We use third-party cookies in order to personalise your experience
Read our Cookie Policy

Bitcoin, what is it?

March 19, 2021

The coronavirus pandemic has prompted retailers to ask customers to wear masks, maintain physical distancing and avoid the use of cash when possible. Despite scientific evidence indicating that currency doesn't transmit COVID-19, there continues to be an unprecedented weariness around the use of cash altogether. We even experienced a coin shortage. In early July of 2020, bank managers started receiving notices from their coin suppliers, who said they may not be able to provide the same amount of change they usually do. So far, though, it hasn’t created a major problem but there seems to be a trend developing behind the scenes and we are becoming more and more Cashless throughout this crisis.The Bank for International Settlements, which advises central banks around the world, released a bulletin in April that said the pandemic could speed up the shift toward digital payments around the world, including central bank digital currencies. That's not a surprise. A global crisis can often act as a catalyst for structural change.For instance, the 2009 Västberga heist led to a cashless society in Sweden. As a string of robberies occurred in shops, banks and even buses, Sweden moved to reduce cash circulation as a way to protect workers. Cash use in Sweden has since been on the decline, from 39 per cent in 2010 to 13 per cent in 2018. Currently about 20 percent of retailers in the country no longer accept cash. People are using credit cards, debit cards, apple pay, google pay, venmo, cash app and other platforms more due to concerns about spreading the virus by handling cash. This was especially true earlier in the spring of 2020, when scientists and doctors were still learning how the new virus spread, and were more concerned about its potential to live on surfaces, including money, for a long time. People also began buying more online, causing less cash to be circulated. All of these trends affect our economy and more and more banks are implementing digital currency usage behind the scenes. Although this may not be mainstream... yet - it seems that the future holds crypto currency near.

What is Cryptocurrency & Bitcoin?

For starters, Bitcoin is the name of the best-known cryptocurrency, the one for which blockchain technology was invented. Bitcoin being such a new concept, is still hard to understand for most. Cryptocurrency on the other hand, is a medium of exchange, such as the US dollar. Cryptocurrency uses digital encryption techniques to control the creation of monetary units and to verify the transfer of funds. Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the goods or services. Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security. Duplication of Bitcoin is impossible - There is no way of duplicating a bitcoin, unlike forged cash. Bitcoin is based on the concept of Blockchain. The Blockchain is a technology for storing and transmitting information without any control body. From a technical point of view, the Blockchain is a distributed database in which the information transmitted by users is verified and grouped at regular time intervals into blocks.These blocks are linked and secured through the use of cryptography forming a chain of blocks: the famous Blockchain. The latter can, therefore, be seen as a distributed and secure record of all transactions made since the start of the distributed system. The Blockchain removes the need for an intermediary. Due to its architecture, the Blockchain is immutable. Once a transaction is validated, it cannot be cancelled. There can be no duplication. This provides you with a high level of security when carrying out transactions and eliminates a major problem with bank-managed cash. Bitcoin has a global acceptance. Due to this feature, it becomes easier to conduct transactions across boundaries and online. Bitcoin is digital and decentralized. Bitcoin people get the liberty to exchange value without intermediaries which translate to greater control of funds and lower fees. Cash is controlled by banks while bitcoin has owners. Unlike many people think, Bitcoin is "tracked". There is a ledger getting maintained at the backend. Each time you trade a Bitcoin the ownership of the Bitcoin itself gets transferred to the new owner and these records are kept indefinitely. Cash does not allow this additional level of confidentiality since banks can know everything about the purchases you have made. With Bitcoin, this problem is solved. You can make online purchases effortlessly while preserving your privacy. Of course, all the transactions you have carried out are stored in the Bitcoin Blockchain. However, only the addresses of your wallets are listed. If you do not tell anyone that these addresses belong to you, no one will know what you have done with your Bitcoins. This is not to say that you don't have laws and regulations to follow when using Bitcoin. On March 25, 2014, the Internal Revenue Service (IRS) ruled that bitcoin will be treated as property for tax purposes, as opposed to currency—meaning bitcoin will be subject to capital gains tax. One benefit of this ruling is that it clarifies the legality of bitcoin. Investors no longer need to worry that investments in, or profit made from, bitcoin is illegal, or worry about how to report them to the IRS.

Effects on the insurance industry

The insurance industry is responding to virtual currencies very slowly. There are some insurance companies getting familiar in the field but Bitcoin insurance is still scarce. That is not to say that insurance cannot be purchased, some insurance companies are leading the way and implementing new programs to protect people with this exposure. Great American Insurance Group recently added an endorsement to its existing business crime policy, and INGUARD accepts premium payments in bitcoin. Teambrella, a new peer-to-peer British insurance company, is currently launching with the goal of becoming the first decentralized bitcoin-based insurance company. Insurance giant MassMutual recently purchased $100 Million of Bitcoin and they are not the only ones investing. Many banks, such as J.P.Morgan Chase Bank, are also buying up Bitcoin. More and more companies will slowly start accepting Bitcoin or other Cryptocurrency as payment methods as the market changes. There are also Crypto Bonds that a person trading Bitcoin can purchase.