O artigo visa entender quais as possíveis respostas a serem dadas pelo Direito em relação à criação do bitcoin. O trabalho explica, propedeuticamente, e, através da análise da legislação comparada, a história da moeda, suas consequências econômicas, as mudanças paradigmáticas ocorridas e, por fim, reflete sobre as teses doutrinárias apontadas, por parte do mundo jurídico, como solução à criação da moeda. O objetivo geral do trabalho é analisar as consequências econômicas do novo sistema de pagamento, assim como explorar as possíveis hipóteses, para regulamentar as transações com a moeda criptográfica, que permanecem em uma área cinza, ainda não completamente atingida pelo Direito. A conclusão do trabalho é que o Estado deve incluir a moeda em suas regulamentações, inicialmente, lidando apenas com à evasão tributária, com a sua possível ligação com o mercado ilegal e com a licença, para trocar tais moedas e, posteriormente, regulamentar aspectos que requerem uma minúcia maior, como a proteção dos direitos dos consumidores.Palavras-chave: Bitcoin. Criptografia. Regulamentação.
Bitcoin is a relatively new and attractive asset. It is used for peer-to-peer transactions and is built upon an interesting system called the Blockchain which allows for fast and secure transactions between users. Although Bitcoin and its underlying infrastructure show a lot of potential for growth and innovation, many users of the so-called “cryptocurrency” are wary of holding it instead of other currencies such as the U.S. dollar because of the high volatility exhibited in the price of Bitcoin. The goal of this paper is to examine the use of theoretically priced put options, “protective puts”, to hedge against price decreases that Bitcoin may experience. The user of this protective put strategy is considered to be an investor with an optimistic view on the price of Bitcoin and wants to own some, but is uncomfortable with the potential for substantial losses due to price decreases. In implementing the protective put strategy, the price of Bitcoin that the investor owns has a floor at the strike price of the options purchased to hedge the risk of price decreases. If the price increases enough, then the options are sold, and those with the new strike price are bought to lock in a higher protected price for the investor. The investor’s goals are to reduce the risk of losses by owning Bitcoin while its price decreases and to lessen the volatility that his portfolio experiences at the expense of the cost of purchased options eating into potential profits. Upon analysis of both historical and simulated data, utilizing protective puts as a hedging mechanism against decreases in the price of Bitcoin has proven effective at reducing expected volatility and limiting losses. The use of the strategy, when analyzed across different simulated market environments, allows for the capture of price increases while stopping excessive losses. Proportional to an unhedged Bitcoin portfolio, the proposed approach reduces volatility more than it reduces expected percentage gains. Upon analysis, the expected profit is slightly less than 28% lower at around 8% hedged from 11% unhedged. However, the standard deviation of percentages of profits or losses is 53% lower, having decreased from 27.8% to about 13.1%. Bitcoin: A Brief Introduction History, Mechanics and Use of Bitcoin In October of 2008, a mysterious person or group known as Satoshi Nakamoto released a paper detailing a peer-to-peer electronic cash system that would come to be known as Bitcoin (The New York Times 2013). The software behind Bitcoin, called the Blockchain, was innovative because the code allowed transactions to be authenticated and processed without a central bank or government. For years, Bitcoin grew nearly unbeknownst to the mainstream public as it was used mostly to facilitate black market transactions. In April 2013 a price surge in the value of Bitcoin caused the total value of all bitcoins to surpass one billion US dollars–this milestone triggered a media frenzy. Over the past 30 months, the value of a single Bitcoin has continued to be volatile, reaching a peak of over $1,242 US dollars before descending to the current price of around $430 per bitcoin (Coindesk 2015). During this period Bitcoin has been adopted as an accepted form of payment, and notable companies have implemented payments using it including Microsoft and Overstock.com (BitcoinValues 2015). Governments have demonstrated an interest in understanding and regulating Bitcoin. For example, former US Federal Reserve Chairman Ben Bernanke has said that Bitcoin “may hold long-term promise, particularly if the innovations to promote a faster, more secure, and more efficient payment system” (Tracy 2013). Bernanke highlights three key advantages that Bitcoin holds over traditional currencies. Bitcoin transactions theoretically are more secure, faster, and effectively free to facilitate. Not all governments have welcomed the rise of Bitcoin, China’s central bank has prohibited any financial institutions from handling bitcoin transactions (Wilhelm 2014). Bitcoin has attracted speculative investors who seek to capitalize on its volatility and perceived upside. As Bitcoin has become more established as a potential asset, companies have recently begun facilitating the development of Bitcoin options exchanges. Issues Holding Bitcoin Back from Major Adoption Despite the