Cryptocurrency Impacts on Industries

This assignment delves into the effects of cryptocurrencies across diverse industries, examining their influence on market performance and specific sectors like Bitcoin gambling. It requires an analysis of relevant research papers and a synthesis of findings to demonstrate the multifaceted impact of cryptocurrencies.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
Introduction......................................................................................................................................2
Strategic background.......................................................................................................................2
Strategic environment......................................................................................................................4
Political factors............................................................................................................................4
Economical factors......................................................................................................................5
Social factors...............................................................................................................................5
Technological factors...................................................................................................................5
Environmental factors..................................................................................................................6
Legal Factors...............................................................................................................................6
Threat of crypto currencies that are handled by currency banks.................................................6
Competitive environment................................................................................................................7
Bargaining power of suppliers.....................................................................................................7
Intensity of existing rivalry..........................................................................................................7
Bargaining power of customers...................................................................................................7
Threat from substitute products...................................................................................................8
Threat of new entrants.................................................................................................................8
Cost and viability of mining Bitcoin...........................................................................................8
Strategic analysis.............................................................................................................................9

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Criminal usage of crypto currencies..........................................................................................10
The interest of the Chinese Government in crypto currency as well as implications of this
interest in and across the world.................................................................................................10
Conclusion.....................................................................................................................................10
Reference List................................................................................................................................12

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Introduction
The case study deals with investigating the growing use of crypto currency by providing
an analysis of this growing world industry (Zhang et al. 2015). The study discuss on at least
three crypto currencies such as Bitcoin, ethereum and darkcoin. The current segment properly
presents data of crypto currency trends and values over past few years. The study clearly
compares the resources and capabilities that are needed to mine crypto currency by small house
users as well as large commercial factories. It even highlights the costs and viability of mining
Bitcoin. The threat of crypto currencies becomes difficult to handle by the currency banks.
Discussion had been done on criminal usage of crypto currencies. Lastly, the interest of the
Chinese Government in crypto currency as well as implications of this interest is noted in and
across the world (Tschorsch and Scheuermann 2016).
Strategic background
The Crypto Currency market is growing at rapid pace in recent years. Major crypto
currencies used in the market are Bitcoin, ethereum and darkcoin. Among these three crypto
currencies, Bitcoin dominates over other currencies recently but the data highlights the market
share will eventually drop down significantly by next few years (Tarasiewicz and Newman
2015). There is growing trend of crypto currencies that are playing major role in the current
market. On analysis, it is even noted that crypto currencies are more complex by nature as
compared to public lexicon. There had been several studies that examine the role and future of
Bitcoin but few actually explore the broader crypto currency market.

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Figure: Trend line of Crypto Currencies (2014 to 2017)
(Source: Rabah 2017)
One of the biggest challenges with digital currency is to prevent unauthorized copying. In
addition, crypto currencies mainly use two mechanisms for preventing it. The first mechanism is
to publish each transaction in a public record as well as storing numerous copies of ledger online
as it allows them to be automatically compared as well as updated. Therefore, these currencies
prevent double spending that uses same Bitcoin in purchasing two different things. The second
mechanism used will be to protect ledger cryptographically (Osterrieder, Strika and Lorenz
2017). Here, every updates is collected together with wide range of new transactions as well as
add to the existing ledger.
Bitcoin, Ethereum and Darkcoin
The difference between Ethereum and Bitcoin lies in the fact where Bitcoin is nothing
more than a currency while Ethereum is a ledger technology where companies are using for
building new programs. In addition, both these crypto currencies operates in Blockchain

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technology where the version used by Bitcoin is 1.0 and for Ethereum is 2.0 as it allows for
building decentralized applications (Ong et al. 2015).
Bitcoin can be termed as digital dollar where anyone can create an account for either
purchasing or selling the digital currency. The price of digital currency fluctuations as it is based
on supply as well as demand (Nakamoto 2016). On the other hand, Ethereum has the potential to
overtaking Bitcoin as the dominant coin in the current marketplace.
Crypto currency Market Capitalization
Bitcoin $ 72018984613
Ethereum $ 29125807759
Darkcoin was developed and uses X11 algorithm as it claims to be immune that attacks
other crypto currencies such as Bitcoin and Ethereum. Darkcoin provides users with security in a
way where it blurs the transaction paths and to that users feel confident in knowing ways for
moving their finances (Morabito 2017).
Strategic environment
Political factors
The crypto currencies are not controlled by any of the government body. Banks in China
and Russia are not accepting these crypto currencies especially Bitcoin. Countries such as United
States, Canada and European Union consider Pro-Bitcoin. These crypto Currencies are allows
between the private entities (Mandjee 2015).

