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Literature Review: Bitcoin Pyramid Schemes Wreak Havoc on Brazil's 'New Egypt'

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Literature Review: Bitcoin Pyramid Schemes Wreak Havoc on Brazil's 'New Egypt'

According to Associated Press (2022) pyramids scheme cases have been on the rise in the recent past, hitting a record high of transactions of $1.8 million in 2017 in Brazil. Pyramid schemes involving bitcoin are rife with dishonest practices that con artists employ to extort money from victims by providing recruiters with rewards (Zhang et al. 2021). People have been asked to suggest friends to a certain website or platform by traders and big businesses in order for them to profit financially from each successful reference. Like any other business, dealing with crypto currencies has its advantages and disadvantages. People are investing more money in crypto currencies, which has increased the chance of loss. Organizations must acknowledge the possibility of investor monies being stolen and put preventative measures in place. Crypto currencies are not the solution to accounting fraud and other serious problems; blockchain technology is. Due to their high volatility, crypto currencies are not a preferred option. There is no way to prove that fraud can be stopped. However, the introduction of automatic identification system (AIS) technology may reduce fraudulent activities. To combat fraudsters in the bitcoin trade, investors and organizations must work together. Hosting investor data on a cloud system increases the chance of money being stolen. The likelihood of acquiring investor financing rises when firms successfully deploy CAIS. More investments are made when more investors are certain that their money is safe. There has been a rise of pyramid schemes in the recent past, therefore, there is a need to combat fraudsters in the bitcoin trade, investors and organizations must work together by hosting investor data on a cloud system increases the chance of money being stolen.

Compare and Contrast

a. Methodology

It is important to note that Boylan and Hull (2022) utilized qualitative research design to gain more in-depth insight into how fraudulent activities manifest in accounting. However, both T&R Staff (2022) and Associated Press (2022) are secondary sources that rely on the utilization of primary data to make their conclusions. Therefore, the methodological comparison is greatly different between these sources, but T & R Staff (2022) and Associated Press (2022) are similar to each other.

b. Findings

Both T&R Staff (2022) and Associated Press (2022) find that there is a substantial risk behind crypto currencies due to the potential of fraudulence and volatility if left unregulated.

However, all three sources (Boylan & Hull, 2022; T&R Staff, 2022; Associated Press, 2022) recognize the great opportunity offered by block chain technology, which is increased accountability.

c. Recommendations

The study (Boylan & Hull, 2022) suggests using block chain technology to improve accountability and recommends its use to combat fraudulent activities. However, both T&R Staff (2022) and Associated Press (2022) acknowledge that there are risks associated with the current state of crypto currencies, which is why they suggest adopting the technology but not the existing forms of electronic money.

Part Two: Review

Fraud and BlockChain

Fraudulence is a core problem in accounting and finance overall, which has ethical, economic, and legal implications. Boylan and Hull (2022) assert that prevention of fraud is impossible to prove, and fraudulent activities can be reduced through the use of automatic identification system (AIS) systems. In contrast, T&R Staff (2022) claims that the wild volatility of crypto currencies makes them unappealing as a solution to the issue. Similarly, such currencies carry their own host of fraudulence, such as pyramid schemes (Associated Press, 2022). In other words, electronic solutions are possible, but the existing ones are problematic.

Accountability through BlockChain

It should be noted that fraudulence in finance is best combated through transparency, accountability, and openness. Recent developments in money and payment methods, such as instant payment systems and stable coins, are two examples of innovations that have the potential to have far-reaching implications. It is reported that there are five technological systems that can help in the improvement of the accounting role (Boylan and Hull, 2022). According to Boylan and Hull (2022), the use of block chain can improve accountability, which leads to a reduction in the rate of fraudulent activities. Similarly, crypto currencies can help ordinary citizens to fight inflation, but with a surge in demand, new forms of fraudulence take place as a result. However, on the contrary, some experts suggest that “the wild volatility in crypto currencies’ value has made it easy for many corporate treasurers to ignore the opportunity hidden behind the substantial risk” (T&R Staff, 2022, para. 2). In other words, one should not dismiss crypto currencies entirely, because they bring a higher level of accountability despite their flaws.