potential that Bitcoin has, many issues hold it back from large-scale adoption. Legality and security are the first two problems that potential investors run into when considering Bitcoin as an investment. These two issues are very gray at the moment, as some countries consider Bitcoin to be a currency while others consider it property and potential gains or losses are taxed differently. Many investors can buy Bitcoin online and hold it in a 3rd party wallet, but most do not have the deep understanding of computer science and cryptography that underlies Bitcoin. Additionally, news of stolen Bitcoin and unknowns about flaws or holes in storage mechanisms can also scare away buyers (Onies, Olayinka, Daniele). Despite these issues, Bitcoin has seen adoption because of its use in payments and also because of the potential that its Blockchain architecture holds for future development. Finally, should an optimistic or informed buyer decide to purchase bitcoins, they should expect the price of the cryptocurrency to be highly volatile. One bitcoin is one bitcoin; however, most people operate under a system where their base currency denomination is not in Bitcoin. The volatility shown in exchange rates is often due to news about acceptance or governmental regulation, in addition to market factors and broader adoption of the technology. The result of this volatility is that should an investor want to redeem his bitcoins for another currency, he may receive much more or much less than was originally spent to acquire them. Bitcoin as an Investment Because of the extraordinary potential that Bitcoin and the Blockchain have shown in recent years, there has been demand for the digital currency as an alternative investment. While reasons for owning it may differ, ranging from holding a different currency, the potential for capital appreciation or to be part of the future, the desire is there. However, there are few people willing to take on the risk of owning bitcoins when the price of the asset is so volatile concerning its exchange rate into US dollars. The Bitcoin market is still nascent and as such proper hedging methods have not been developed yet, requiring investors to accept the risk present in the market. Bitcoin adoption may be much higher in the future if people can have more control over the financial outcomes of their investment through hedging mechanisms (Prior 2015). Hedging a Historical Bitcoin Portfolio Methodology and Goals To test hedging the risk of a buy-and-hold Bitcoin portfolio, the decision was made to use the simple, yet often effective strategy of buying protective put options (CBOE). To evaluate how well the strategy would have worked, the last six months of daily price data for Bitcoin as a test sample. For the put options, European-style options were used, and the strike prices were set at $25.00 intervals. The expiry was placed to be at the end of the six-month period tested. Ten put options were bought (each covering 100 bitcoin) on the first day, as well as 1,000 bitcoins and progress of the hedge was tracked over the six-month period. The purchase of the put options is assumed to have been funded from a pool of cash which can be accessed for the cost of options and it is not tracked separately from the rest of the portfolio, although gain and loss from sales and purchases of puts are. To capture the upside of the investment in Bitcoin, if the price moved high enough to warrant the purchase of a put option at a higher strike price, it was done so. In doing this, the old put was sold to regain some of the cash spent on it because it is no longer required for the hedge. If the price of Bitcoin dropped below the strike price of the options, the price was locked-in at the strike price. The options were held until expiry since they are European-style and cannot be exercised beforehand. This allowed the price of Bitcoin to move until the expiry of the hedge and to possibly not require the use of the put by the time the option’s expiry date arrived. The goal of implementing such a hedging strategy is to reduce the volatility the Bitcoin portfolio experiences and to limit losses, while not sacrificing a majority of upside potential. Due to the high historical volatility of bitcoins, it was sought to determine whether a hedging strategy involving protective put options will limit losses while still allowing for significant upside for the long-term investor who is optimistic about Bitcoin prices and adoption. Simulating Options Prices In order to price the options for the protective put strategy, the Black-Scholes equation was used (Black, Scholes 1973). In order to compute accurate prices for the puts, the following inputs were used: · Risk-free interest rate of 1.00% · Daily price of a bitcoin · Strike price in increments of $25.00 · Days remaining until option expiry · Dividend of zero · Historical volatility of Bitcoin prices, calculated to be 53.40% Put prices were calculated using these inputs by a Visual Basic for Applications (VBA) script inside an Excel sheet, as well as in a column-based format for consistency and compatibility with Palisade Corporation’s Excel add-in for simulation, @Risk. To calculate the volatility to use in the equation, the historical percentage of Bitcoin price changes over the six-month period the experiment was run on was used. To get the yearly volatility, the standard deviation of those values was multiplied by , because Bitcoin trades every day of the year. Assumptions Made During Model Development To streamline model development and simplify the analysis, some theoretical assumptions were made. One major assumption is that there are no transaction costs. Many Bitcoin exchanges charge a fee for placing trades, typically 0.25% of a transaction’s face value Coinbase. Additionally, Bitcoin options exchanges are not up and running yet, so transaction costs for options were omitted as well due to a lack of data and desire for simplicity in determining the efficacy of the protective put hedging strategy. Bitcoin, being considered an alternative currency, is purchased by exchanging another form of currency for it. In the historical scenario and simulations run, Bitcoin is bought with U.S. dollars; however, no currency exchange fees are incorporated, nor are bid or ask spreads. Some exchanges charge a final fee when Bitcoin is converted to another currency or withdrawn from the account. These costs were not built into the model since the premise of this work is based on an optimistic Bitcoin investor who has no desire to withdraw any form of currency from his accounts. Lastly, the options market for U.S. equities will sometimes exhibit mismatched prices or market making spreads. This model assumes that option prices will not be affected by these factors and that they will trade at their fair value as determined by the Black-Scholes equation with inputs specified above. There will be no market impact as liquidity is assumed to be infinite, and there will be no transaction costs per contract or order. Analysis of Historical Results Performance of Puts Over Six-Month Test Period Over the six-month test period evaluated, the protective put strategy worked well. The value of Bitcoin during the evaluation period was relatively volatile, which provided a good scenario for the procedure to be tested against. The price of a bitcoin over the six months chosen can be seen in Figure 1. The price path looks as though it follows a rough sine wave with a five-month wavelength and then spikes up during the sixth month. This study’s goals are to limit the downside of an investment in Bitcoin while retaining most of the upside and reducing the volatility of returns. Regarding accomplishing these, the protective puts worked as planned. During the six-month period, a few different trends seemed apparent based on the price path. During the upwards part of the wave in the price of a bitcoin, the portfolio increased in value, and the downward drag on value was the cost of upgrading puts to their next strike price. This impediment to the portfolio's value is to be expected, as a hedge can be defined as paying a price to reduce uncertainty. When the price went down below that of the strike price of the options owned, the lowest price for the portfolio was capped at the strike price of the options, multiplied by the number of bitcoin owned plus the cost of the options. In this section of time, the options did not expire, allowing the right to sell the bitcoins in the portfolio for a set price moving forward if the portfolio needed to be liquidated. The portfolio remained intact, and the price of bitcoin moved upwards again, allowing puts of an even higher price to be purchased and lock in a higher price for each bitcoin. On the last day, since the price of bitcoin was above the strike price of the puts owned, the puts expired worthless. The effects of the hedge can be seen in Figure 2, where the cost of the portfolio was locked in near the beginning, only increasing when puts were exchanged for others at a higher strike price. The value, however, increased over time and did not have the ability to fall much below the original cost of the portfolio in the worst case scenario of the price of Bitcoin falling through the strike price of the puts. In Figure 3, it can be seen that the volatility of the hedged portfolio is much lower, and the potential for loss was much lower. When compared to the unhedged portfolio’s profit and loss, it is clear that without hedging, selling any time from months three to five would have resulted in a loss, while the hedged portfolio would have allowed the capture of approximately a 20% gain. Reducing the volatility of the portfolio was another goal when using the protective put strategy. Using the historical volatility model to get the volatility for Bitcoin over the six-month period gave a 53.4% yearly volatility. Using the same metrics for the percent changes in the value of the portfolio comprised of Bitcoin and put options, the volatility resulted in a value of 39%. Evaluating solely the volatility of the 1,000 bitcoins owned in the portfolio gave the same result, offering a 39% yearly volatility. As such, the puts did effectively reduce portfolio volatility over the six-month period, while allowing the capture of upside and potentially limiting losses should the price of Bitcoin decreased over the time period examined. Simulation of Bitcoin Portfolio Using Random Walks Methodology To get a better idea of how the protective put strategy would work in different and potentially trending environments, simulated geometric random walks were used to analyze potential price paths of Bitcoin over a period of six months (Nau). 