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Adoption and Rejection of Bitcoin- Insights from Major Organizations

Adoption and Rejection of Bitcoin- Insights from Major Organizations

Bitcoin technology has spurred the growth of cryptocurrency innovation that uses independent blockchain techniques. The integrity of this form of currency relies on cryptography and peer-to-peer networking. It has removed the need for trusted third parties and costs associated with intermediaries in financial institutions. Bitcoin’s proponents argue that its many properties make it an ideal currency for merchants and consumers. Those against Bitcoin argue that the technology facilitates payment for illegal activities. The opposing views reflect companies’ willingness to use or not to use Bitcoin as another form of currency. While some firms, such as PayPal and Starbucks, have adopted Bitcoin as a form of currency, other companies such as Alibaba have not embraced this technology, citing a range of reasons that extend beyond facilitating payments. PayPal Company and Starbucks Company use Bitcoin as a form of currency because it is easier to use, is independent of the legal, and financial system, has high transaction costs, and increases competitiveness. Conversely, Alibaba does not embrace the technology because of high price volatility, uncertainty, and vulnerability to financial laundering tools.

Bitcoin was envisaged as a medium of exchange in day-to-day transactions when it was launched. The technology elicits failure because it is decentralized, implying that it has no monetary authority to facilitate sending it from user to user on the Bitcoin network (Analytic Exchange Program, 2017). Furthermore, the technology has special use cases while simultaneously limited in quality (Analytic Exchange Program, 2017). Bitcoin can also serve as a medium for retail transactions, thanks to its digital provenance. Furthermore, bitcoin is considered an inconvertible fiduciary, also known as fiat, since it does not require a reserve, but its resources are available for others to use.

Meanwhile, PayPal and Starbucks are currently allowing their customers to use Bitcoin to shop at companies worldwide. In the same vein, Starbucks has embedded iPayYou’s Bitcoin wallet in its apps to enable customers to pay for an assortment of items using Bitcoin. On the other hand, a company like Alibaba has not yet adopted cryptocurrency payment methods and opted for Alipay and other alternatives, such as debit cards, to purchase goods and services from merchants on its sites globally.

Reason for using Bitcoin at PayPal and Starbucks Companies

PayPal and Starbucks use Bitcoin as the standard form of currency because it offers low transaction fees. The incentives for a lower transaction fee for PayPal and Starbucks are lucrative (Blundell-Wignal, 2014). The new demographic groups for companies that use Bitcoin as a payment form translate to potential customers who engage in the Bitcoin trade. The relatively high transaction fee offered to customers is a great source of revenue. Such income boosts these firms’ capital and liquidity pools. However, it is worth noting that the presence of third parties involved in Bitcoin transactions makes them impose a high transaction fee for users.

Accordingly, PayPal and Starbucks use Bitcoin as a form of payment because it accelerates faster processing of transactions. The two firms are online retailers that seek to optimize flexible payments and purchasing experiences. The blockchain technology used in developing Bitcoin guarantees to facilitate faster and more efficient payment processing services for the two firms (Blundell-Wignal, 2014). Particularly, PayPal has adopted Bitcoin as a form of payment to enhance its international payment processing. The technology has Bitcoin transaction accelerators that charge an extra fee to accelerate transactions for these companies. In this way, PayPal and Starbucks offer a greater customer experience that gives them a competitive edge. PayPal and Starbucks use bitcoin as a form of payment to facilitate transaction processing and ultimately gain a competitive advantage.

Starbucks and PayPal also use Bitcoin as a form of payment because of its ease of use and independence from the control of a legitimate financial system. Essentially, bitcoin’s technical background facilitates purchasing, buying, and trading (Muftic, 2017). The technology has enabled these firms to create automated and scalable payment interfaces. Moreover, bitcoins are not subject to financial transaction monitoring, motivating customers to move their funds outside the legitimate financial system (Muftic, 2017). As a result, customers usually cash out their finances by exchanging them with bitcoins. The reason for this is that bitcoin facilitates near-complete anonymity of transactions.

Additionally, the private key ensures that the transaction is irreversible. These features make it easy for the two firms to process funds and facilitate customers’ purchasing of products. Consequently, PayPal and Starbucks use Bitcoin as a form of payment, courtesy of its ease of use and independence from controlling a legitimate financial system.