BlockChain is the Answer

By reviewing the literature, it is evident that the answer to fraudulence and other major accounting issues is block chain technology, not crypto currencies. The study (Boylan & Hull, 2022) suggests using blockchain technology to improve accountability and recommends its use to combat fraudulent activities. On the contrary, both T&R Staff (2022) and Associated Press (2022) acknowledge that there are risks associated with the current state of crypto currencies, which is why they suggest adopting the technology but not the existing forms of electronic money.

Section 2: Literature Review

In accounting and finance as a whole, fraud is a major issue that has moral, financial, and legal ramifications. According to Boylan and Hull (2022), it is impossible to establish that fraud can be prevented, although fraudulent activity may be decreased with the use of automated identification system (AIS) technologies. T&R Staff, however, argues that crypto currencies are not a desirable alternative because of their extreme volatility. Brazilian federal police arrested two men and a woman in April who was loading a helicopter. They had banknotes nicely folded and totaled 7 million reais ($1.3 million). They claimed to be employed by G.A.S Consulting & Technology, according to the inmates. The business Glaidson Acacio dos Santos owned, according to the police, had $7 billion worth of transactions.

Review of Literature

Block Chain-Based Stewardship

The most effective way to prevent financial corruptness is via visibility, integrity, and accountability. The adoption of block chain, in accordance with Boylan and Hull (2022), can enhance accountability, which lowers the frequency of fraudulent acts. Regular people can use crypto currencies to combat inflation, but as a result of the demand boom, new fraud schemes emerge (Boylan & Hull, 2022). Third-party regulators enforce laws against fraudulent transactions in conventional financial systems. In the world of crypto currencies, there are no authorities; instead, the money itself is meant to serve in that capacity. Zcash reportedly revealed a catastrophic problem that it corrected in 2018. Zcash was developed to allow entirely anonymity operations through the use of nil confirmations.

Block Chain Remedies

Block chain technology is the answer to fraudulence and other major accounting issues, not crypto currencies. A study suggests using block chain technology to improve accountability and recommends its use to combat fraudulent activities. Both T&R Staff and Associated Press acknowledge that there are risks associated with the current state of crypto currencies. This is why they suggest adopting the technology but not the existing forms of electronic money. Over intervals of 12 to 48 months, investors were guaranteed a profit on their deposits of 10 percentage points per month (Boylan & Hull, 2022). As deals flowed in from all over the globe, the monies were then being sent to Dos Santos or his Venezuelan wife, who was then to use it to purchase pricey opulent residence or jewelry. According to analysts, Brazil's lax rules governing crypto currency contributed to Dos Santos' ascension.

Analysis of Literature

Contrary to crypto currencies, block chain technology offers a solution to fraud and other serious issues with electronic money. At the same time, Boylan and Hull (2022) claim that the usage of block chain technology can increase accountability which lowers the frequency of fraudulent acts while T&R Staff (2022) argue that the extreme volatility of crypto currencies renders them unattractive as a solution to the problem. Block chain technology is also advocated for implementation in the research Boylan & Hull (2022) to promote accountability and discourage fraudulent activity. Both Boylan and Hull (2022) and T&R Staff (2022) claim that block chain technology can assist regular people in fighting inflation; crypto currencies have also seen a rise in fraud due to increased demand. Unlike Boylan and Hull (2022), T&R Staff (2022) and Associated Press both advocate for embracing the technology but not the present varieties of electronic money since they recognize that there are hazards connected to crypto currencies in their current condition.

Discussion

Traders and major corporations have disseminated a message requesting people to refer a friend to a given website or rather a platform so that they can earn some money from every successful referral. Bitcoin is a risky business, as any other business, and those online traders may know today. Bitcoin pyramid schemes are full of fraudulent activities that schemers use to get money from people by offering incentives to recruiters who bring in new members into the scheme. For example, Bitcoin investors are at risk of losing their money in the blockchain environment (Boylan and Hull, 2022). The advancements in technology have enhanced trade and transactions as well as investment in the form of cryptocurrency. Dealing with cryptocurrency has its benefits and challenges just as dealing with any other business. A lot of people are venturing into cryptocurrency as it seems convenient, not knowing that they are creating weak links for attackers to penetrate and fraud them from their unsecured funds (BBC News, 2022). Law enforcement is doing all it can to minimize fraud in the business of cryptocurrency. The law protects those who are potential victims of theft in fraud in cryptocurrency. Therefore, organizations need to understand the problems of bitcoins so that they protect the finances of the clients who invest in cryptocurrency.

