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Deepak Atmaram Kinger

Deepak Atmaram Kinger is Vice President leading the Banking and Financial Services business for Middle East and Asia Pacific at VirtusaPolaris, a well-known information technology services provider with a global reach. He has over 19 years of international experience in financial services across Retail, Commercial Banking and Capital Markets. He has lead business growth across global client portfolios spanning North America, Asia, Middle East and Europe.

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Bitcoin - Growth and Future of This Industry

Bitcoin as a form of payment for services and products has observed growth lately. Merchants have an incentive to accept the digital currency since fees are lower than normally forced by credit card processors.

The global financial services industry is seeing a tremendous churn as emerging technologies from Blockchain and digital currency to democratization of financial services using APIs to the rise of mobile transactions are reshaping the landscape. An exciting and fast changing space to watch out for is Blockchain and Cryptocurrency.

Bitcoin is the most mature of the Cryptocurrencies that emanated from a whitepaper that was published in 2008 by Satoshi Nakamoto. Bitcoin leverages Blockchain as its core technology and is based on the principles such as decentralization, anonymity and controlled supply through a complex process called ‘mining’.

Recent years have seen phenomenal growth of Bitcoin as a storage of value. It has effectively become a paperless, bank-less, state-less currency that allows people to pay directly for goods and services. Bitcoin offers an efficient, accountable, and low cost methodology to transfer funds to its diversified consumer base. The users can send and receive Bitcoins electronically for an arbitrary transaction fee by using wallet software on a mobile or a personal computer. In addition to this, Bitcoins can also be obtained in exchange for fiat products, money and services.

Bitcoin as a form of payment for services and products has observed growth lately. Merchants have an incentive to accept the digital currency since fees are lower than normally forced by credit card processors. Stealing Bitcoins and charge backs are almost impossible in this case. The commercial use of Bitcoin though is not that spread out, people have come up with different ways to use this technology to make life simple and smooth. A good example of this is Bitcoin ATMs that allow a two-way exchange between cash and bitcoins. There are more than 1000 Bitcoin ATMs today spread across 58 countries. There are also credit cards that run on popular networks such as Visa but settle the transaction real time on a Bitcoin exchange at the backend.

There are various areas where Bitcoin technology could make a huge impact and could be an exponential growth booster for the Cryptocurrency. Some use cases are presented below:

·         Universal currency - The trade and exchanges around the world with the help of Bitcoin can become quick and straightforward. With the use of cryptocurrency the snarls of currency/money exchange will no longer exist.

·         Greater control on transactions – With the use of digital currency, individuals can exchange money directly with each other, without any third party involvement. Bitcoin allows the user to maintain maximum control over the payment processes.

·         Boosts flexibility, security and secrecy – The payment industry currently relies on a four party payment model which involves providers, authorization messages, and settlement steps to connect the payer and the payee. Bitcoin and other cryptocurrencies promise simpler cash payment that needs only two parties: payer and the payee. The only other entities involved besides the payer and the payee, are those that provide services such as a currency exchange.

·         Real time agility and definitiveness – Digital cash facilitates immediate transfer of value, a feature that is becoming more desired by some apps today to match the instant response pace and the cutting edge technologies.

·         Diminish the transaction costs – Digital cash allows the payment to occur with little or no transaction cost. However, it is way different from today’s payment networks scenario where payer and payee bear all the risk for lost or stolen e-cash.

·         Quick and easily accessible to the unbanked – With the advent of digital cash, making payments will become more effortless and less tedious. Anyone can pay, even people without a bank or credit card account can learn and access this hassle free mode of payment. With Bitcoins coming into mainstream the technology can be made easily reachable to the huge part of the world’s population, which is either under-banked or unbanked.

·         Help in micropayments - It is not possible to pay small amounts every time by using traditional payment methods for petty things. Cryptocurrencies like Bitcoin can help in such scenario as they are divisible up to eight decimal points, so one can pay the smallest amounts easily.

While there is huge potential for Bitcoin, its widespread adoption is still a while away. The still nascent stage of adoption of Bitcoin in the industrialized markets means that it will take time for the infrastructure to be laid and it is way too early to expect a substantial uptake in developing countries anytime soon.

In addition to this, Bitcoin has also faced some challenges it has seen in recent times.

·         Extreme Volatility – Just in the last few months, the value of Bitcoin has swung between $970 and $1600. This is not good for the long term stability of the Cryptocurrency.

·         Differences in the Bitcoin community which poses a risk to standardization. There have been recent efforts to create an alternative platform Bitcoin Unlimited which will undermine the current marketplace

·         Regulatory pushbacks – While Bitcoin benefits from the high level of privacy for its users, it has also been at the receiving end of regulatory pushbacks by Governments around the world. Bitcoin makes it simple to engage in money laundering and poses potential economic and political risks to countries. Most recently, the US regulator SEC rejected the application for the Winklevoss Bitcoin ETF (Exchange Traded Fund) as an investment vehicle.

·         Competition from other Cryptocurrencies like Ether and Zcash that will take away the digital currency market share from Bitcoin. Zcash for example has improved cryptographic algorithms than Bitcoin as well as its unique Blockchain technology.

Having said that, these only seem to be short term bumps in the journey of Bitcoin. The future is still very bright for the Cryptocurrency. Given the limited supply of Bitcoins, as the adoption continues to increase, the corresponding uplift in its value will be non-linear. Its value hit a new high of $1600 recently and experts predict the value of Bitcoin to touch $4000 within a year.  Time to take the plunge and invest in Bitcoins? Well, that depends on your risk appetite!

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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