Decentralization bitcoin’s Achilles’ heel
THE PRICE OF THE DIGITAL CURRENCY BITCOIN hit $4,045 on Sunday, almost 3.23 times its exchange value early this year. Economic Information Daily commented on Monday:
Over the past three weeks bitcoin, which was worth just 1/1300 of a US dollar when it first hit the market, has doubled in value despite the wobble earlier this month. The issuance of the rival “bitcoin cash” on Aug 1 affected a number of crypto currencies in its first week of trading, but bitcoin held up.
Decentralized and not replicable, bitcoin can be swiftly transferred across borders regardless of the amount, and the transaction costs are normally lower than traditional currency transfers. Investors, therefore, would seem to have good reason to be optimistic about the original crypto currency.
Yet bitcoin also comes with risks despite the fact that it has been thriving against all odds. There is still a substantial divergence of opinion between countries when it comes to what is bitcoin, since only a few countries deem it to be a legitimate currency.
Most countries, including China, tend to see bitcoin as a virtual commodity, because it is not issued by the monetary authorities of any sovereign state and the organizations running bitcoin businesses do not possess authorized currency credentials either.
Decentralization, a big selling point of bitcoin, could be the Achilles’ heel of the crypto currency. On the one hand, lax supervision and unclear definition may subject bitcoin to graver risks when transaction security is compromised. On the other hand, the digital currency is far from being irreplaceable, and faces increasing challenges from potent rivals like bitcoin cash.
While only a few retailers accept bitcoins, hackers have been rather keen to exploit the crypto currency for blackmailing. In May, the ransomware virus, WannaCry affected more than 300,000 computers in 150 countries and regions, demanding payments of up to $600 in bitcoin to restore access. The craze for crypto currencies, reminiscent of the “Tulip bubble” in the Netherlands in the early 1630s, has to be cooled down before it inflicts damage on real-life finance and public security.