Discuss about bitcoin and cryptocurrency. For me, this is an interesting topic because bitcoin issues are often the talk, including confusion in many quarters. What is cryptocurrency? What is bitcoin? How does the regulator respond to the development of the current crypto currency? And how is the bitcoin phenomenon going forward?
In its purest form, cryptocurrency or crypto currency is a kind of electronic cash that can be sent directly from person to person (peer-to-peer) without going through financial institutions, or banks. Generally if we are currently sending funds or money to other parties, of course, must be processed through the bank. In this case, the bank serves as an intermediary. Well in this crypto technology, the payment is made directly without an intermediary. Transactions conducted between two parties in a network are then verified through a specific encoding process or cryptography. Well, Bitcoin is one of the existing cryptocurrency types, and is popular. In addition to Bitcoin there are more than a few crypto currencies similar to various names, such as ethereum, litecoin, etc. Many of these crypto currencies are short of devotees until they die one by one. In Bitcoin, if there are transactions of two persons, the other party in the network that can decode or verify the occurrence of the transaction, will be rewarded with bitcoin. This step is known as mining bitcoin (mining).
From what I've learned before, that David Yermack, researcher at the Bureau of Economic Research, New York University (2016) that bitcoin still fails to meet the criteria as a currency. It cites the basic functions of a currency, the medium of exchange, the a store of value, and the unit of account. Of the three criteria, bitcoin does not qualify as money. Yermack doubts that bitcoin can be a currency or means of payment acceptable to today's audiences. I agree with the analysis. If we look at bitcoin volatility in recent years is very high, much higher than the existing currency. This has an impact on the difficulty of calculating the short-term risks of bitcoin. In addition, the exchange rate of bitcoin in the day to day does not correlate at all with any currency in the world, nor with commodities such as gold for example. This makes bitcoin useless in risk management and difficult for the owner to hedge.
Let's look at one by one the money function on bitcoin for more details. First, as a medium of exchange. Bitcoin has no intrinsic value, so its value will depend largely on its usefulness in the economy or consumption. But in reality, today is still very small parties who use bitcoin in everyday life to make various payments. Few traders (merchants) are willing to accept bitcoin. Some countries such as Japan, for example, allow bitcoin to be used as a means of payment (not as legal tender or legal currency). But if we go to Japan, just a few, not to say very little, the store is willing to accept payment with bitcoin. Especially in other countries, including Indonesia. In other words, payments using bitcoins are currently very rare.
Second, as a unit of account. For users or buyers, we certainly look for ease in buying goods. For example, a bowl of chicken noodles cost Rp 25 thousand, a cup of coffee costs Rp 15 thousand. This will make it easy to calculate. But in the use of bitcoin, various problems arise, mainly due to its extreme volatility. The value of bitcoin can vary drastically from minute to minute. This makes it difficult for the seller to determine the price of an item. In addition, there is no uniform or fixed market price associated with bitcoin. I also tried to check on some bitcoin markets around the world, and the prices vary. This disparity, in the theory of market value, violates the law of one price for a currency. Why breaking? Because it is open most likely people to do arbitrage in the same market (buy cheap and sell high in commodities and the same time).
Third, as a store of value. When a currency serves as a store of value, the owner certainly has the expectation that the currency he holds can be obtained easily and can be redeemed for future goods or services as needed. The economic value of goods or services purchased in the future is expected to be equal to the money used or stored now.
From the above analysis it can be seen that Bitcoin, according to Yarmeck (2016), still can not meet the criteria as money because it has the deficiencies as above. Generally people currently hold bitcoin instead of being used as a means of payment, but rather to speculative investment. Bitcoin is also increasingly difficult to accept because it is disconnected with the payment system and banking in many countries, because most authorities in the world forbid it to be used as a means of payment.
For me bitcoin is worth to be a currency. Because like fiat currency, bitcoin can use also for payment. Fiat currency mostly use to pay or buy something. Like bitcoin can use in many different things including payment, you can use bitcoin to buy in online store because there are some online shops in the internet that accepted bitcoin for payment.
