The need for a computer-generated and trust-worth communication

model could therefore not be underestimated (Vigna & Casey, 2016). Mathematical theories and

the use of computer science used together showed that there was a way to ensure communication

amongst in a secure manner.

After the Second World War, cryptography became a rationale for communication.

Having found a rationale for secure communication the need to find a manner of sending money

online having the same characteristics of anonymity and security emerged. Constant attempts

CRYPTOCURRENCY AND BUSINESS GROWTH 5

were witnessed. They first emerged as theoretical constructs until the first digital money

transactions happened (Iwamura, Kitamura & Matsumoto, 2014). One of the basic reasons for

enhancement of cryptocurrency was the raging political environment. In 1980, Chaum, an

American cryptographer formed the very first algorithm that was secure and which information

exchange between two parties could not be altered by either party after the transaction. Chaum

formed the basic ground upon which future cryptographers would build on future electronic

transfer of currency (Gandal & Halaburda, 2016). Chaum had named this method of currency

exchange as the “Blinded Money”. Since then, cryptocurrencies have been continuously

developed inclusive of the Bit Gold among others. The most recent crytpocurrency is the Bit coin

that is still operational since its inception in the year 2009.

Trends in the use of Cryptocurrency

Cryptocurrencies and loved and feared in the same measure. Some people believe that

cryptocurrencies are a new way that would possibly be a Ponzi scheme that would later dry off

the users of their last coins while some believe that it is a payment that is worth the toil. Trends

in the use of cryptocurrency however indicate that there is a reason to trust the new money

remitting scheme as opposed to fearing it (Narayanan et al., 2014). Five most important trends

are notable for any entrepreneur, businessman and industries that plan to make use of

cryptocurrency. Among these trends are the following:

There is a constant entry of new players in the cryptocurrency business.

Years ago, Bitcoin was probably the only globally accepted cryptocurrency. Its

successful operation made it an honorable venture that has been tested and proven over the years.

Bitcoin was however only accepted for business transactions and therefore individuals who

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wanted to make use of cryptocurrency to remit other payments were restricted. New forms of

cryptocurrencies are however emerging after noting this disparity. An example is the Academy

coin which allows instructors to receive payments from students and their parents effectively.

This recent growth in the use of cryptocurrency proves that its future is secure (Vigna & Casey,

2016). Competition among various companies engaging in the cryptocurrency business is

essentially going to be a reason for businessmen to lay their trust in the venture. Increased

competition will lead to an increased providence of quality services which is a reason for

businessmen, entrepreneurs and key players in the business fraternity to trust the venture.

More Agencies and Governments are showing support for cryptocurrency.

As it presently stands, most cryptocurrencies operate as stand out entities that are not controlled

by any legal body. Concerns over their use have since been felt due to this critical issue. Most

businessmen are forced to believe that cryptocurrencies are an illegal method of remitting

payments which is the reason that most are yet to utilize cryptocurrencies. Security concerns

reading how funds remitted the cryptocurrency way are used is also an issue that has made

governments to be against cryptocurrencies (Gandal & Halaburda, 2016). It is however on very

rare occasions that cryptocurrencies are reported to support illegal businesses. As a result, a

notable increase in agency as well as government support can be noted which proves that the

future of cryptocurrency is set to be advantageous.

Increased focus on the blockchain

Most cryptocurrencies use the blockchain technology which allows massive transactions

to be made internationally. Blockchain international, the company that allows massive

cryptocurrency transactions has continuously enrolled various key players in the industry. The

figure below explains the increase in terms of the usage of block chain technology.

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Having been tested and proven, the blockchain technology removes the use of a middleman

making it sure that the transaction only happens between the cryptocurrency company and the

middleman. The issue of security and anonymity is therefore undisputable for the future.

An end to the annoyance of the traditional remitting manner

Traditional payment methods such as use of bank checks, regular fees among others have

been a continuous annoyance to businesses. This is based on the simple fact that they are slow

and undergo scores of processes before completion (Hayes, 2016). They are also costly to

transact and business may make huge losses if they are not careful enough to watch the manner

in which they make these transactions. Cryptocurencies on the other hand are appealing and very

cheap to use. They are not driven by profits like other financial corporations are. Furthermore,

the transactions are made with ease and the cash is received immediately. Cryptocurrencies are

continuously appreciated as a rationale for speedy transactions where security and anonymity are

guaranteed.

