Digital Currency vs. Traditional Currency: A Comparative Analysis

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ACADEMIC
RESEARCH
WRITING REPORT
AND
PRESENTATION

INTRODUCTION
This assignment is prepared to present a comprehensive analysis of a
given topic; is digital currency should be used instead of traditional
currency? Digital currency is also known as crypto currency or electronic
currency. It is a paperless, decentralized and easy to use currency. It has
increasingly been used with the advent of internet. And the traditional
currency also known as fiat currency. And it is supported by the central
government of any nation.
I have chosen the role of opponent for this particular essay and the
argument will be followed by the counter-argument by the supporter of
the argument.
This assignment will be segmented into three parts: first part will provide
particular argument followed by counter-argument and rebuttal for that.
The argument part will be a statement in favor or opposition of the chosen
topic. And the other aspect of the argument will be supported by the
opponent with the help of evidence and examples. And in the end the
recommendation will be made in favor of any of these currencies and their
future.

First argument: digital
currency has limited supply
• Digital currency should not take place of
traditional or fiat currency as they have limited
supply. The fiat money supported by the central
bank of any nation ; has indefinite supply. Their
production and supply depends on government
mandate. Their availability in the market depends
on various factors like exchange rate, and they
offer convenience during any commercial
transaction. They bound the user to accept the
exchange in fiat currency during commercial
transaction. And some legal obligation on the
consumer.

Supply of digital currency can be
increased by improving the underlying
algorithm
• Counter argument: The digital currency should
be used as their supply can be enhanced with the
improvement in block chain technology or any
underlying algorithm The electronic currency has
unlimited supply. Their supply depends on the
underlying algorithm rather than on government
mandate. They offer decentralization and limited
supply.
• Rebuttal: They are easy to transfer in during
commercial transaction. And their supply can be
improved with the advent of new technologies.

Evidence and example
• For instance, bit coin, Ehthereum and tether, ripple
etc. are the digital currencies and most of them are
supported by the block chain technology. Block chain
technology ensures the details of complete
transaction in reduces the chances of financial
crimes. The commercial exchange in bit coin
becoming attractive with the passage of time due
ease of it offers. It also easy to use but for limited
population as it requires digital literacy. The use of
traditional currency does not require any special
knowledge and can be transferred easily. But their
limitless supply also give birth to money laundering
and other financial crimes.

They offer anonymity
• Digital currency should not be used as they are
able to hide the identity of the user. And they
make it difficult to track any fraudulent
transaction. They are increasingly been used for
various crimes due to the lack of government
regulation. They are in their evolving phase so
the complete nature of them has to be studied
with the help of technology that is capable track
that transaction. Digital currency also needs
supporting technologies like mobile phones,
access to internet etc. and they can only be
accessed by those who have enough purchasing
power.

anonymity can be used for
multiple benefits
• Counter argument: Traditional currency on the
other hand is relatively easy to track. and the
identity of those who transact can be disclosed with
the help of demographic and other details. They do
not require to have any other equipment, and they
can be used similarly despite the level of income.
• Rebuttal: The openness in the transaction makes
the traditional currency attractive, reliable and
convenient mode of transaction. besides, the use of
biometrics and many other efficient technologies
can reduce the problem of hidden identity
considerably.

Evidence and example
• Electronic currency has been in news recently for
potential to give birth to fraudulent transactions. They
can also be controlled by the private entities; which will
further lead to wealth concentration as expected by
many. But if they are regulated with effective law and
regulatory mechanism this problem can be reduced
considerably. All central banks can come together and
appoint one committee to figure out the possible
technologies to reduce the threat of anonymity , in any
financial transaction. Technologies like block chain
technology can also be further improved to resolve this
issue. And further investment in innovation may make
the digital currency affordable and easy to use.

They offer
immutability
• Digital currency should not be used as the transaction
made with them can be reversed. So, if a user
decides to do so, he or she can remove the complete
commercial transaction as per his requirement. It
may give rise to some temporary financial crimes. It
can also be used for pseudo transactions. Traditional
currency should be used for financial transactions as
the transactions made with them can not be reversed
easily. Traditional currency also offer ease of
transaction. And the transaction made with the
purpose of charity can also be reversed and used as
black money due to network and system vulnerability.

immutability of digital
currencies is beneficial
• Counter argument: Digital currency should be used
for financial transaction as it offers the facility to
reverse the transaction at any time. It also helps in
case user needs refund for any cancelled transaction.
So, it in a way empower the user. And also help reverse
the incidence of terror financing.
• Rebuttal: Digital transaction can also be used to
ensure the facility to take the money back from the
dealer if in case he or she fails so meet the expectation
of a client. Electronic money also offer fast and speedy
transaction and fast reversal due to the underlying
algorithms. By improving the block chain technology
the suspicious can also be tracked and controlled.

Evidence and example
• This particular argument can be supported with one
example. if some commercial transaction outside the
border of a nation has been made for import and export of
any product or services. Then, in fiat money transaction it
become quite difficult for the business entity to reverse it.
But this can easily be achieved in electronic mode of
transaction. There are chances of some fraudulent
activities but they can also be controlled with the constant
up gradation of supporting algorithms. Digital currency will
also help in reducing the leakages and corruption.
Transactions made electronically can be centralized by the
governmental actions and they will impact the reverse
done with the bad intention. So, digital currency can be
utilized during the calamities immediately.