Cryptocurrency as the future of the global financial and monetary system

Dr. Alisher Toshpulotov M.Ed. DBA, Adjunct Professor, Business and management studies


This work examines such a unique means of payment as cryptocurrency, how it originated, how the security of funds held in the owner’s account is ensured, and whether there is a future for such a high-profile project as Bitcoin. Recently, one way or another, we have had to deal with such terms as “crypto currency”, “mining”, “blockchain”, etc. It is silly to deny the fact that the popularity of alternative banknotes is growing at a tremendous rate. That is why they attract the attention of many scientists from the financial and economic spheres. The study of their impact on the global economy is becoming one of the primary and promising areas of work for analysts. By itself, the abrupt introduction of currencies has various unpredictable consequences. On the one hand, these are new business opportunities, many operations have become more convenient to perform due to the absence of tax duties and state control, On the other hand, many illegal operations, and even illegal goods have become possible to purchase avoiding the payment systems of banks.

To date, the heads of the largest companies and representatives of various countries are puzzled by the question of whether it is worth working and developing a new currency or excluding it from circulation in order to prevent the appearance of risk in their financial planning. Speaking about cryptocurrency money, it is safe to say that this direction is quite promising. By itself, the term cryptocurrency means a type of digital currency based on cryptographic methods of protection. The issue of cryptocurrencies can be carried out in unlimited quantities, everything will depend on real money entering the network to purchase services and goods. It is from here that such a large cost and no less high its security follows. It is impossible to forge a cryptocurrency, but it is quite possible to steal it from an electronic carrier, but despite this, in the near future it is planned to use the cryptocurrency as a separate currency on the Internet. Thus, such a concept as cryptocurrency is accompanied by such definitions:

1) A promising innovation in the field of technology regarding the circulation of digital money;

2) The construction of innovative software in the field of computer technology;

3) Modernization and restructuring of the world-class system.

I would like to explain how the reliability of cryptocurrencies is ensured, and why they can be used without harm to your wallet. To protect the cryptocurrency, its creators have created a distributed database called blockchain. The peculiarity of this database lies in the fact that data storage devices are not connected to a common server, thus, the blockchain technology initially has security at the database level. This database stores a list of ordered records that are constantly growing, because of its principle of operation, this system is called blocks. Each block contains a timestamp and a link to the previous block. Users can only use the block chains to which they have access. Thus, they have keys, without which writing and deleting from files without entering this code is impossible. This method is called encryption, encryption ensures synchronization of copies of the distributed block chain for all users.

Each coin in the system is a cryptographic (mathematical) hash code. They have a unique code that cannot be forged, and it is used only once, which makes the cryptocurrency a weak link in the financial system. Initially, the concept of block chains was proposed by Satoshi Nakomoto in 2008, he later introduced such a currency as Bitcoin to the world, it is considered to be the “father” of cryptocurrencies. The concept he proposed was first implemented in 2009 on Bitcoin, which I mentioned earlier. In bitcoin, the blockchain plays the role of the main general registry for all transactions, thanks to this technology, bitcoin has become the first digital currency that solves the problem of double spending without using any “authoritative” authority or server. A decentralized server is responsible for the security of the blockchain system, which is engaged in timestamping and peer-to-peer network connections. The result is a single database that is managed autonomously.

