Cryptocurrency and its effects on Entrepreneurship

2016 Rohit Chaturvedi

They knew it exactly right when they said that money is not all that matters but how one uses it gives it a true value. Well, in a fast growing and changing world where almost everything can be changed in the face of money, an evolution of a new form of currency altogether, has tilted these changes towards the better and easier. And every time one wished to have monetary transactions, after the year 2009, they got an all new possibility 21 million strong in circulation-the cryptocurrency.

This pseudonymous developer Satoshi Nakamoto gave meaning to the mammoth world of cryptocurrency when he came up with a SHA-256 based set of lines of code with monetary value and named it “Bitcoins” back in 2009. This idea of his was not only a goldmine of an all new era of exchanging digital information through a process made possible by certain principles of cryptography but also had something else in common with gold-the idea of decentralization. Since then cryptography based transactions have been more of a movement with bitcoins just being one among 100s of new such currencies and have raised the consent for an idea that has made people to question the fact that in case they can’t have high definition on their TV, what’s wrong with mere black and white.

2 years later of a milestone that had just hit the bull’s eye with its approach, the first altcoins named “Namecoin” came into existence which can be simply put as “alternative bitcoins”. Since then companies have come up which had differences with the Bitcoins in terms of hash function used or giving the general public the ability to mine for their currency without the purchase of specific hardware such as the ASIC machines used to mine Bitcoin, the general idea of usage and propagation being mostly the same.

The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed their use and trade, others have banned or restricted it. Likewise, various government agencies, departments, and courts have classified bitcoins differently. China Central Bank banned the handling of bitcoins by financial institutions in China during an extremely fast adoption period in early 2014.In Russia, though cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other than the Russian ruble.

When money is primarily a medium of exchange, any switch necessarily requires the existence of potential buyers and sellers of the money. Secondly, the number of merchants who accept Bitcoin also represent economic activity with respect to legal goods, thus allowing an automatic weeding out of illegal activity. The number of merchants shows a significant positive trend over the last few years, mainly through the efforts of two entrepreneurial payment processing firms: Bitpay and Coinbase. These two firms together make up the market for payment processing. As of September 2015, Bitpay processes payments for over 60,000 merchants across the globe while Coinbase processes payments for 41,000 merchants. These numbers have grown significantly since the inception of these firms a few years ago. In September 2013, both firms processed payments for a total number of 10,000 merchants. By February of 2014, this number has reached 44,000 total merchants, with Coinbase at 24,000 out of those. Some big firms accepting bitcoins include Microsoft, Dell Computers, DISH Network, Expedia, WordPress, and Overstock.

While any merchant can begin to accept Bitcoin electronically without contracting with these two companies (by writing a small computer program), there are several added benefits for merchants who choose to contract out the payment processing with either of these firms that charge a small fee (an average of 1% or lower of each sale) for their services. For one, both firms offer merchants the option to immediately convert Bitcoin accepted by their business to dollars or their currency of choice almost immediately (the next day). This allows merchants to protect themselves from price volatility in Bitcoin yet take advantage of the lowered transaction fees as compared to accepting payments through credit cards (an average 3% of each sale). Bitpay and Coinbase bear the exchange rate risk involved. On the other hand, merchants also have the added benefit of security of accepting payments as well as other integrated services such as accounting for tax purposes offered by these firms.

Apart from its perks, there has been a rising consent about a currency that is decentralized and offers person to person a volatile stake in the economy. The digital currency that this day is offered by over 700 different companies is an easy way for many to dodge taxation and launder money. Since charting taxable income is based upon what a recipient reports to the revenue service, it becomes extremely difficult to account for transactions made using existing cryptocurrencies, a mode of exchange that is complex (and in some cases impossible) to track.

The arrival of money in the first stages of societal evolution as an alternate to bartering is now somewhat different to the switch taking place from centralized fiat money to digital money. Those switches were facilitated by the waves of discomfort occurring to find a double coincidence or sudden inflations. But a switch arising at such a spectacular speed with none of those effects being in operation has been a matter of consent worldwide and has led people to question that –is the currency they are having transactions with even worth the attention when they have an insecurity lingering around on whether they would be able to use it further or simply in the presence of a currency which is well centralized and accounted.

As a form of currency which doesn’t has a base value and whose valuation is primarily decided by the number of users it has, there has been an increasing competition amongst the altcoin providers. Also, a substitution effect has been observed in the recent times where incremented usership of one kind of altcoin would increase its value to an extent, where people would start looking for other variants that would keep on fueling the competition.

With new and excited entrepreneurs in the pipeline, bitcoin has can be looked upon as an execution that has a lot more to offer than it has been visualized with. A very rational comparison between gold and bitcoins on fungibility and a closed(limited) resource pool makes it worth a lot of consideration. With companies opening to bitcoins as a mode of transaction, the digital currency has a great potential and which has forced the fraternity to look at the moon and not just the finger pointing to it.

Where entrepreneurship offers the idea of creating what’s on the mind for a societal transformation and money making through it the, modes of transaction have played a crucial role in merchandizing of goods. Emergence of Bitcoins in itself has been very successful and relevant entrepreneurship model and has brought herculean changes in the process how economies work. Entrepreneurs now need to be open towards more methods by which they can vendor products. Cryptocurrency has become the epitome of a rising revolutionary switch from fiat to digital, from degradable to lasting from protracted to spontaneous and from contemporary to futuristic, the future being an ocean of opportunities still waiting for its Columbus.