THE IMPACT OF BITCOIN

Bitcoin – The status, impacts and prospects
CONTENT

I.

OVERVIEW OF BITCOIN.............................................................................................4
1. What is Bitcoin?............................................................................................................4
2. The process of formation and development................................................................4
3. Bitcoin mining................................................................................................................5
3.1. Bitcoin mining.........................................................................................................5
3.2. Blockchain...............................................................................................................6
3.3. Proof of Work..........................................................................................................6
3.4. Bitcoin Mining Difficulty........................................................................................6

II.

THE STATUS OF BITCOIN..........................................................................................7
1. The status of Bitcoin in the world................................................................................7
1.1. Countries that attach great importance to Bitcoin................................................7
1.2. Countries adjust Bitcoin.........................................................................................8
1.3. Countries reject Bitcoin..........................................................................................8
2. The status of Bitcoin in Vietnam..................................................................................8

III. THE IMPACT OF BITCOIN.........................................................................................9
1. Factors affect bitcoin.....................................................................................................9
2. The impact of bitcoin.................................................................................................9
2.1. Power to the Dark Web...........................................................................................9
2.2. Speculations..........................................................................................................10
2.3. Politicization of Money.........................................................................................10
2.4. Apprehension among the Central Banks.............................................................10

2.5. The Emergence of New Markets..........................................................................11
IV. PROSPECTS FOR BITCOIN......................................................................................11
1. The big prospects for bitcoin......................................................................................11
2. The forecast of bitcoin.................................................................................................12
2.1. Optimistic forecast for Bitcoin in 2018................................................................12
2.2. Pessimistic outlook for Bitcoin in 2018................................................................12
V.

CONCLUSION..............................................................................................................13
1. Buy and holding...........................................................................................................13
2. Trading in Bitcoins......................................................................................................13
3. Investing in bitcoin......................................................................................................13

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Bitcoin – The status, impacts and prospects
LIST OF PICTURES
Picture 1: Chart of the legality of Bitcoin worldwide....................................................7
Picture 2: An ATM of Bitcoin.......................................................................................9
Picture 3: Transaction schedule Bitcoin......................................................................11
Picture 4: Chart of Capitalization Bitcoin...................................................................11

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Bitcoin – The status, impacts and prospects
I. OVERVIEW OF BITCOIN
1. What is Bitcoin?
Bitcoin is a peer-to-peer payment system created in 2009. It is the first open
source digital currency, and Bitcoin is managed by an open source software
algorithm that uses the global internet network both to create the Bitcoins as well
as to record and verify transactions. Being a cryptocurrency, Bitcoin uses the
principles of cryptography to control the creation and transfer of money. Access to
the Bitcoin network requires downloading the Bitcoin software on personal
computer and joining the Bitcoin network, which allows participants to engage in
operations, and update and verify the transactions.
Compared to a standard fiat currency, such as dollars or euros, the key
distinguishing feature of Bitcoin is that the quantity of units in circulation is not
controlled by a person, group, company, central authority, or government, but a
software algorithm controls the amount of Bitcoins issued. A fixed amount of
Bitcoins is issued at a fixed a-priori defined and publicly known rate, implying that
the stock of Bitcoins increases at a decreasing rate. In 2140 the Bitcoin growth rate
will converge to zero, when the maximum amount of Bitcoins in circulation will
reach 21 million units. Hence, the maximum stock of Bitcoins will not change
after 2140.
Bitcoins can be used to buy goods or services worldwide, provided that
transaction partners accept Bitcoin as a mean of payment. A transaction implies
that Bitcoin owners transfer their ownership of a certain number of Bitcoins, in
exchange for goods and services. An increasing number of companies accept
Bitcoins as payments for their goods and services (CoinDesk 2014). Bitcoins can
be also exchanged for other currencies.
To summarise, Bitcoin is a fiat currency without an intrinsic value. In contrast
to standard government backed fiat currencies, e.g. dollar, euro, Bitcoin is
developed outside of an underlying economy or issuing institution, implying that
there are no macroeconomic fundamentals that would determine its price

formation.
2. The process of formation and development
In 2008, in the context of the economic crisis, the Federal Reserve (FED) had
to inject money continuously to help the global economic downturn, people began
to question and lose heart. Trust in government-issued currency. At that time, a
new currency concept called "crypto currency" emerged, in which Bitcoin was the
most remarkable idea. Bitcoin's difference in comparison to other virtual units is
that it uses the block chain technology, which works like a public notebook listing
all transactions. If you want to learn about the transactions of any bitcoin address,
you have to look up the blockchain, since the information is not stored on that
bitcoin address.
On 18 August 2008, the domain name bitcoin.org was registered. Later that
year on 31 October, a paper authored by Satoshi Nakamoto titled Bitcoin which