10,000 simulations were run for each random walk scenario and the portfolio and Bitcoin profits and losses in dollars and percentages were analyzed as outputs, as well as portfolio and Bitcoin volatility. Initially, a positive drift was used in the random walk, indicating a general uptrend in the simulated price of Bitcoin. To validate the strategy in multiple types of markets, random walks with negative and null drift were also used. Random Walk with Positive Drift In order to simulate the price of Bitcoin, a geometric random walk with positive drift was initially used. Upon analysis of the natural logarithm of historical price changes represented by , there was a positive drift of value 0.0032 based on the average daily price change percentage with volatility incorporated. Stated symbolically, , where is the drift value calculated and is the standard deviation of the daily changes, of value 0.02808. It is worth noting that the drift may be different based on different windows of time. The ones digits in the formula used represent the size of the time step for each day, as the equation progresses to price from daily. The random walk with positive drift is represented by the equation below, where represents a random perturbation chosen from the standard normal distribution. Unsurprisingly, with the positive drift, the simulated price of a bitcoin trended up, resulting in a mean ending portfolio value of $433,000 given a beginning investment of $228,230 (the cost of 1,000 bitcoin at the starting date of the historical scenario). After incorporating the cost of buying and selling options to hedge the simulated positions, the average profit was 34.2% over the simulated term of six months (Figure 4). Over the same period and using the same inputs, the percentage of profit on the unhedged portfolio was 77% (Figure 5). Comparing the profit and loss percentages to those achieved by the unhedged portfolio, the unhedged portfolio has a much greater return. This return is not surprising since the positive drift term in the random walk equation should result in favorable increases in Bitcoin’s price over the duration of the simulation, making a hedge less necessary in hindsight. A comparison of the standard deviations of the scenarios also reveals the effects of hedging. The standard deviation of the profit and loss percentage for the unhedged portfolio is 69% while the protective puts decreased that same profit and loss standard deviation to 34% for the hedged portfolio. It is clear that the protective put strategy allows an investor to invest with less risk by reducing standard deviations of simulated profit and loss percentages, but the strategy also sacrifices potential return, likely due to the high price of the options due to volatility. Random Walk with Zero Drift While the six-month period analyzed had shown the price of Bitcoin to exhibit an upward trend, this may not be the case in the future. For this reason, random walks of null and negative drift were analyzed as well in order build a better image of what may happen using the protective put strategy in environments of less favorable price paths. The equation used for the random walk with zero drift is: Simulating the random walks using a drift value of zero provided results representative of approximately an equal number of winning and losing price progressions. The average expected profit for the portfolio comprised of put options and bitcoins was slightly less than 1%, with a standard deviation of 16.7%. Examining the chart (Figure 6), it is clear that the protective put strategy had an effect on the outcomes, there are spikes in the histogram of outcomes representing the price floors that the put options created. This shows that the options did indeed limit the losses that could have been experienced in downward trends. The effect of the options can also be seen in the confidence interval. The hedged portfolio had a 90% chance of ending with an expected profit or loss between -19.3% and 33.4%, while the same confidence interval for the unhedged portfolio expected between a -49.8% and 72.8% profit or loss. The unhedged portfolio has a much smoother distribution of outcomes (Figure 7), representing the outcomes of wherever the price of Bitcoin ended during each simulation. The expected loss for the unhedged simulations was approximately zero percent, but with a much higher standard deviation of 39.12%. When comparing the unhedged portfolio to the hedged portfolio, the puts managed to reduce expected losses to about a maximum of 19.3%, while the unhedged portfolio had a 4.9% chance of losing more than half of the initial investment. Expected gains also decreased by over 50%, however this was an expected consequence of the hedging strategy’s option costs. Random Walk with Negative Drift After evaluating random walks with positive and zero drift, for completeness a random walk with negative drift was simulated. For the drift value, -0.0032 was used, since this is the negative counterpart to the positive value used in the random walk with positive drift. When the expected profit is negative, as is the case when the drift implies a downward trend in the simulated price of Bitcoin over time, the benefit of a protective put strategy became most apparent due to limiting losses consistently. The equation used for the random walk with negative drift is as follows: The hedged distribution of profit and loss percentages has some peaks likely representing different strike prices that the options prevented the portfolio from falling under (Figure 