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Discussion: Bitcoin

What do you think of Bitcoin? I’m not a fan, mostly because it a distraction – a plaything for the rich and greedy.

Bitcoin is an alternative currency that provides individuals with a wide range of secure choices when transacting online. Unlike other monetary forms, bitcoin is a complex digital currency that people can use to purchase products and services online. Although many online vendors do not endorse the cryptocurrency, Bitcoin has proved to be one of the most secure forms of payments in the world today (Burniske& Tatar, 2018). I highly anticipate a world where Bitcoin will go mainstream because of its secure nature that reduces the incidents of cybercrime affecting the experience of many consumers online. However, a lot should be done to educate individuals on the functionality of the cryptocurrency to penetrate the hardlines adopted by many entities regarding its application in the world today. The aspect of greed is associated with Bitcoin because of its high value, which limits the number of people who can own the cryptocurrency.

After reading the article, which supports your views, I realized that the author is focused on one negative aspect of the cryptocurrency. Mike Beggs in The Dumb Moneycriticizes the lack of human factor in Bitcoin handling and transactions, citing the heavy reliance on cryptographic proof, which escalates the cost of doing business using the digital wallet (Beggs 2013). Beggs paints a scenario that many people can relate to where the financial institutions can reverse transactions when concerns are raised regarding the ability of the currency to facilitate a financial outcome. Even though Satoshi Nakamoto portrays Bitcoin as the ultimate solution to the growing mistrust when conducting online transactions, the author believes that the total elimination of the human aspect lowers the impact of the financial activity yet money is supposed to be a social utility. I disagree with the views based on the ability of Bitcoin to seal the loophole exploited by different entities during an online transaction.

Money Creation

Why is it okay for banks to create money through the process of holding fractional reserves and lending while it is not okay for fraudsters such as Bernie Madoff to run a pyramid scheme?

Financial institutions operate under a strict set of rules that restore order and provide users with the much-needed trust when conducting different transactions in their immediate environment. Over the years, banks have earned consumer trust, which enables them to oversee the execution of different monetary activities in the world today. However, it should be noted that the process has not only being difficult but also involving because of the different requirements expected to be fulfilled before a bank can be declared operational in the business environment (Hofstetter et al., 2018). The stringent measures are supposed to ensure that financial institutions can respond to the different risks present in the banking industry, which can cripple operations in the business environment. From this observation, banks are allowed to generate income by holding customer’s money and lending it to other people because of their ability to handle individual demands without experiencing any challenges.

On the contrary, fraudsters such as Bernie Madoff are unregulated compared to financial institutions that use money from individuals to generate profits. Before his death on April 14th, 2021, Bernie Madoff wealth was estimated to be more than $830 million according to court papers (Costello, 2021). Ponzi schemes are profitable but are highly discouraged because of the motive of individuals overseeing the financial processes. Despite their noble ideas that yield unlimited rewards to both investors and the founders, Ponzi schemes are considered unlawful because of their nature of operations, which can be misleading at times. From this realization, the lack of oversight by the government and its various arms such as Congress and the Supreme Court declare the Ponzi schemes illegal regardless of their profitable nature, which generate slightly higher profits compared to the conventional banking models. Therefore, the fight against Ponzi schemes is influenced by the need to promote compliance and structural performance, which cushions consumers from any form of exploitation.

Response to Other Students


Dear Norah Stenersen,

I can totally relate to your reservations against Bitcoin because of the high-cost factor attributed to the monetary form. I believe this has been the basis of every conversation against Bitcoin because of the inability of many individuals to gain access to the cryptocurrency. However, I am highly convinced about the role of Bitcoin in eliminating trust issues in the world of online transactions where cybercrime-related issues are on the rise. Wouldn’t you feel safe knowing that no one, apart from you, can access your money? I crave for a world where people have a high bargaining power than financial institutions, which always tend to exploit our vulnerabilities to generate their income. Importantly, the secure aspect of the cryptocurrency has become its unique selling proposition, which promotes the much-needed privacy and confidentiality aspect required when transacting online (Burniske& Tatar, 2018). However, I must admit that the high cost associated with the cryptocurrency is its greatest downfall, which discourages many individuals from endorsing Bitcoin in the world. What are some of the approaches that can be used to create a win-win situation where Bitcoin is viewed as a viable alternative to end the rising cases of cybercrime in the online financial models?

Money Creation

Dear Beom Soo Kim,

Financial institutions are allowed to generate money because of the ability of the government and its auxiliary agencies to audit their operations and protect the consumers against any form of exploitation that mainly benefits the people behind the Ponzi schemes. For instance, Bernie Madoff accumulated a lot of wealth by providing misleading financial information to investors, which influenced their investment decisions, exposing them to a wide range of financial risks. Even though many people endorse Ponzi schemes because of their noncompliance to government policies, how can consumers be protected from any manipulative practices overseen by fraudsters such as the late Bernie Madoff?

By putting things into perspectives, financial institutions emerge as the most secure forms of handling money in the world today, regardless of their exploitative tactics that take advantage of individuals to keep their hard-earned cash. Interestingly, banks use similar models as Ponzi schemes where they can lend a person’s savings to another customer and generate high interest while rewarding the one who has saved their money with low interests (Deason et al., 2021). The ability of the firms to exploit consumers is approved by the conventional systems, which facilitate operations in the world today. I am actually skeptical of the financial institutions and their high charges imposed on consumers despite using our money to generate their income. What are some of the policies that can be used to ensure that consumers benefit from their association with banks today?




Beggs, M. (2013, November 13). The dumb money. Jacobin, Retrieved from https://www.jacobinmag.com/2018/04/bitcoin-cryptocurrency-monetary-system

Burniske, C., & Tatar, J. (2018). Cryptoassets: The innovative investor’s guide to Bitcoin and beyond. New York: McGraw-Hill Education.

Costello, R. (2021). Bernie Madoff and the Crisis: The Public Trial of Capitalism. Criminal Justice35(4), 45-52.

Dawson, M., Maricut‐Akbik, A., &Bobić, A. (2019). Reconciling Independence and accountability at the European Central Bank: The false promise of Proceduralism. European Law Journal25(1), 75-93.

Deason, S., Rajgopal, S., Waymire, G. B., & White, R. M. (2021). The Role of Accounting in Ponzi Schemes. Accounting Horizons35(1), 29-46.

Hofstetter, M., Mejía, D., Rosas, J. N., & Urrutia, M. (2018). Ponzi schemes and the financial sector: DMG and DRFE in Colombia. Journal of Banking & Finance96, 18-33.

Nabilou, H., &Prüm, A. (2019). Central banks and regulation of cryptocurrencies. Review of Banking and Financial Law (Forthcoming).


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