Mitigation

The increasing investment by people in the line of cryptocurrencies, such as bitcoin, has resulted in numerous risks of losses. For example, Zhang et al., (2021) conducted research on a traditional investment scam known as the Ponzi scheme. Clients are unaware that investing in numerous Ponzi Schemes put their money at high risk of loss. The research proposed system of detecting Ponzi Schemes has been put into use today by several professionals. This system uses a smart contract Ponzi scheme identification method that is based on the light GBM algorithm. The experiments that were conducted by Zhang et al., (2021) gave datasets that show that this system has an improved level of accuracy in terms of the AUC index and F-score index. Smart contract deploys a specified function that cannot be terminated manually but can terminate itself automatically, if the conditions are not met, hence a better way of detecting Ponzi Schemes. As such, organizations need to realize that the funds of investors are at risk of theft, and mitigating policies should be in place.

Recommendations

Cloud Accounting Information Systems (CAIS) are an important way of reducing fraudulent activities on data. The concept also enhances the management of information in the cloud accounting information systems, which gives the users the confidentiality of security and privacy of their data. CAIS has also helped eradicate fraud activities in the field of accounting in both private and public sectors (Al-Nsour et al., 2021). Organizations operating in bitcoin and cryptocurrency need to implement CAIS so that the finances of the investors stay secure. This CAIS system is the same as the traditional one and a lot of organizations are already including it in their work programs. The difference between the traditional one and CAIS is only that the latter is hosted on remote servers in the cloud. Hosting the information of investors on the cloud system brings the risk of theft of the funds. Technological advancement has created loopholes that online fraudsters may use to track the transaction of funds. Through such drawbacks, the thieves may direct the funds to other accounts where investors lose their money. Investors and organizations need to collaborate so that they can deal with fraudsters and their risks in the bitcoin trade. When organizations implement CAIS correctly, then the potential of securing investor funds increases. When more investors are certain that their funds are secure, then more investments are generated.

Conclusion

There has been a rise of pyramid schemes in the recent past, therefore, there is a need to combat fraudsters in the bitcoin trade, investors and organizations must work together by hosting investor data on a cloud system increases the chance of money being stolen. Organizations must acknowledge the possibility of investor monies being stolen and put preventative measures in place. The AUC index and F-score index of this method have higher levels of accuracy. People are investing more and more in cryptocurrencies like bitcoin, which has led to several dangers of loss. Cloud Accounting Information Systems (CAIS) are a crucial tool for minimizing data fraud. The CAIS has aided in the eradication of accounting fraud in both the public and commercial sectors. Hosting investor data on a cloud system increases the chance of money being stolen. In order to combat fraudsters, organizations and investors must work together. According to Associated Press (2022) pyramids scheme cases have been on the rise in the recent past, hitting a record high of transactions of $1.8 million in 2017 in Brazil.

References

Al-Nsour, E., Weshah, S., & Dahiyat, A. (2021). Cloud accounting information systems: Threats and advantages. Accounting, 7(4), 875-882. https://doi.org/10.5267/j.ac.2021.1.021

Associated Press. (2022, January 22). Bitcoin pyramid schemes wreak havoc on Brazil’s ‘New

Egypt.’ Market Watch. https://www.marketwatch.com/story/bitcoin-pyramid-schemeswreak-Havoc – on – brazils – new – egyp t- 01642870663

https://www.proquest.com/openview/6e001b2172b0df47a6a938b044975b5d/1

BBC News. (2022, March 9). Will the US crack down on cryptocurrency? Accessed on 12 November, 2022, Retrieved from https://www.bbc.com/news/business-60680786

Boylan, D. H., & Hull, J. E. (2022). Have Accounting Information Systems significantly helped in detecting fraudulent activities in accounting? The Journal of Applied Business and Economics, 24(3), 45-56. https://doi.org/10.33423/jabe.v24i3.5191

T&R Staff. (2022, May 10). Digital currencies underpin a sci-fi future for treasury. ALM:

Treasury and Risk. https://www.treasuryandrisk.com/2022/05/10/digital-currenciesunderpin-a-sci-fi-future-for-treasury/?slreturn=20220930184148

Zhang, Y., Yu, W., Li, Z., Raza, S., & Cao, H. (2021). Detecting Ethereum Ponzi schemes based on improved LightGBM algorithm. IEEE Transactions on Computational Social Systems, 9(2), 624–637. https://doi.org/10.1109/tcss.2021.3088145