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Bitcoin – The status, impacts and prospects
described detailed methods of using a peer-to-peer network to generate "a system
for electronic transactions without relying on trust".
Satoshi Nakamoto (probably a nickname) is the founder of Bitcoin Virtual
Currency. We don't know exactly who they are, although there are many
conjecture. All that is known about Satoshi is an expert in the field of coding. In
the early days, Nakamoto is estimated to have mined 1 million bitcoins. Before
disappearing from any involvement in bitcoin, Nakamoto in a sense handed over
the reins to developer Gavin Andresen, who then became the bitcoin lead
developer at the Bitcoin Foundation, the 'anarchic' bitcoin community's closest
thing to an official public face

By 2010, Bitcoin is publicly traded with a conversion of 1000 BTC = 3 USD.
In May 2010, Laszlo Hanyecz, a Florida programmer, was the first to buy a virtual
Bitcoin currency item that spent 10,000 Bitcoins in exchange for two pizza boxes
delivered to his home.
July 2010, MT. GOX opened and became the largest and most well known
trading platform in the Bitcoin community. By the end of 2010, the value of the
Bitcoin market exceeded $ 1 million.
Bitcoin continued to grow strongly and was expected to surpass $ 1 billion by
2013. At that time, the conversion ratio for a bitcoin of $ 92, with about $ 11
million in circulation.
3. Bitcoin mining
3.1. Bitcoin mining
Where do bitcoins come from? With paper money, a government decides when
to print and distribute money. Bitcoin doesn't have a central government. With
Bitcoin, miners use special software to solve math problems and are issued a
certain number of bitcoins in exchange. This provides a smart way to issue the
currency and also creates an incentive for more people to mine.
Mining is the process of adding transaction records to Bitcoin's public ledger of
past transactions (and a "mining rig" is a colloquial metaphor for a single computer
system that performs the necessary computations for "mining". This ledger of past
transactions is called the block chain as it is a chain of blocks. The blockchain
serves to confirm transactions to the rest of the network as having taken place.
Bitcoin nodes use the blockchain to distinguish legitimate Bitcoin transactions
from attempts to re-spend coins that have already been spent elsewhere.
Mining is intentionally designed to be resource-intensive and difficult so that
the number of blocks found each day by miners remains steady. Individual blocks
must contain a proof of work to be considered valid. This proof of work is verified
by other Bitcoin nodes each time they receive a block. Bitcoin uses the hashcash
proof-of-work function.
The primary purpose of mining is to set the history of transactions in a way that

is computationally impractical to modify by any one entity. By downloading and
verifying the blockchain, bitcoin nodes are able to reach consensus about the
ordering of events in bitcoin.
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Bitcoin – The status, impacts and prospects
Mining is also the mechanism used to introduce Bitcoins into the system:
Miners are paid any transaction fees as well as a "subsidy" of newly created coins.
This both serves the purpose of disseminating new coins in a decentralized manner
as well as motivating people to provide security for the system.
Bitcoin mining is so called because it resembles the mining of other
commodities: it requires exertion and it slowly makes new units available to
anybody who wishes to take part. An important difference is that the supply does
not depend on the amount of mining. In general changing total miner hashpower
does not change how many bitcoins are created over the long term.
3.2. Blockchain
A blockchain is a digitized, decentralized, public ledger of all cryptocurrency
transactions. Constantly growing as ‘completed’ blocks (the most recent
transactions) are recorded and added to it in chronological order, it allows market
participants to keep track of digital currency transactions without central
recordkeeping. Each node (a computer connected to the network) gets a copy of
the blockchain, which is downloaded automatically. Bitcoin is the most wellknown user of this technology and, as its’ use is crucial for the smooth running of
Bitcoin transactions, it would help us all as Bitcoin users and fans to better
understand just how this technology works.
3.3. Proof of Work
A proof of work is a piece of data which was difficult (costly, time-consuming)
to produce so as to satisfy certain requirements. It must be trivial to check whether

