Bitcoin is a private initiative that has created a virtual currency and a payment system that accelerates the use of a virtual currency based on cryptography and decentralized management, it was launched in 2009 by the mysterious Satoshi Nakamoto. Bitcoin is considered not only an interesting, but also a disruptive technical innovation by many people. A number of regulatory and supervisory bodies propose that Bitcoin’s design presents distinctive risks that differ from other payment methods and stores of value. It can be regarded as speculative assets. In this essay, I will focus on its transaction risk and the characteristic of bitcoin against monetary policy.
Bitcoin is an irreversibility payment which highly creates transaction risk. If …show more content…
However, they ignored the economic concept behind and the threat of these is much more serious. Keep the currency stable and reliable is the functions of the national government traditionally. The authorities control the money supply, set interest rate target, in order to promote economic growth and prevent runaway inflation caused market exchange system’s failure. On the basis of the needs of economic to adjusted monetary policy, is a difficult task. Central Banks are hiring hundreds of people to analyze economic data, to find the best monetary policy. Bitcoin destroyed these functions of the central bank, but turned to the simple arithmetic. Due to the autonomy of computer system, it was unable to cope with complex data, such as economic output and unemployment rate. Bitcoin uses fixed algorithm to control the money supply. The new coins will be produced at the rate of pre-determined, and reach the upper limit until 2140, in the end, the money supply will stop growing. The emerging of bitcoin seems to present libertarian ideals, let the currency get rid of the central bankers’ meddling, but it was a mistake. It ignores the economic cycle and regardless of the consequences. Some later appeared virtual currency is trying to rectify this, allows infinite money supply growth, in order to achieve the positive inflation rate. And some increased the punishment mechanism of hoarding, trying to make the currency more freedom. They have obvious progress than Bitcoin, but have the same defects. The economy not only depends on monetary velocity, but also depends on human behavior. However, the complexity of human behavior is unable to grasp by simple rules. Therefore we need to central bankers, to adjust of monetary policy momentarily, to promote social prosperity. Admittedly, the management of monetary policy experts failed to prevent the happening of the financial crisis in 2008. But their
Bitcoin is an irreversibility payment which highly creates transaction risk. If …show more content…
However, they ignored the economic concept behind and the threat of these is much more serious. Keep the currency stable and reliable is the functions of the national government traditionally. The authorities control the money supply, set interest rate target, in order to promote economic growth and prevent runaway inflation caused market exchange system’s failure. On the basis of the needs of economic to adjusted monetary policy, is a difficult task. Central Banks are hiring hundreds of people to analyze economic data, to find the best monetary policy. Bitcoin destroyed these functions of the central bank, but turned to the simple arithmetic. Due to the autonomy of computer system, it was unable to cope with complex data, such as economic output and unemployment rate. Bitcoin uses fixed algorithm to control the money supply. The new coins will be produced at the rate of pre-determined, and reach the upper limit until 2140, in the end, the money supply will stop growing. The emerging of bitcoin seems to present libertarian ideals, let the currency get rid of the central bankers’ meddling, but it was a mistake. It ignores the economic cycle and regardless of the consequences. Some later appeared virtual currency is trying to rectify this, allows infinite money supply growth, in order to achieve the positive inflation rate. And some increased the punishment mechanism of hoarding, trying to make the currency more freedom. They have obvious progress than Bitcoin, but have the same defects. The economy not only depends on monetary velocity, but also depends on human behavior. However, the complexity of human behavior is unable to grasp by simple rules. Therefore we need to central bankers, to adjust of monetary policy momentarily, to promote social prosperity. Admittedly, the management of monetary policy experts failed to prevent the happening of the financial crisis in 2008. But their