I show that the prices of the internationally traded crypto-currency bitcoin can be used to estimate a currency's unofficial exchange rate and capital controls at a daily interval. Two important bitcoin features are documented: (1) Bitcoin-based exchange rates approximate the behavior, but not the level, of unofficial exchange rates, and (2) Bitcoin prices contain a bitcoin-trend term and must be appropriately normalized prior to being used for this purpose. Bitcoin-based exchange rates reveal that (3) there is no consistent pattern of Granger causality between unofficial rates and official rates by exchange rate regime or barriers at the daily frequency, and (4) that countries can engage in short-interval capital controls.
In this paper, I analyze Bitcoin price formation and adoption rates at a global and national level. In determining Bitcoin prices, I consider contemporaneous and lagged values of traditional determinants of currencies, such as inflation and industrial production, and digital currency specific factors, primarily public interest. Using monthly time-series data across five years (2011 – 2016), I find that global public interest in Bitcoin, measured by Google searches for the keyword ‘Bitcoin,’ has a positive and significant impact on Bitcoin prices. I extend the analysis to a country level by employing a proxy for adoption rates, represented by the number of local Bitcoin client downloads, which is a useful predictor of prices. I examine pooled data across 12 countries to show that searches for ‘Bitcoin’ can be used to predict adoption rates and, consequently, prices. To the best of my knowledge, this is the first academic article to study Bitcoin usage at a national level. I find that contemporaneous values of traditionally used macroeconomic determinants of currency prices, except inflation, do not have a significant impact on Bitcoin prices.
A fundamental open problem in the area of blockchain protocols is whether the Bitcoin protocol is the only solution for building a secure transaction ledger. A recently proposed and widely considered alternative is the \GHOST protocol which, notably, was proposed to be at the core of Ethereum as well as other recent proposals for improved Bitcoin-like systems. % The \GHOST variant is touted as offering superior performance compared to Bitcoin (potentially offering block production speed up by a factor of more than 40) without a security loss. Motivated by this, in this work, we study from a provable security point of view the \GHOST protocol.<br/><br/>We introduce a new formal framework for the analysis of blockchain protocols that relies on trees (rather than chains) and we showcase the power of the framework by providing a unified description of the \GHOST and Bitcoin protocols, the former of which we extract and formally describe. We then prove that \GHOST implements a ``robust transaction ledger'' (i.e., possesses liveness and persistence) and hence it is a provably secure alternative to Bitcoin; moreover, our bound for the liveness parameter is superior to that proven for the bitcoin backbone in line with the original expectation for \GHOST. Our proof follows a novel methodology for establishing that \GHOST is a robust transaction ledger compared to previous works, which may be of independent interest and can be applicable to other blockchain variants.
Tema ovog rada su kriptovalute. Budući da većina ljudi nije pravodobno upoznata s ovom temom, ovaj rad prikazuje i opisuje kriptovalute te način na koji se upotrjebljuju u svakodnevnom životu. Kriptovalute (eng. cryptocurrency) digitalne su valute dizajnirane kao sredstvo razmjene. Poznate su po tome što su državne agencije i banke isključene iz procesa razmjene. Kriptovalute omogućuju jednostavnu, jeftinu i brzu transakciju na području cijeloga svijeta. Trenutno najisplativije kriptovalute su Bitcoin i Ethereum, a u radu je opisana njihova korisnost, prednosti i mane. Budući da se Bitcoinu predviđa uspješna budućnost i sve je prisutniji i prihvatljiviji na tržištu, u radu su navedeni primjeri iz Hrvatske koji to potvrđuju. Sve veći broj poduzetnika odlučuje se za uvođenje kriptovaluta. U primjerima je obuhvaćen širok spektar djelatnosti, od frizerskih usluga, preko raznih tvrtki koji se bave prodajom računalne opreme, ugostiteljskih usluga preko mogućnosti brzog i lakog podizana gotovine na kripto bankomatima pa sve do plaćanja komunalnih usluga, pa čak i humanitarno djelovanje. Mnogi smatraju da su kriptovalute samo sinonim za prijevare i pranje novca, no programeri tvrde da su kriptovalute samo jedna vrsta tehnologije, alat koji sam po sebi ne može biti ni dobar ni loš, ovisno o tome za što se koristi. Autor ovoga rada proveo je istraživanje o tome kako se može besplatno započeti trgovanje kriptovalutama te je anketom ispitao stavove ispitanika o implementaciji kriptovaluta u društvu.