data satisfies said requirements.
Producing a proof of work can be a random process with low probability, so
that a lot of trial and error is required on average before a valid proof of work is
generated. Bitcoin uses the Hashcash proof of work.
3.4. Bitcoin Mining Difficulty
3.4.1. The Computationally-Difficult Problem
Bitcoin mining a block is difficult because the SHA-256 hash of a block's
header must be lower than or equal to the target in order for the block to be
accepted by the network.
This problem can be simplified for explanation purposes: The hash of a block
must start with a certain number of zeros. The probability of calculating a hash that
starts with many zeros is very low, therefore many attempts must be made. In order
to generate a new hash each round, a nonce is incremented. See Proof of work for
more information.
3.4.2. The Bitcoin Network Difficulty Metric
The Bitcoin mining network difficulty is the measure of how difficult it is to
find a new block compared to the easiest it can ever be. It is recalculated every
2016 blocks to a value such that the previous 2016 blocks would have been
generated in exactly two weeks had everyone been mining at this difficulty. This
will yield, on average, one block every ten minutes.
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Bitcoin – The status, impacts and prospects
As more miners join, the rate of block creation will go up. As the rate of block
generation goes up, the difficulty rises to compensate which will push the rate of
block creation back down. Any blocks released by malicious miners that do not
meet the required difficulty target will simply be rejected by everyone on the

network and thus will be worthless.
3.4.3. The Block Reward
When a block is discovered, the discoverer may award themselves a certain
number of bitcoins, which is agreed-upon by everyone in the network. Currently
this bounty is 25 bitcoins; this value will halve every 210,000 blocks. See
Controlled Currency Supply.
Additionally, the miner is awarded the fees paid by users sending transactions.
The fee is an incentive for the miner to include the transaction in their block. In the
future, as the number of new bitcoins miners are allowed to create in each block
dwindles, the fees will make up a much more important percentage of mining
income.
II. THE STATUS OF BITCOIN
1. The status of Bitcoin in the world

Picture 1: Chart of the legality of Bitcoin worldwide

1.1. Countries that attach great importance to Bitcoin
Some countries have accepted Bitcoin and brought real laws to regulate
Bitcoin transactions. Bitcoin is considered a legal payment method in Japan,
moreover, some organizations recognize it as a currency. The law in dealing with
banks has not changed, but they are also being considered to make Bitcoin can
even be used in everyday life. India seems to be the next nation to legalize Bitcoin,
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Bitcoin – The status, impacts and prospects
The Indian government agrees that the regulation of Bitcoin may be beneficial and
is currently drafting legislation aimed at this. The Reserve Bank of India is also

considering the use of Blockchain technology in the banking sector.
1.2. Countries adjust Bitcoin
These are the countries that have Bitcoin laws, although they do not consider
it a coin like Japan. Most countries in the world belong to this group. In the
United States, for example, the CFTC classifies Bitcoin as a commodity, while the
United States Treasury considers this a money services business. Although no
financial manager views it as a currency, it is still reported in tax returns.
In Europe almost all countries have regulations about Bitcoin, primarily aimed
at minimizing crimes in the financial sector such as money laundering, but does
not legally use it as a currency. The same trend have also occurred in the Americas
from Canada and Greenland to Argentina.
In the East, Asia and Oceania, there are also some regulations about Bitcoins
and other electronic currencies, again aimed at preventing financial crimes. The
bitcoin policy has always been controversial in Russia, but Russian central bank
finally came up with rules that consider electronic money as an asset.
1.3. Countries reject Bitcoin
Only a few countries, exactly 6, completely banned Bitcoin. One noteworthy
example is Iceland, which has the largest Bitcoin digging industry in the world, but
people are not allowed to buy Bitcoin. Surprisingly, one can own by digging
Bitcoin, but not buying Bitcoin from a foreign exchange. This is an effort to
prevent capital outflows from Iceland. Five other countries belong to Bolivia,
Ecuador, Bangladesh, Kyrgyzstan and Vietnam.
2. The status of Bitcoin in Vietnam
With the price is on the rise sharply as today, bitcoin are more interested
Vietnamese people than ever. In addition to the electronic trading platform, bitcoin
is also traded directly through ATMs
These ATMs appear inside of cafes and restaurants. Particularly in the area of
HCM City, there are such 4 ATMs operating. With this machine, customers put in
paper money in exchange for bitcoin, then can trade goods and services like any
currency. Most of these shops previously listed prices of products and used Bitcoin

as a mean of payment, but since the government has regulations which illegal
means of payment, including Bitcoin and other similar virtual currency will be
fined from VND 150 million to VND 200 million, these stores trade bitcoin by
cash. Besides, many people think that when the government do not specify Bitcoin
is money or goods and not specify whether Bitcoin is a means of payment
prohibited or not, the transaction through Bitcoin is completely outside the
jurisdiction of the State Bank.