A threat to data access

Every developing idea has its own advantages and disadvantages. One negative trend in

cryptocurrency is the fact that recording data is almost impossible especially in a business

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environment where recording business transactions is worthwhile. Payments made by customers

may never reveal their identities (King, 2013). The good that they paid may also not be amply

recorded. However, an organization that requires such data can pay their customers so that they

provide a record themselves. In this observation, transactions made using cryptocurrency may be

costly for those organizations that need to record and keep data for future reference.

Application in Business

At least 2.9 million people across the globe use cryptocurrency to do business. This is a

sufficient number that is expected to increase with time. One appreciation of cryptocurrency is

the manner that it has consistently restored faith among various businessmen. An estimated rise

on the use of cryptocurrency iss expected to render this payment method as having more than 8

million users by 2019. A study conducted by the Cambridge Center for Alternative Finance

proves that at least the industrial sector is closely adapting and feeling that cryptocurrency is the

way to enlarge their financial capacity (Park et al., 2015). An increasing number of

cryptocurrency companies is also being witnessed which proves that the industry is sufficiently

handling business matters effectively.

One of the most moving factors of cryptocurrency and its sudden growth is its ability to

go global. Using cryptocurrency, businesses is globalized. Small businesses can undertake

cryptocurency as a manner to go global. Clients from across the globe can access an organization

that uses cryptocurrency and make payments as their goods are delivered with ease. The

functionality of localized financial institutions is therefore disengaged by cryptocurrency. In fact,

most small businesses across the United States and across Asia attribute their successes to

cryptocurrency. Going global not only assists businesses in being known it also helps the

business to meet a wide range of customers (Delmolino et al., 2016). Cryptocurrency therefore

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opens a business to an infinite number of opportunities which makes it a worthwhile business

strategy.

Crytpcurrency is a tool for business competitiveness. A business can be said to be

competitive or not when observed under various spheres of its operation. One of the spheres of

operation regards how a customer can be able to make payments to the firm and the delivery of

their goods and services (Surowiecki, 2011). The theory behind cryptocurrency is that payment

is received immediately. Once a firm confirms that the payment has been made, an immediate

dispatch of the goods or services is made. From this point, the client is assured that the firm is

competitive. Using cryptocurrency, a firm manages to keep their customers satisfied. In addition,

the firm is able to overwhelm competitors who use the traditional form or remitting payment

(Hayes, 2016). This is based on the fact that payments made using cryptocurrency are

encountered with ease and hence the delivering of the goods is also made fast. To overwhelm

competition, a firm may result to the use of cryptocurrency. The firm is set to provide improved

quality of services to their customers and hence becomes a substitute of competing businesses

(Iwamura, Kitamura & Matsumoto, 2014). Research also indicates that modern customers are

opting for remitting payment using digital currencies which confirms that cryptocurrency serves

this purpose and hence important.

Before the adoption of cryptocurrency, the business fraternity witnessed an

overwhelming loss due to fraud and theft. Organizations that operate the traditional way are set

to encounter theft and fraud as most of them encounter huge transfers of cash. An estimated

annual loss of $190 billion in the American business fraternity is said to happen as a result of

loss of credit cards alone. Frauds are also common and often lead to hefty failures in the

American business space. Cryptocurrency however offers a respite from these security threats.

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Cryptocurrency offers a manner of payment using digital financial instruments that are very

secure as transactions are usually made on a peer to peer business model (King, 2013). A peer to

peer business model means that inasmuch as scores of transactions happen, the transactions are

independent of each other and the only relationship that exists is that of the customer and the

firm. Furthermore, anonymity is maintained and hence no single individual can have some

access to the currency pool of the firm thereby undertaking some fraud or even stealing from the

firm (Harwick, 2015). Cryptrocurrency therefore offers an environment where funds are secure

providing room for growth.