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Economical factors
It is noted that market capitalization of crypto currencies exceed $6,000 billion. There are
more than 21 million Bitcoins that exist till date and 15,359,800 are in circulation. Bitcoin are
too small that can affect Federal Government as it has the ability to conduct monetary policy.
More than 88,000 merchants use Bitcoin (Low and Teo 2017).
Social factors
These crypto currencies drive forces such as anonymity, savings as well as reach. There
is low-level of awareness as well as usage of these crypto currencies among the public. It is
noted that merchants today are adopting the payment technology as it increase adoption among
the consumers (Lansky 2016).
Technological factors
Bitcoin public ledger is being leveraged in a smooth ways. Technology Life Cycle is
presented below where time is taken in the x-axis and adoption rate is taken in the y-axis.
Figure: New Technology Life Cycle
(Source: Halaburda and Sarvary 2016)

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Environmental factors
If there is growth in demand, there is more need of computational power. It is noted that
miners need to find an alternative source of electricity that are mostly cheap in old plants.
Therefore, Carbon footprint associates with 1.5 tons of carbon gas emissions (Osterrieder, Strika
and Lorenz 2017).
Legal Factors
There is decentralized nature of the coin that mainly restricts any type of regulatory
effort. Countries like Canada, USA and EU are putting regulations in given form. For instance,
Obama Administration partners with private companies such as Blockchain alliance
(Folkinshteyn and Lennon 2016).
Threat of crypto currencies that are handled by currency banks
As there is growth of crypto currencies, it is expected that more central bankers are
looking crimping their use. There are few issues in central banking that provokes anxiety as
compared to fear of losing control of one’s currency. The Chinese Central bank actually had
banned initial coin offerings of digital currencies such as Bitcoin that lead to fall in the value of
some crypto currencies by 20% (Chodorow 2017). On analysis, it is noted that there is growing
uneasiness regarding how disruptive technology act to the whole banking as well as payments
system.
Firstly, banks spend time to remain safe and restrict new entrants. The bankers mainly
think of regulation that makes financial services less appealing for the new entrants. Recently,
the penny is dropping where the non-bank rivals can target more profitable areas that leave
regulated banks less profitable (Chan et al. 2017).

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Secondly, more than $600 billion has been raised for funding private debt as shown in the
market data. The policymakers are spending too much time for analyzing the non-banking sector.
In addition, the growing dependence of bank on large technology firms helps in running their
infrastructure in systematic way (Osterrieder, Strika and Lorenz 2017).
Thirdly, the central banks actually had lost control over payments when individuals are
privately issuing Bitcoin currencies. Here, issue of currencies considered as lucrative business
just like Central bank but it varies with the cost of issuing a coin or bank note as well as its face
value (Bashir, Strickland and Bohr 2016).
Competitive environment
Bargaining power of suppliers
Low supplier switching costs positively affect crypto currencies. There is less bargaining
power of the suppliers.
Intensity of existing rivalry
When exit barrier are low then weak firms likely to enter the market as it increase profit
levels for the remaining business. Low exit barriers have positive impact for Bitcoin (Tschorsch
and Scheuermann 2016).
Bargaining power of customers
When customers have limited choices and the choices are made available. In addition,
limited buyer choices have positive impact for Bitcoin.

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Threat from substitute products
There is limited number of substitutes where customers find other products or services as
it fulfill their needs. Limited substitutes have positive impact for usage of Bitcoin.
Threat of new entrants
There is high threat from new entrants who shows willingness to enter the market. High
entry barriers have positive impact for usage of Bitcoin.
Cost and viability of mining Bitcoin
The cost of Bitcoin value has been on a free fall from last few months. The coin now
costs slightly prompts for every Bitcoin exchange for registering extreme lows. Cryptocoin does
not have long life year ahead that is a clear indication (Tschorsch and Scheuermann 2016). The
longevity of Bitcoin relies mainly on the direct support from the community in case of mining
activities. There is specific cost that is required to sustain this activity and turns to be detrimental
to growth of mining in the industry.
Mining considers as an investment that offer rewards to those who actually render service
in solving mathematical problems (Osterrieder, Strika and Lorenz 2017). Here, the computation
is needed for approving the transactions as well as keeping the public ledger healthy that shows
updated and aligned data. In addition, laws of economics highlights that any rational investor
will engage in production when return exceed the effort in the short-term and long-term. It is not
different from Bitcoin cloud mining or in that case regular crypto mining.

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Strategic analysis
There are different start-up companies such as Coinbase, Blockchain as well as Circle
and BitPay uses Bitcoin in their operations. It is essential that the miners such as individuals and
business enterprise as it form the core backbone of Bitcoin as it ensures the integrity of digital
currency. Bitcoin runs on a Blockchain as it is decentralized as well as public ledger on every
transaction made on the network. The user’s shows interest in winning Bitcoin as it creates an
arms race of miners that scrambles for assembling ever-more sophisticated as well as powerful
equipment to mine new Bitcoin (Osterrieder, Strika and Lorenz 2017).