8). The mean of the distribution is -11.2%, which is likely attributable to the price of Bitcoin falling to the strike price of the option fairly quickly, but the portfolio was prohibited from dropping any further. The standard deviation of the hedged strategy’s results was a mere 7.4%. Because of these factors, the most lost was 19.3%. There was a 90% chance of earning anywhere from the minimum to 3.4%, although the strategy tended to lose approximately either 19%, 14% or 7% due to the strike prices. Also included in the losses are any increases in the simulated price path resulting in a higher strike price before the options were driven into effect. The unhedged distribution suffered significant losses in the negative drift scenario. Given the bias of the simulated price to trend down, the expected loss was 43.97%, with a standard deviation of 21.98% (Figure 9). In the simulated scenario, there was a 90% probability of losing between 3.9% and 71.9%, with the highest simulated loss being 85.64% although it could theoretically be 100%. When compared to the summary statistics of the hedged portfolio, it is clear that hedging is expected to reduce volatility and expected loss significantly in a situation of negative drift. Combined P&L of Random Walk Scenarios To verify the usefulness of the protective put hedging strategy in reducing expected losses and volatility over different price paths, a simulation was conducted with all three previous random walks. The results of the distributions of both the hedged and unhedged distributions were simulated 10,000 times. To establish the combined statistics of the hedged and unhedged portfolios, it was assumed that each outcome is equally For the of the hedged and unhedged simulated outcomes are (Figure the unhedged distribution is much more as is by its standard deviation of on a mean of simulated outcomes, the distribution of hedged results has a standard deviation of and a mean of another the combined hedged scenarios have a standard deviation that is lower than the combined unhedged The expected return of the hedged distribution is lower than that of the unhedged distribution. to the results of the simulation, the use of protective puts the volatility of the profit and loss distribution more than the expected return was indicating that the strategy worked for the of reducing the volatility of limiting downside and not much upside. on the analysis a hedging strategy utilizing protective put options reduces the volatility and losses of a Bitcoin portfolio Additionally, when the price of Bitcoin is simulated using geometric random protective puts reduce losses and volatility over scenarios of expected price and trends. If the value of Bitcoin then the cost of the puts options reduces the however, less so than the in volatility. Due to the strategy of puts options at greater strike options in the case of significant the bitcoin portfolio in a gain. unhedged Bitcoin portfolio would be to a in Bitcoin prices that gains or significant losses. the effects of losses, reducing volatility and still a return, the use of a hedging strategy such as the proposed protective put strategy may well be for optimistic Bitcoin In order to a model simulation and other to this to be to Figure path of Bitcoin for the six-month historical test period. Figure of the portfolio cost over the same six Figure of profits with and without hedging. 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In this Note, I will argue that Bitcoin should be categorized and regulated as a commodity. This treatment would be consistent with the economic behavior of Bitcoin’s users and would provide a clearer regulatory path for Bitcoin’s future. Additionally, categorizing Bitcoin as a commodity would provide increased clarity to existing regulatory efforts. Part I of this Note will briefly discuss the basic technological underpinnings of the Bitcoin system. Part II will quickly survey the current regulatory landscape around Bitcoin. Part III will examine Bitcoin’s identity crisis and explain why Bitcoin should not be categorized as a currency or a security—the two other categories vying for Bitcoin’s inclusion. Part IV will explain why Bitcoin is a commodity, and Part V will examine the legal advantages of treating Bitcoin as a commodity. Finally, Part VI will examine how treating Bitcoin as a commodity can provide needed consumer protection regulation in the Bitcoin economy.
This paper examines Bitcoin from a legal and regulatory perspective, answering several important questions. \n \nWe begin by explaining what Bitcoin is, and why it matters. We describe problems with Bitcoin as a method of implementing a cryptocurrency. This introduction to cryptocurrencies allows us eventually to ask the inevitable question: is it legal? What are the regulatory responses to the currency? Can it be regulated? \n \nWe make clear why virtual currencies are of interest, how self-regulation has failed, and what useful lessons can be learned. Finally, we produce useful and semi-permanent findings into the usefulness of virtual currencies in general, blockchains as a means of mining currency, and the profundity of Bitcoin as compared with the development of block chain technologies. We conclude that though Bitcoin may be the equivalent of Second Life a decade later, so blockchains may be the equivalent of Web 2.0 social networks, a truly transformative social technology.