Due to the fact that electronic money is largely produced and implemented by developing structures, these modern funds are not confirmed by controlling forces, thus, there are no decentralized structures in the field of cryptocurrencies, they do not yet have either a main center or a credit and financial structure that would control the issuance of cryptocurrencies. There is a large amount of cryptographic money in the world, such as Ripple, Litecoin, Bitcoin, BitSharesX and others. However, Bitcoin is the leader in the market, today its exchange rate on the market is $ 23 068 (February 2022), so I think it is most rational to consider the work of this system on its example. In my opinion, cryptocurrencies are a very convenient means of payment, since transactions are performed instantly, without any intermediaries and taxes, there is no need to go to the bank or transfer money from one wallet to another, and you can pay with Bitcoins. As we know, every country has a soy currency. The US has the dollar, Russia – rubles, China — Yuan. Now the Internet has its own currency, it has solved the problem of “changing” the currency in international transactions and can completely change the entire network market. Bitcoin is the most effective in this regard, since it is easier for the participants of the transaction to use it; Firstly, it will be cheaper, and secondly, safer. I would like to tell you how bitcoins are mined and what is necessary for this. The process of mining and issuing bitcoin is called mining. Mining today is the main way to acquire cryptographic money; it is based on solving mathematical problems. To extract the cherished bitcoins, miners need the most powerful computers that will allow them to solve mathematical problems with maximum speed. 2018

New form of cryptographic currencies are flooding the market, Bitcoin and Ethereum continue keeping the top rank and liquidity.

Global companies such as PayPal, WebMoney, Google, Baidu, Boost VC, eBay and many others are showing increasing interest in bitcoins. This is because the cryptocurrency attracts a large number of investors, who are so hunted by global organizations. As for banks and governments, both of them treat cryptocurrency with distrust. Banks explain their position by the fact that bitcoin cannot guarantee the full security of the owners’ assets, by the fact that once, bitcoin exchanges were hacked and money disappeared. You can understand their point of view, because the main thing for them is to keep customers, but you can’t constantly look back and see only the negative sides in everything, you need to understand that there is a place for mistakes and failures in the real world, besides, the creators of the cryptocurrency themselves try to exclude such cases. The government also reacts with distrust to cryptocurrency, since it is much more difficult to catch intruders on the Internet, because there is very little information about their identity, and it is almost impossible to track a cybercriminal. It follows that from the point of view of using Bitcoin, it is very convenient and multifunctional, and from the point of view of security, it is not very reliable.

Bitcoins, as well as the blockchain technology itself, are changing the paradigm of financial and monetary relations. All those rules that were built before are breaking down. No one directs these processes, there are no commissions, it is very difficult to be controlled by the state. The most important drawback is a very unstable course. Because of this, Russia warns against using bitcoins. However, global trends suggest the opposite. All over the world, bitcoins are being steadily integrated into everyday life. ATMs are installed in many shopping centers where you can replenish your bitcoin wallet. There are also various plastic cards with a bitcoin account. You can pay for bitcoins for almost all goods. It is also very easy to make purchases online using bitcoins. 

Blockchain technology is absolutely fair. The decision to provide this currency will be determined not by people, but by computer mechanisms. If the state takes control of bitcoins, it will get an ideal monetary system, without corruption. It is impractical to ban a currency that is gaining more and more popularity. It’s not even possible. It is better to find a way to control it.

I would like to note that the system is not reliable, not in terms of its organization and work, but in terms of unscrupulous and unconscious users. So, can Bitcoin be considered a useful product? Undoubtedly, yes, but while there is a question of security and the calculation of criminals, this system will do more harm than good. Agree, no one wants to keep their money in a wallet, from which they can disappear at any moment. In conclusion, I want to say that Bitcoin has definitely established itself as something new, as a new product for investors around the world who are certainly interested in the development of this currency, no monetary system can show the same high level of efficiency and independence as Bitcoin does. This system is being improved with great speed, unlike all its competitors. Despite the constantly changing Bitcoin exchange rate, it does not cease to interest people, at least because such a capricious rate is easily compensated by other positive qualities of the system.

In the end, I would like to say that bitcoins are a fairly convenient means of payment. It has huge advantages and a great future. The disadvantages can be eliminated. Or as Herman Gref says, take control. However, this is a breakthrough of humanity in terms of settlement financial mechanisms. We can say that this is a new stage in financial relations. With this currency, we can reach a new level. Ordinary banknotes are already losing popularity in relation to plastic cards. And it is safe to say that the market will change radically in 10 years, and I want to believe that the life of ordinary users will be simplified.

Submitted by Dr. J Anand [email protected]

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