A technical article in 2008 and the follow-up open-source software in 2009 released by Satoshi Nakamoto have modified the concept of currency and seem to continue affecting our economic and financial thinking. In less than 8 years, bitcoin, a digital currency, is not only accepted as a mean of payment but also traded in numerous ?bitcoin exchanges?, which have accumulated a market capitalization of around 10.7 billion U.S. dollar. The phenomenon raised the interest of scholars across wide disciplines including finance, economics, law, and computer science. Research articles regarding bitcoin has gradually formed a growing body of literature, which reflects the state of the art of bitcoin research. However, there is no systematic survey of this literature up to now. The purpose of this study is to fill the gap by systematically surveying the bitcoin literature in the hope to uncover the main discussion topics and made suggestions for future research. We collect a total of 253 articles directly related to bitcoin from the Scopus database. In addition to providing basic descriptive statistics of this dataset, we apply co-word analysis to separate the literature into groups. This is done by establishing a network in which articles are nodes and co-usage of the key terms links these articles. The network is then separated into groups based on nodes? similarity in their connectivity. The result is a division of the articles into three groups each contain distinct discussion topics. The first group is a pool of technological articles which elaborates on improving various aspects of bitcoin technology. The second group focuses on bitcoin?s impacts to existing financial system and real economy. The discussions in the third group call for a legal framework to regulate bitcoin and other digital currency. In the end, we model the bitcoin research in a PEST (political, economic, social, and technological) analysis structure and suggest that the influence of bitcoin and the associated technology on society as a whole is a big gap waiting to be filled in future research.
Bitcoin has long been touted as a currency and a payment system that relies on cryptography and mathematics rather than trust. But is Bitcoin really trustless? And if so, would that be a good thing? This article undertakes a critical deconstruction of Bitcoin and the blockchain, their themes of democracy and transparency, and the idea that they are trustless. The article then proposes a new conceptualization of the role of trust in business and contracting: the bridging model, which allows for a more nuanced understanding of the interplay between enforcement and trust in contract formation. The bridging model is first applied to traditional banking, to illustrate and analyze the enforcement mechanisms underpinning the U.S. dollar as currency and the banking system as a whole, and to demonstrate that the enforcement mechanisms (government backing and regulation) are not as robust as generally believed. The bridging model is later applied to Bitcoin, to show not only that the system requires more trust than is generally understood, but also that both currency and payment systems benefit from the involvement of trusted intermediaries in response to problems and crises.
Bitcoin is a rising digital currency and exemplifies the grow- ing need for systematically gathering and analyzing pub- lic transaction data sets such as the blockchain. However, the blockchain in its raw form is just a large ledger listing transfers of currency units between alphanumeric character strings, without revealing contextually relevant real-world information. In this demo, we present GraphSense, which is a solution that applies a graph-centric perspective on digital currency transactions. It allows users to explore transactions and follow the money ow, facilitates analytics by semantically enriching the transaction graph, supports path and graph pattern search, and guides analysts to anomalous data points. To deal with the growing volume and velocity of transaction data, we implemented our solution on a horizontally scalable data processing and analytics infrastructure. Given the ongoing digital transformation in financial services and technologies, we believe that our approach contributes to development of analytics solutions for digital currency ecosystems, which is relevant in fields such as financial analytics, law enforcement, or scientific research
Cryptocurrencies became popular with the emergence of Bitcoin and have shown an unprecedented growth over the last few years. As of November 2016, more than 720 cryptocurrencies exist, with Bitcoin still being the most popular one. We show the statistical properties of the most important cryptocurrencies. We characterize their exchange rates versus the US Dollar by fitting parametric distributions to them, including the Student t distribution, the generalized hyperbolic distribution as well as the asymmetric normal inverse Gaussian and the asymmetric variance gamma distribution. Our findings show that cryptocurrencies exhibit strong non-normal characteristics, with standard heavy-tailed distributions such as the Student t distribution giving good descriptions of the data. This is the first study that looks at the parametric distribution of cryptocurreny returns. The results are important for investment and risk management purposes.
In this article, we review the recent developments in the digital currency landscape. We survey the economic drivers that led to the creation of digital currencies and show that they are a natural step in the evolution of means of payment. We overview two major classes of digital currencies, cryptocurrencies and platform-based digital currencies and discuss how the design of such currencies affects the incentives of their users and ultimately their popularity. Finally, we discuss competition in the digital currency market.
Bitcoin is difficult to categorize and indeed has been associated with 112 different labels in the British media (e.g., “private money,” “commodity”) – most of which poorly describe bitcoin. Specifically, our analyses of 674 media articles, focusing on the relationship between labeling and categorization, identify classification inconsistencies at three levels: within clusters of labels, between labels and categories, and between category attributes. These inconsistencies hamper categorization based on attribute similarity, audience goals, and causal models, respectively. We identify four factors that nurture this categorical anarchy and conclude with a call for research on the socioeconomic revolution heralded by blockchain technology.
