The article from Credit Suisse though suspects Bitcoin and other virtual currencies, also claims that it has future in certain areas and countries. The writer of the article Jonathan Horlacher says that Bitcoin has grown into a global phenomenon wherein some see the beginning of a new era; others see the potential for a major crash.
Answering the question about the chances of the success of the system the writer says that people first need to understand how Bitcoin works. He further elaborates that Bitcoin which is the largest and best known of hundreds of digital currencies, such as Ripple, Litecoin, Dogecoins, etc have a fundamental problem: the lack of physical form.
Nonetheless, he makes it clear that Bitcoin and other digital currencies are mere data which can be copied without a great deal of effort. Therefore, there is a risk of the same “digital coin” being spent more than once. The writer discusses various aspects of Bitcoin in his pursuit to explore the potential and opportunities.
For instance, the article further claims that while it is unlikely to ever truly compete with traditional currencies, Bitcoin could, when combined with the traditional finance system, have cost advantages over credit cards and money transfer firms like Western Union.
Bitcoin Has Cost Advantage Over Cards
According to a Credit Suisse article Bitcoin’s biggest advantage – decentralization – is also its biggest drawback. He thinks that because there is no authority guaranteeing its value, preventing its widespread adoption as a means of payment. He claims that a lot of people around the world are skeptical about this feature and keep distance from it.
The Federal Reserve Bank wants Government-Backed Fedcoin
Some government agencies are trying to bring in the governments to legitimize the virtual currency by bringing their own. For instance, in the last couple of months some proposals have come up regarding the circulation of virtual coins being issued by the centralized authorities as this according to some people it ensures that investments are safe.
Interestingly enough a senior researcher at the Federal Reserve Bank of St Louis floated the idea of a government-backed ‘Fedcoin’ that uses a Bitcoin-style protocol. According to the writer the US dollar as the monetary object, combines the best of cryptocurrencies and cash to give tough competition to Bitcoin.
He questions that if there is no central bank, how can the money supply be increased? The surprising answer is: by using a kind of quiz.