One of the most derailing factors that render a business less successful is the issue of

customization. Some cash transactions require the involvement of scores of middlemen such as

lawyers and brokers. This reminds that the traditional cash transaction is evidently not

customizable. Cryptocurrency however helps a business to overcome the barrier of

customization. Cryptocurrencies can be customized to suit a specific transaction. This is because

the transaction can be instantly made regardless of the hefty amounts that are to be transferred.

As such middlemen such as lawyers and brokers are put at pay (Delmolino et al., 2016). This

approach can effectively save a firm of the many payments, levies and fees that are required by

middlemen giving the organization a better chance for economic growth.

Advantages of cryptocurrency

a. Better Security- Cryptocurrency offers a new trend of payment which is secure as

transactions are encrypted. That is, once a transaction happens, reversing it is foully and

therefore is safe for an organization engaging in hefty transactions.

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b. It cuts out the middleman- many businesses using the traditional payment methods are

suppressed by middlemen such as banks and legal authorities. Cryptocurrency puts away

middlemen allowing the firm to enjoy the full benefits of trade.

c. Access to a wide market- Unlike local currencies, cryptocurrency can be used across the

globe. It therefore opens up a business to infinite customers.

d. Cryptocurrency is a tool for globalization- Due to its universal recognition;

cryptocurency transforms a business from a local scale to an international scale. As such,

transactions from across the world can be handled simpler and easier.

Disadvantages of cryptocurrency

a. Lack of a physical form- Cryptocurrencies lack a physical store where cases of failure

can be administered or solved from. The future of cryptocurrencies therefore remains unknown

until they build some known physical site.

b. Risk of unknown technical flaws: Most cryptocurrencies operate from an online office.

The threat of hacking and other technical flaws therefore faces these sites. Unkown technical

flaws may happen which may lead to loss of coins.

c. Lack of buyer protection mechanism: Many cryptocurrencies operate in such a manner

that the seller requests for payment before delivering the goods. Should the seller not deliver the

goods, then the buyer is not entitled to receive their cash back and hence it is risky for the buyer.

Conclusion

Cryptocurrency is the new trend of making business transactions (Surowiecki, 2011).

This approach is efficient for businesses as it maintains security and anonymity. More than

obvious, the use of cryptocurrency places the business at an advantageous edge as it provides

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better security, cuts out middlemen, gives access to a larger market and has universal

recognition. Instant customization is also possible which places an organization at a growth path.

References

Delmolino, K., Arnett, M., Kosba, A., Miller, A., & Shi, E. (2016, February). Step by step

towards creating a safe smart contract: Lessons and insights from a cryptocurrency lab.

In International Conference on Financial Cryptography and Data Security (pp. 79-94).

Springer Berlin Heidelberg.

Gandal, N., & Halaburda, H. (2016). Can we predict the winner in a market with network

effects? Competition in cryptocurrency market. Games, 7(3), 16.

Harwick, C. (2015). Cryptocurrency and the Problem of Intermediation.

Hayes, A. S. (2016). Cryptocurrency value formation: An empirical study leading to a cost of

production model for valuing bitcoin. Telematics and Informatics.

Iwamura, M., Kitamura, Y., & Matsumoto, T. (2014). Is Bitcoin the Only Cryptocurrency in the

Town? Economics of Cryptocurrency and Friedrich A. Hayek.

King, S. (2013). Primecoin: Cryptocurrency with prime number proof-of-work. July 7th.

Narayanan, A., Bonneau, J., Felten, E., Miller, A., & Goldfeder, S. (2016). Bitcoin and

Cryptocurrency Technologies: A Comprehensive Introduction. Princeton University

Press.

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Park, S., Pietrzak, K., Alwen, J., Fuchsbauer, G., & Gazi, P. (2015). Spacecoin: A

cryptocurrency based on proofs of space(Vol. 528). IACR Cryptology ePrint Archive

2015.

Surowiecki, J. (2011). Cryptocurrency. Technology review, 114(5), 106-1

Vigna, P., & Casey, M. J. (2016). The age of cryptocurrency: how bitcoin and the blockchain are

challenging the global economic order. Macmillan.

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