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Bitcoin – The status, impacts and prospects

Picture 2: An ATM of Bitcoin

In the morning of 17th January, the price of Bitcoin fell to about 20%, and this
virtual currency almost touched 10,000 USD/coin, a drop of nearly 50% compared
to the peak not long ago.
This fact indicates that virtual currency is a future trend or not is not entirely
sure, but the risk in the current investment is very high. Therefore, before what is
happening, investors need to consider seriously pouring money into the virtual
currency
III. THE IMPACT OF BITCOIN
1. Factors affect bitcoin
Let's list the factors that will have a decisive influence on the cost of Bitcoin's
exchange rate:

Absence of hacker attacks and failures


No disagreements within the community. Let me remind you that
Bitcoin Cash and Bitcoin Gold appeared in August and October due to
disagreements.

The worsening of the economic situation in the world

If a large number of people will use Bitcoin
2. The impact of bitcoin
2.1. Power to the Dark Web
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Bitcoin – The status, impacts and prospects
Dark web is the section of the web that is not accessible through the search
engine. What we are given access to is the surface web which is not even half of
the existing internet. Dark web is accessible only through special software like Tor
Browser which enables anonymous searching of the internet.
Dark web is the place where you can find assassins, weapons and a lot more
illegal stuff. By using crypto currencies like Bitcoins people can make illegal
transactions without giving any information about themselves. Cryptocurrencies
like Bitcoins are a way to empower such transactions across the globe which will
ultimately result in increased cyber crime.
2.2. Speculations
As on 14th January 2015, Bitcoin was valued at $170 and as on 24th July 2017,
it values at $2772. There have been many ups and downs in the value of Bitcoins
and this scenario is likely to continue. Due to the extreme highs and lows BitCoins
present a massive possibility for speculation. Just like trading in shares, trading in

Bitcoins is massive and seeing the rise in traction around cryptocurrencies it is
likely to grow further.
Another reason accounting to this is the increasing cost of investing in the
stock markets. A share in Apple or Facebook can cost around $150 while Bitcoins
can be bought in fractions at a price as low as one-tenth of a cent. This makes it an
easy target for speculative gains.
2.3. Politicization of Money
Earlier all the monetary transactions were enabled through central banks
(directly or indirectly). Now, with the evolution of Bitcoins, the scenario has
changed. The power that was vested in the governments and central banks is
shifting to the masses. This revolutionary change in transaction handling has the
power to change the economic structure. To bring security and enable scrutiny,
central banks and financial institutions maintain a record of all the transactions
undertaken by the people. Now with digital currencies, this economic power can
be challenged by people. This has led to the creation of a new autonomous body
which can facilitate transactions. Ultimately if adopted on a large scale, Bitcoins
can lead to the politicization of money.
2.4. Apprehension among the Central Banks

There have been implications that Bitcoins can be used to secretly launder
money outside the country. Central banks across the world have been wary of
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Bitcoin – The status, impacts and prospects
Bitcoins as an uncontrollable and unpredictable form of currency.
Cryptocurrencies are leading to loopholes in the current bank’s data about the
money transactions leading to inability to track economic activities. Crypto and

Cyberspace has emerged as a power in itself thus bringing a check on the activities
of the so powerful governments.
2.5. The Emergence of New Markets
Cryptocurrencies have led to the emergence of new markets. Currencies like
Bitcoin and Ethereum have opened gates for a new kind of market which unlike
present money market is controlled by no one. Cyberspace will rise up as the
managing body that will handle and maintain such disruptive markets. The near
zero transaction cost (along with other characteristics) has made these currencies
even superior to the traditional money we are accustomed to using. What can be
surely stated is that it is just the beginning and the number of possibilities is
endless.
IV. PROSPECTS FOR BITCOIN
1. The big prospects for bitcoin
The Bitcoins seem to have a potentially great future:

