Bitcoin: A Disruptive Innovation or A Bubble Set to Burst?

Case Code: BSTR561
Case Length: 15 Pages
Period: 2008-2018
Pub Date: 2019
Teaching Note: Available

Price: Rs.400
Organization: Bitcoin
Industry: Cryptocurreny
Countries: -
Themes: Services Marketing

Turnaround of Indian Railways: A Tough Road Ahead?

Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

The case discusses the emergence of bitcoin as the leading cryptocurrency and its future course. Created in 2008 by pseudonymous computer programmer Satoshi Nakamoto, bitcoin evolved into a popular virtual currency used by millions of users globally to carry out secure, transparent, anonymous border-free transactions at a minimal fee. The bitcoin model was based on a global peer-to-peer network, and was fully decentralized, offering easy payments with a minimum transaction fee, counterfeit proof transactions, hassle-free fundraising, and speculative gains. By end of 2017, bitcoin’s market capitalization was around US$278 billion. Despite being considered a disruptive innovation by some experts, there were severe challenges bitcoin had to grapple with. The biggest downside to it was that it was highly volatile. The exchange rate for Bitcoins was constantly fluctuating because it was a decentralized, relatively new currency. Further, bitcoin transactions were slow and were also being used to finance illegal activities. Moreover, the miners of bitcoins were consuming huge computational power and energy, impacting the environment negatively. Unlike traditional currencies, there was a limited supply of these cryptocurrencies, and with the high energy cost and expensive hardware required to earn bitcoin, its future remained in question. While some analysts were optimistic about the future of bitcoin and its gaining the status of a mainstream currency, others felt that bitcoin was a bubble waiting to burst in the future.

Issues

The case is structured to achieve the following teaching objectives:

Understand the concept of cryptocurrencies
Understand disruptive innovation in the financial payments sector
Understand the business model of bitcoin
Study the pros and cons of bitcoin
Identify the challenges that bitcoin will face in being accepted as a mainstream currency

Can Bitcoin Become the Digital Currency of the Future?

Exhibits