Kriptovalute su digitalni novac utemeljen na kriptografiji i decentraliziranom sustavu. Postoje samo u elektroničkom obliku kao jedinstveni digitalni novčići ("tokeni"). Iza njih ne stoji autoritet države niti ih je moguće svojevoljno proizvesti. Rad se fokusira na značajkama, postavkama, razvoju i svim međuodnosima važnih ekonomskih faktora koji utječu na kriptovalute. U prvom poglavlju navedena su obilježja kriptovaluta. Drugo poglavlje daje primjere i govori o primjeni kriptovaluta u svakodnevnom životu. U trećem poglavlju je raspravljano o trenutnim i budućim regulacijama najmoćnijih zemalja svijeta (G20) , kao i njihovoj zajedničkoj suradnji u želji za jedinstvenim i standardiziranim pravilima, a sve u svrhu što kvalitetnijeg nadzora nad kriptovalutama kako bi se spriječile malverzacije i zaštitili potrošači. Četvrto poglavlje govori o inicijalnoj ponudi kovanica, a peto poglavlje je namijenjeno sigurnosti kriptovaluta. Cilj istraživanja je utvrditi koliko je studentska populacija upoznata i usmjerena prema novim oblicima digitalnog novca, koje značajke kriptovaluta smatraju pozitivnima, a koje negativnima i u kojoj su mjeri investirali ili su spremni investirati dio svojih ulaganja u kriptovalute i sl. Metode istraživanja korištene u radu su kompilacija na temelju proučavanja postojeće literature o temi rada, prikupljanje i analiza podataka vezanih uz kriptovalute, ponajprije podataka vezanih uz cijene i tržišnu kapitalizaciju, anketiranje studenata Ekonomskog fakulteta u Rijeci i metoda dedukcije putem koje su pokazane sve važne karakteristike i obilježja kriptovaluta. Na temelju provedene ankete u kojoj je sudjelovalo 90 studenata Ekonomskog fakulteta u Rijeci zaključak toga dijela istraživanja je da je mlada populacija dobro upoznata s kriptovalutama i njenim glavnim značajkama, ali i određenim nedostatkom informiranosti o tehnologiji (trećina studenata nije čula za pojam "blockchain") i nedovoljnoj odlučnosti oko investiranja i trgovanja u kriptovalute. Povrh toga, dokazan je i negativan utjecaj hakerskih napada i određenih kriminalnih radnji, kao i nestabilnost tržišne cijene na povjerenje studenata, ali i ukupne populacije vezane uz globalni financijski sustav u kriptovalute. Ishod istraživanja omogućio je da zaključimo kako su kriptovalute trenutno u ranoj fazi razvoja i nisu se dovoljno implementirale za široku primjenu u trgovini roba i usluga ili općenito kao sredstvo razmjene. Faktor koji je uključen u istraživanje kako bi opisao veličinu, odnosno obujam neke kriptovalute je tržišna kapitalizacija u dolarima. Temeljna ideja ovog rada je informirati čitatelja o pozitivnim i negativnim značajkama koje se se vežu uz kriptovalute. Na taj način čitatelji će biti bolje informirani i educirani o potencijalnom riziku ulaganja u kriptovalute, kao i većoj razini zaštite prilikom posjedovanja neke digitalne valute.
Blockchain is a distributed database that maintains a dynamic list of data records, hardened to prevent tampering and revision. It is the framework for cryptocurrencies like Bitcoin. \n \nA Blockchain learning tool would provide a secure and verifiable learning transaction ledger. Its decentralised nature would ensure a learner, rather than institution-centred record of achievements that would be difficult to tamper with, enabling parties, such as employers or learning institutions, to review with confidence. \n \nAs a mechanism for transferring credit, Blockchain might also be used to enable selected actions to be rewarded with tokens that can be then traded against future learning costs. \n \nWe will describe Blockchain Learning and invite colleagues to form a community to investigate its learning and teaching potential further.
The enforcement of outcomes in online dispute resolution (ODR) is a delicate problem. Since disputes arising out of e-commerce transactions are typically low in value, the traditional channels of coercive enforcement are often not a viable option. The article argues that the Bitcoin system can be used as a source of inspiration to devise new models of self-enforcement. The article describes the legal framework of ODR and argues that the goal of self-enforcement can be attained through the use of technology. It then describes the relevant features of the Bitcoin system, underlining its potential as a new forum for the expression of private autonomy. It then investigates the features of Bitcoin adjudication, before arguing that Bitcoin must be regarded as an original and self-contained system of dispute resolution, whose characteristics can be used to theorise new models of self-enforcement. Next, it compares four alternative models of self-enforcement, two of which take Bitcoin adjudication as an example. Finally, it puts forth recommendations for all actors involved in the implementation of self-enforcing ODR mechanisms and argues that different models should be left free to compete.