At Bitcoin’s peak in November 2013, there were 93,000 global transactions made in a single day. These users purchased everyday items such as personal services, food, and real estate. This alone suggests that Bitcoin is not primarily used as a long-term investment tool, but rather is used as a currency and a vehicle for global transactions. Congress and the IRS should regulate it accordingly. Representative Stockman’s Virtual Currency Reform Act offered an attempt to negate the IRS decision and officially classify Bitcoin and other virtual currencies as currency instead of property. A tax reclassification would alleviate typical users’ many inconveniences caused by burdensome accounting and tax reporting. A reclassification would also allow and encourage the use of Bitcoin and other virtual currencies because imposing a sales tax on transactions similar to everyday currencies is a small change that most users would not find prohibitive or restrictive. While it is evident that there needs to be some form of IRS taxation of virtual currencies, attempting to classify Bitcoin according to existing tax principles is challenging and ineffective.\nAlthough this is new technology and subsequently uncharted territory for many doctrines of law, the technology should be embraced and encouraged to prosper. For example, typical sales tax on transactions made on the internet are currently an unsolved dilemma. It gets even trickier trying to throw virtual currencies into the mix. Between complex tax law, jurisdictional issues, and the constant globalization of our economy, challenging legal questions will arise. Classifying certain Bitcoin transactions for a sales tax instead of a capital gains and losses tax is the first step in the right direction toward answering these difficult questions and encouraging the use of Bitcoin and other virtual currencies to further global trade in the future.
Contemporary financial technology (“fintech”) efforts to enhance the clearance and settlement of transactions may reopen of long-settled questions about accounting, its role in the development of capitalism, its theological undertones, and its practical efficacy. This essay considers distributed ledger technology, the database systems underlying Bitcoin and similar digital currency experiments. Distributed ledgers do more than record transactions. They can also verify them without apparent human intercession, and they can execute more complicated tasks that take on the appearance of and have some of the same practical effects as contracts. If double-entry bookkeeping animated the modern constitution of subjects and objects of property, what do distributed ledgers herald?
Fault-tolerant consensus has been studied extensively in the literature, because it is one of the most important distributed primitives and has wide applications in practice. This paper surveys important results on fault-tolerant consensus in message-passing networks, and the focus is on results from the past decade. Particularly, we categorize the results into two groups: new problem formulations and practical applications. In the first part, we discuss new ways to define the consensus problem, which includes larger input domains, link fault models, different network models . . . etc, and briefly discuss the important techniques. In the second part, we focus on Crash Fault-Tolerant (CFT) systems that use Paxos or Raft, and Byzantine Fault-Tolerant (BFT) systems. We also discuss Bitcoin, which can be related to solving Byzantine consensus in anonymous systems, and compare Bitcoin with BFT systems and Byzantine consensus.
In this article, we explore the formidable yet untapped capabilities of Blockchain technology and Bitcoin in order to alleviate poverty. We focus on the Republic of Moldova, which has been plagued by endemic corruption and persistently high poverty levels since her independence in 1991 following the collapse of the Soviet Union. The transformative power of Blockchain technology and Bitcoin are then evidenced through a dual analysis of tourism 2.0 (with a real-world case study) and e-governance, which can contribute to increased inward capital investment flows, and help fight off corruption practices. Finally, we conclude that these new technologies constitute a significant step in the right direction, in order to break away from twenty-five years of disappointing socio-economic development performance.
Abstract A multidimensional financial system could provide benefits for individuals, companies, and states. Instead of top-down control, which is destined to eventually fail in a hyperconnected world, a bottom-up creation of value can unleash creative potential and drive innovations. Multiple currency dimensions can represent different externalities and thus enable the design of incentives and feedback mechanisms that foster the ability of complex dynamical systems to self-organize and lead to a more resilient society and sustainable economy. Modern information and communication technologies play a crucial role in this process, as Web 2.0 and online social networks promote cooperation and collaboration on unprecedented scales. Within this contribution, we discuss how one dimension of a multidimensional currency system could represent socio-digital capital (Social Bitcoins) that can be generated in a bottom-up way by individuals who perform search and navigation tasks in a future version of the digital world. The incentive to mine Social Bitcoins could sustain digital diversity, which mitigates the risk of totalitarian control by powerful monopolies of information and can create new business opportunities needed in times where a large fraction of current jobs is estimated to disappear due to computerization.