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Criminal usage of crypto currencies
Crypto currencies are considered to be one of the new technology-driven virtual
currencies that had existed from the year 2009. Because of the nature of this digital currency,
they are used by the criminal organizations (Tschorsch and Scheuermann 2016). It is important
for law enforcement organizations as well as regulations to understand about how these digital
currencies work and their use by criminal organizations. Crypto-currencies are a group of virtual
currencies that relays upon peer-to-peer system that gets disconnected from central issuing
authority as it allows users an anonymous or near-anonymous method for conducting
transactions. Bitcoin, Ethereum as well as DogeCoin are some of the existing crypto currencies
that have combined market capitalization of $ 90 billion.
The interest of the Chinese Government in crypto currency as well as implications of this
interest in and across the world
Chinese Authorities have mainly ordered crypto currency exchanges for ceasing trading
as well as notify users of their closure that signals a widening crackdown by authorities on the
industry as it contain financial risks. Here, the exchanges actually stopped users to register for
overseeing internet finance risks as it circulates online as well as verified by a government.
China is cracking down on the crypto currency business as it tries to limit risks where consumers
pile into a highly speculative market. Digital currencies such as Bitcoin and Ethereum do not
have sovereign endorsement as it is not legal currencies (Osterrieder, Strika and Lorenz 2017).

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Conclusion
At the end of the study, it is concluded that crypto currencies are widely used current but
has some limitations as well. More than 3 million people are estimated to be actively using
crypto currencies such as Bitcoin, Ethereum and Darkcoin. Crypto currency exchanges render
on-off ramps for the systems by providing services to users either to buy or sell crypto currency.
Central banks are in tension where they feel that their ability to monitor the payment system
would fall in the near future. The central bank may even lose control of the money supply and
this is an acute concern. The cost of mining is not fixed and decreases and expensive. It is noted
that the modern software as well as hardware continues to make the process less costly. Here,
miners have the option to hold onto their Bitcoins till there is improvement in the pricing.
Therefore, Bitcoin is selling at what it is told as under the cost of mining where the overall
system had become unsustainable. There are various factors that need to be considered that
mining cost of each of the Bitcoin will have adverse effects on the performance of crypto
currencies in different industries even in the Bitcoin gambling market.

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Reference List
Bashir, M., Strickland, B. and Bohr, J., 2016, November. What Motivates People to Use
Bitcoin?. In International Conference on Social Informatics (pp. 347-367). Springer
International Publishing.
Chan, S., Chu, J., Nadarajah, S. and Osterrieder, J., 2017. A statistical analysis of
cryptocurrencies. Journal of Risk and Financial Management, 10(2), p.12.
Chodorow, A., 2017. Rethinking Basis in the Age of Virtual Currencies. Va. Tax Rev., 36, p.371.
Folkinshteyn, D. and Lennon, M., 2016. Braving Bitcoin: A technology acceptance model
(TAM) analysis. Journal of Information Technology Case and Application Research, 18(4),
pp.220-249.
Halaburda, H. and Sarvary, M., 2016. Cryptocurrencies. In Beyond Bitcoin (pp. 97-163).
Palgrave Macmillan US.
Lansky, J., 2016. Analysis of Cryptocurrencies Price Development. Acta Informatica
Pragensia, 5(2), pp.118-137.
Low, K.F. and Teo, E.G., 2017. Bitcoins and other cryptocurrencies as property?. Law,
Innovation and Technology, pp.1-34.
Mandjee, T., 2015. Bitcoin, its legal classification and its regulatory framework. J. Bus. & Sec.
L., 15, pp.157-219.

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Morabito, V., 2017. Digital Currencies. In Business Innovation Through Blockchain (pp. 81-
100). Springer International Publishing.
Nakamoto, S., 2016. Changing the Dominant Monetary Regime, Bit by Bitcoin. The Evolution of
Money, p.196.
Ong, B., Lee, T.M., Li, G. and Chuen, D.L.K., 2015. Evaluating the potential of alternative
cryptocurrencies. Handbook of digital currency. Amsterdam: Elsevier, pp.81-135.
Osterrieder, J., Strika, M. and Lorenz, J., 2017. Bitcoin and cryptocurrencies—not for the faint-
hearted. International Finance and Banking, 4(1), p.56.
Rabah, K., 2017. Digital Cryptoeconomics Powered by Digital Cryptocurrency. Mara Research
Journal of Computer Science & Security, 1(1), pp.107-131.
Tarasiewicz, M. and Newman, A., 2015. Cryptocurrencies as distributed community
experiments. Handbook of digital currency, pp.201-222.
Tschorsch, F. and Scheuermann, B., 2016. Bitcoin and beyond: A technical survey on
decentralized digital currencies. IEEE Communications Surveys & Tutorials, 18(3), pp.2084-
2123.
Zhang, B., Wardrop, R., Rau, R. and Gray, M., 2015. Moving mainstream: benchmarking the
European alternative finance market. Journal of Financial Perspectives, 3(3), pp.60-76.