Vsaka valuta ima vzpone in padce, kar je odvisno od razmer na trgu, ki so tisti cas prisotne. Ljudje stremimo k napredku, se razvijamo, ucimo in nismo ustvarjeni, da bi stagnirali. Vsak dan prinese veliko novosti in od nasih potreb, zanimanja in odprtosti je odvisno kako bomo te novosti (ce sploh) sprejeli.
Bitcoin digitalna valuta je vsekakor novost in napredek v svetu digitalnega denarja. Morda lahko marsikoga spomni na prizor iz filma Matrica, v katerem Morfej vprasa Neota ce hoce vzeti modro tableto in tako oditi nazaj v svet, katerega pozna ali bo vzel rdeco tableto in videl svet tak kot je. Neo se je odlocil za rdeco tableto in zacel z raziskovanjem o clovestvu, hierarhiji, pravilih ipd. Bitcoin bi lahko povezali ravno s to rdeco tableto. Z obstojem te valute bodo vedno obstajali slabi dogodki,stvari, vendar se iz tega lahko izcimi se veliko dobrega in uporabnega. Bitcoin se lahko izoblikuje v financno trdnost in moc, potrebuje le se vec zaupanja ljudi v ta sistem (Palihipatiya, 2013).
Dandanes obstaja že precej digitalnih valut, ki so v uporabi, vendar je Bitcoin ena izmed bolj prepoznavnih. Njegove glavne lastnosti so decentraliziranost, anonimnost, P2P tehnologija, hitrost transakcij in majhni stroski. Ima že vrsto podpornikov (podjetij, trgovin), ki omogocajo placila z njimi, seznam pa se cedalje veca. Tudi v Sloveniji že imamo dve spletni trgovini, ki prav tako omogocata placilo s to valuto.
Menim, da ima Bitcoin svetlo prihodnost v kolikor se bo uspesno branil pred raznimi zlorabami, pranjem denarja ipd. Vendar moramo vedeti tudi, da žal to valuto izkoriscajo tudi tisti, ki preko nje poslujejo ilegalno, s preprodajo orožja, drog, prostitucijo ipd. Ker je valuta decentralizirana in omogoca anonimno uporabo, organi pregona ne morejo storiti nicesar, da bi to preprecili. Samo predvideva se lahko v kaksnem obsegu se to danes izkorisca.
Nesta obra, o autor desenvolve um estudo econômico e histórico da origem do Bitcoin e de seu valor enquanto moeda. Em sua argumentação, o autor explora a relação entre a moeda digital Bitcoin e a Economia Austríaca, discutindo, em particular, o Teorema da Regressão de Ludwig von Mises e sua conexão com a evolução do mercado monetário, bem como a abordagem evolutiva seminal de Carl Menger.
Cryptocurrencies like Bitcoin are offering new avenues for economic empowerment to individuals around the world. However, they also provide a powerful tool that facilitates criminal activities such as human trafficking and illegal weapons sales that cause great harm to individuals and communities. Cryptocurrency advocates have argued that the ethical dimensions of cryptocurrency are not qualitatively new, insofar as money has always been understood as a passive instrument that lacks ethical values and can be used for good or ill purposes. In this paper, we challenge such a presumption that money must be 'value-neutral.' Building on advances in artificial intelligence, cryptography, and machine ethics, we argue that it is possible to design artificially intelligent cryptocurrencies that are not ethically neutral but which autonomously regulate their own use in a way that reflects the ethical values of particular human beingsor even entire human societies. We propose a technological framework for such cryptocurrencies and then analyse the legal, ethical, and economic implications of their use. Finally, we suggest that the development of cryptocurrencies possessing ethical as well as monetary value can provide human beings with a new economic means of positively influencing the ethos and values of their societies.