International currency

Alternative to real money

Fast translations

Impossibility to forge currency

Are not subject to inflation
The following two graphs can testify to a bright future:

Picture 3: Transaction schedule Bitcoin

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Bitcoin – The status, impacts and prospects

Picture 4: Chart of Capitalization Bitcoin

2. The forecast of bitcoin
Investors were divided into two camps: some believe that Bitcoin will end,
while others believe that everything is just beginning. Each side has its own
convincing facts and counterarguments.
2.1. Optimistic forecast for Bitcoin in 2018
Optimists believe that the rate of Bitcoin in a couple of years (possibly tens of
years) can generally reach up to 100 thousand dollars for 1 BTC, but it is only in
the future. Personally, I think that this is quite realistic if the governments of the
countries can agree among themselves and make it legal.
A favorite counter-argument among optimists is a comparison of Bitcoins with
real gold (they are often called "virtual gold"). Remember the demand for real
gold. Once $ 300 for one ounce was considered very expensive. During the 2008
crisis, gold rose and reached $ 1,800 per ounce. And what is gold? Than it is
provided? It's just metal. Bitcoins are also not provided with anything. However,
the potential opportunity to make it an international currency makes for it
unlimited growth prospects.

An adequate forecast indicates that in 2018 the cost of Bitcoin will be around $
10 thousand. There should be no sharp falls. Most analysts and banks expect
growth.
Forecast for Bitcoin in 2017: $ 1000 .. $ 10000
Forecast for Bitcoin in 2018: $ 5000 .. $ 13000
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The forecast for the Bitcoin rate in 2019 is 8000 $ .. 27000 $
2.2. Pessimistic outlook for Bitcoin in 2018
The main reason for pessimists is that the Bitcoins are outlawed and that their
cost is artificially inflated. They are sure that governments will never legalize the
currency with such prospects.
The second weighty argument against the Bitcoins is the question of the
security of your virtual money. If you lose or steal coins, no one will return them to
you, as it is impossible for someone to prove anything and return it. However, this
issue should be resolved over time through the release of ever newer versions of
wallets, which will have better protection levels.
A pessimistic forecast indicates that the rate will be in the region of $ 1,0002,000 per coin.
V. CONCLUSION
1. Buy and holding
The most common form of “investing” in Bitcoin is buying the currency in
hopes it will appreciate in value. If this is the case then you need to decide for
yourself if you think this is a good time to buy. Meaning, do you think the price
will continue to rise
A few pointers for buying and holding Bitcoins:

Never invest more than you are willing/able to lose – Bitcoin is a very
risky investment and you should keep in that in mind at all times.

After buying Bitcoins make sure to move them into your own personal
wallet and never leave them at the exchange. My personal recommendation is to
use a hardware wallet to store your Bitcoins. If you can’t afford a hardware wallet,

try a paper wallet.

Make sure to buy Bitcoins only from exchanges that have proven their
reputation.

Buy Bitcoins through Dollar cost averaging – This means that you don’t
buy all of your Bitcoins in one trade but instead buy a fixed amount every month,
week or even day throughout the year. This way you average the price over the
course of a whole year.
2. Trading in Bitcoins
Bitcoin trading is different than buying and holding. When you are trading
Bitcoins it means that you are actively trying to buy Bitcoins at a low price and sell
them back at a higher price in relatively short time interval. Trading successfully
requires knowledge and practice. The trading market is occupied by very large
players who are just waiting for newbies to come in and throw their money away
by trading aimlessly.
3. Investing in bitcoin
Some people would like to invest their money into mining Bitcoin. For the past
few years mining Bitcoin is only profitable if done at large scales. This means you
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Bitcoin – The status, impacts and prospects
will need to get expensive mining equipment and hopefully have access to free
electricity. Also it’s usually much more cost effective to buy Bitcoins with this
money instead of using it to buy mining equipment.
Some of you may have heard of all sorts of sites that allow you to mine
Bitcoins through them. This is known as cloud mining and these sites fall into one

out of two categories:

They are complete scams that will run away with your money and don’t
actually use it to mine Bitcoin.

They are not scams, but they are bad investments since you will
probably get more Bitcoins if you just use that money to buy Bitcoins instead of
paying the site.

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