Question

Why is “Bitcoin” payment system, and why it so controversial?

Answer 1

What is Bitcoin?

Bitcoin is the first and most prominent “decentralized online virtual currency.” According to the U.S. Treasury Department, a virtual currency is a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency.Almost anything can function as a virtual currency: beaver pelts, gift cards, frequent flier miles, credit cards, checks. Unlike other types of virtual currency, an online virtual currency has no physical form; all transactions must take place online.

Why Bitcoin?

Bitcoin transactions are fast and cheap. Unlike checks, credit cards, or wire transfers, online virtual currency transfers are instantaneous and processing fees are close to zero. International transfers do not require currency conversion. Because Bitcoin payments cannot be undone, customer charge-back fraud is not possible. Moreover, unlike credit cards, which use the same credit card number over and over for a particular cardholder, each Bitcoin transaction uses a unique encrypted number, eliminating the possibility of stolen credit-card fraud. Finally, all Bitcoin transactions are anonymous.

Why Bitcoin so controversial?

a virtual currency such as Bitcoin can be used to purchase real-world goods and services only to the extent that sellers who accept it are confident that they can convert it to an acceptable sum in legal tender currency. That confidence is virtually non-existent with Bitcoin because the currency has been extraordinarily unstable.

A second major disadvantage is storage insecurity. Although the Bitcoin protocol offers excellent transactional security by virtue of encryption and shared public ledgers, it offers very little storage security. There is no governmental entity to insure Bitcoin accounts, and their vulnerability to complete loss as a result of malware, password loss (no organization to contact to request a password reset), theft, fraud, or other failures has been widely noted. Once Bitcoin is gone, it is lost forever.

The third major disadvantage of Bitcoin is its lack of legitimacy. The very origins of Bitcoin are shrouded in mystery: It was created without any public discussion by a person or persons whose identity has never been revealed, leading some to conclude that is nothing more than a get-rich-quick scheme or a scam. It has been banned in several countries, and numerous others have issued warnings about its use.

The fourth disadvantage of Bitcoin—a side effect of its anonymous transactions—is its association with criminality such as drug running, money laundering, tax evasion, fraud, gunrunning, and child pornography. Because it operates outside the national and international financial system, Bitcoin makes it almost impossible for law enforcement to “follow the money.” Another troubling aspect of Bitcoin in this context is that its decentralized administrative structure, requiring a lot of computing power and energy to run, attracts dishonest operators who, instead of making the necessary investment in computer equipment, use tactics such as botnets or malware to harness the computing power of unsuspecting Internet users in the hopes of receiving the “mining” rewards.

One other problematic aspect of Bitcoin is that it appears to have been designed to promote an anti-government ideological agenda.