Reasons why Alibaba is not using Bitcoin

Alibaba does not accept Bitcoin as an alternative payment method because of its price volatility. Historically, the bitcoin price has been volatile; hence, it renders a company’s stock using it as a means of payment risky (Analytic Exchange Program, 2017). Several factors underlie Bitcoin’s high volatility, including high-profile use of the form of payment in illegal drugs and the public due to statements by CEOs. Typically, the developer of core technology in Bitcoin governs it using decision design to limit its production to a fixed quantity (Analytic Exchange Program, 2017). Such a property makes Alibaba’s investors fear investing in the firm’s capital resources because of the high level of risk involved. The argument is that investors are unsure of what they would liquidate within the 24-hour withdrawal limits imposed. Therefore, the high price volatility of bitcoin provides the ground for its rejection by Alibaba.

Another key reason why Alibaba does not accept Bitcoin as a form of payment is that the new currency is a less traceable payment method for illegal purposes. Bitcoins are increasingly used in scams as it is vulnerable to financial fraud. According to the Analytic Exchange Program (2017), using Bitcoin as a means of payment usually leaks crucial data that can be used to identify a company’s or the user’s activities. For instance, if the user transfers bitcoin to Alibaba’s digital wallet, scammers can take the firm’s identity information to link it to its blockchain pseudonym to reveal other transactions ultimately. As a result, exchanging transaction history with one set of bitcoins and addresses can enhance bitcoin laundering in the firm, leading to heavy financial loss. For these reasons, Alibaba does not accept Bitcoin as an alternative form of payment because it is vulnerable to laundering tools.

Similarly, bitcoin poses a regulatory risk to Alibaba, prompting its rejection as a form of payment. Weber (2015) posits that bitcoin is a form of fiat currency that is prone to use in the underground market, such as money laundering, tax evasion, and other illegal business activities. In this regard, governments may seek to restrict their use. This situation poses uncertainty about Bitcoin, not to mention its liquidity, universality, and longevity for Alibaba. These factors could make Bitcoin worthless in the near future and, in the process, lead to financial damage and ultimately Alibaba’s financial health. As such, bitcoin is not used as a form of payment at Alibaba because of the regulatory risk.

The advancement of the e-money system has seen the establishment of Bitcoin as an alternative form of payment. Most companies continue to use this form of payment to facilitate financial transaction processing and other business-related benefits. Even so, some firms have not embraced the technology, citing several risk factors and associated with bitcoin. PayPal and Starbucks are some of the companies that have adopted Bitcoin as a form of payment, while Alibaba represents firms that do not accept Bitcoin in their payment systems. Despite potential disadvantages, more firms continue to embrace Bitcoin as a form of payment because of low transaction costs, independence from the control of a legitimate financial system, and high competitive advantage

References

Analytic Exchange Program. (2017). Risks and vulnerabilities of virtual currency cryptocurrency as a payment method (pp. 1-40). Retrieved from https://www.dni.gov/files/PE/Documents/9—2017-AEP_Risks-and-Vulnerabilities-of-Virtual-Currency.pdf

Blundell-Wignal, A. (2014). The Bitcoin Question: currency versus trust-less transfer technologY (pp. 1-19). Retrieved from https://www.oecd.org/daf/fin/financial-markets/the-bitcoin-question-2014.pdf

Muftic, S. (2017). Overview and analysis of the concept and applications of virtual currencies (pp. 1-52). Joint Research Center. Retrieved from http://publications.jrc.ec.europa.eu/repository/bitstream/JRC105207/lbna28386enn.pdf

Weber, W. (2015). A Bitcoin Standard: Lessons from the Gold Standard (pp. 1-34). Retrieved from https://www.bankofcanada.ca/wp-content/uploads/2015/12/bitcoin-standard-

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Question 


This week’s reading centered around Bitcoin Economics. For this week’s research paper, search the Internet and explain why some organizations are accepting and other organizations are rejecting the use of Bitcoins as a standard form of currency. Your paper needs to identify TWO MAJOR COMPANIES that have ADOPTED Bitcoin technology AS WELL AS ONE that has REFUSED to accept Bitcoin as a form of currency. Be sure to discuss each organization, how they adopted (or why they won’t adopt) Bitcoin, and what recommendations you have for them to continue to support Bitcoin (or why they should support Bitcoin).

Adoption and Rejection of Bitcoin- Insights from Major Organizations

Adoption and Rejection of Bitcoin- Insights from Major Organizations

Your paper should meet these requirements:
Be approximately FOUR TO SIX PAGES in length, not including the required cover page and reference page.
Follow APA 7 guidelines. Your paper should include an introduction, a body with fully developed content, and a conclusion.

Support your answers with the readings from the course and at least TWO scholarly journal articles to support your positions, claims, and observations, in addition to your textbook.

Be clearly and well-written, concise, and logical, using excellent grammar and style techniques.

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