There are some advantages and disadvantages of using Bitcoin. The advantages of using Bitcoin include:
– Bitcoin offers an easy paying system. For example, Bitcoin enables mobile payments, which are made via phones, to be made easily. In order to accept payments that will be made using Bitcoin, the only thing that is required is to bring the code in the Bitcoin digital wallet application to the phone display and to allow the person who wants to pay to recognize this code. With NFC radio technology7, by getting contact between two phones, the transaction can be done (bitcoin.org).
– Digital money does not need the physical existence of those trading. In view of this, Bitcoin takes less time for its users.
– Beside the cost of transportation, storage, and security, expenditures are also prevented. In the US, for these kind of activities, $60 billion are spent in a year.
– Transactions become easier all over the world. In countries such as the US, Japan, France, among others, it is sufficient to have some amount of Bitcoin to enable transactions to occur.
– Bitcoin has the same qualifications as gold. It can be very rarely imitated. In order to be able to produce a Bitcoin, there is a need for equipment and power, and the amount of this is is limited to 21 million8.
7 It consists of abbreviations of the words Near, Field, and Communication. NFC is the electromagnetic radio area, passing interaction between “pioneer” and “target” devices, that enables the transfer of several pieces of data. It is similar to Bluetooth in terms of short range and is deemed a subset of RFD devices (www.chip.com.tr).
8 There are currently 1.3 million Bitcoin in circulation and, until 2040, with an increase of a few millions, there is a plan to reach 21 million Bitcoin (www.fortuneturkey.com).
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– Banks do not generally accept to pay for fee commission. Directly application of transactions between nodes became easier. Bitcoin processor transmits the transactions to the nearest nodes and spreads to transactions in the network in order. The transactions that are disturbed or invalid are not accepted by the trustable nodes. Transactions are generally free of charge.
– Bitcoin use does not produce inflation. It is well known that limited monetary supply is seen as an advantage to inflation. The total amount of monetary sup-ply consisting of Bitcoins is exactly consist of 21 million.
– Transactions can be carried out all the time and at every place by provid-ing work flexibility. (Rogojanuand Badea, 2014: 109–110). There are no bank holidays and obligatory limits. Bitcoin presents users with the opportunity to control their money as they desire (Glantz, 2014: 2).
– Bitcoin users have full control on the transaction. Cases such as payment except for the desires of users or without giving information are not under consideration. Without personal information, Bitcoin can make payment. In addition, Bitcoin users can protect their Bitcoins by ciphering or reserving (Glant, 2014: 2).
– Finally, Bitcoin does not depend on any central authority or mediator institute.
Therefore, they are not affected by the economic actions experienced in dif-ferent countries.
The disadvantages of using Bitcoin include:
– The most important disadvantage of using Bitcoin is the problem of sudden and frequent fluctuation. Bitcoin, determined according to the exchange rate, supply, and demand, in the face of increasing demand, can experience a sudden price rise or in the case of decreasing demand, the opposite of this. Let us ex-plain this situation with some examples. In 2013, during the crisis experienced in South Cyprus, those wanting to draw money from banks were limited to 300 Euros. Following this development, those living in the region, in order to send money abroad or to be able to receive money from abroad, began to use Bitcoin. With increasing demand for Bitcoin, which was $100 at the beginning, showed an increase of $1000 at the end of the process. Another fluctuation was experienced in China in the same year. First, the claims that China would forbid Bitcoin became a current issue. Then, the Hong Kong Central Bank warned people about being careful against digital monetary units. Following these events, Bitcoin, which was valued at $945, fell to $638.
– News such as McGox going bankrupt and hack attacks can be shown as an example to the deflations experienced in the market. Basically, although sup-ply and demand determine falls and rises, as a requirement of its nature being
Digital Economy and Bitcoin 69
high speculative, even simple and small news can rapidly change the course (kriptobilgi.com).
– One of the disadvantages of using Bitcoin is the problem with security viola-tion. Due to the fact that Bitcoins are used in an online medium, vulnerability increased. Security violations can lead to the loss of accumulated violations.
If Bitcoins are stolen or lost, there is no institute to fix the damage (Rogojanu
& Badea, 2014: 111). One of the largest security violations in history is the event, in which McGox was hacked, which is one of Tokyo’s centered Bitcoin exchange offices. While name or names behind this hack are not still known, hackers, entering the system, succeeded in stealing 650.000 Bitcoins. McGox declared bankruptcy as a result (hwp.com.tr).
– Cyber crimes that are done on digital transactions could be one of the disad-vantages of using Bitcoin. Bitcoin is responsible for the illegal activities that it encourages such as gambling, tax evasion, and terrorism and it facilitates the transactions of forbidden goods. That is why the American Treasury Depart-ment declared that it will apply the rules related to money laundering in the use of digital money. Again, the Department of New York Financial Services, in the scope of a larger investigation related to their own applications, summoned various firms related to Bitcoin (Rogojanu & Badea, 2014: 112).
Conclusion
Although there are some differences in the views of economists and those studying technology regarding the effect of developments in information and communi-cation technologies on the run of the economy, the main point that they have consensus on is the view that in the next process, these developments, modifying the existent paradigm, will innovate the operation system of the economy. The change of traditional payment instruments with the coming of the digital money transfer, the transformation of traditional trade to electronic trade, and changes alike, together with the digital economy acquiring a place in our life, became remaining face of the innovation and competition.
In particular, the subject of digital money acquired an important place in light of scientific studies in recent times. Although the first commercial transaction began in 2010 and a short time passed in this interval, thanks to the results it obtains today, Bitcoin was placed in a different place by the financial world, the academy, and the media and it is more sophisticated. Bitcoin, which is independ-ent of cindepend-entral managemindepend-ent, does not have any mediator, can make rapid transfers, does not have any limit and constriction, is almost costless, and is followed with interest by many countries at the present day. In addition, since the amounts of
Haldun Soydal 70
either supply and demand of Bitcoin in a day or the reactions it gives to events taking place reflect the prices, Bitcoin buying-selling forms an opportunity for people wanting speculative aimed investment.
Nowadays, it is considered that Bitcoin, called the “The capital of the future”
and seen as the biggest second invention, will be revolutionary and will fill the gaps of the market with its sophisticated and strong substructure.
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