There are over 275 virtual currencies in existence today. One of these currencies is Bitcoin, the largest andmost recognised virtual currency in the world. With its exponential growth over recent years, Bitcoin isbringing a degree of permanence for, and dependability on virtual currencies that can no longer be ignored byregulators. While an increase in international regulatory activity over the past 12 months suggests that somegovernments understand this, Australian regulators appear reluctant to act. In addition to examining Bitcoin’soperational system in detail, this article examines the affect that Bitcoin is having on two key features of thefinancial system: (1) the money laundering and illicit finance supply system; and (2) the payment system. Bycomparing the effectiveness of the response measures enacted by Australian and international regulators inCanada, Singapore, the United States, and the United Kingdom, this article demonstrates that even thoughAustralia’s current payment system policy is capable of addressing the threats posed by virtual currencies, thecurrent money laundering and terrorist financing regulations fail to satisfy Australia’s international obligations,and stifle the legitimate use and development of virtual currencies in Australia.
Bitcoin’s popularity increased as its value increased and people became excited about the prospect of a trustless, decentralized currency that could be used on the Internet. Within the last two years, however, people and organizations began exploiting the potential of the block chain that powers the bitcoin network. These people realized that the block chain — a transparent public ledger that cannot be altered — can be used for more than digital currency. One such organization calls itself Ethereum and its developers plan to use block chains to allow decentralized autonomous applications to operate free of government censorship or corruption. While such a network would have a profound effect on society — allowing trustless voting, uncensored social networking and the like — its impact on copyrights could be devastating. This paper argues that the emerging, decentralized Internet (also known as Web 3.0) will be the straw that breaks the copyright owner’s back. This paper argues that, with block chain technology and decentralized applications, those buying and selling unauthorized copies of copyrighted material cannot be subject to court injunctions; making enforcement of copyrights nearly impossible on a decentralized Internet. This paper then proposes that copyright holders get out in front of the problem by embracing a decentralized Internet. This can only be done by drastically reducing the price of copyright licenses. In other words, by offering cheap licenses at the dawn of Web 3.0, copyright holders can instill a sense that it’s better to be safe than sorry when it comes to the ongoing struggle between technology and copyrights.
Bitcoin is a peer-to-peer electronic payment system that operates as an independent currency. This paper is a philosophical investigation of the ontological constitution of Bitcoin. Using Slavoj Žižek’s ontological triad of the real, the symbolic and the imaginary, the paper distinguishes between three ideal typical theories of money: commodity theory, fiat theory, and credit theory. The constitution of Bitcoin is analysed by comparing the currency to each of these ideal types. It is argued that Bitcoin is commodity money without gold, fiat money without a state, and credit money without debt. In conclusion, it is suggested that Bitcoin poses an ideological challenge to conventional forms of money in so far as it not only provokes sedimented beliefs about money but also exposes the forms of exploitation, risk and even violence inherent in the existing system of state authorized credit money.
Kaylash Chaudhary, Ansgar Fehnker, Jaco van de Pol, Mariëlle Stoelinga
Bitcoin is a popular digital currency for online payments, realized as a decentralized peer-to-peer electronic cash system. Bitcoin keeps a ledger of all transactions; the majority of the participants decides on the correct ledger. Since there is no trusted third party to guard against double spending, and inspired by its popularity, we would like to investigate the correctness of the Bitcoin protocol. Double spending is an important threat to electronic payment systems. Double spending would happen if one user could force a majority to believe that a ledger without his previous payment is the correct one. We are interested in the probability of success of such a double spending attack, which is linked to the computational power of the attacker. This paper examines the Bitcoin protocol and provides its formalization as an UPPAAL model. The model will be used to show how double spending can be done if the parties in the Bitcoin protocol behave maliciously, and with what probability double spending occurs.
Bitcoin was created in 2009 to serve as a virtual currency system outside the controls of the government or a central bank. Since then, both the cryptocurrency and the underlying blockchain technology have attracted significant attention worldwide. Several companies already accept payment for goods and services in Bitcoin, with the attraction being low processing costs and ease of use in cross-border transactions.
Can the parties to a conctract agree that the consideration should be paid in bitcoins? Or will this obligation be qualified as the delivery of 'objects'?
Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any government or monetary authority. This paper analyses the question of whether bitcoin is a currency or an asset and, more specifically, what is its current usage and what usage will prevail in the future, given its characteristics? We analyse the statistical properties of bitcoin and find that it is essentially uncorrelated with traditional asset classes such as stocks, bonds and commodities, both in normal times and in periods of financial turmoil. The analysis of transaction data of bitcoin accounts shows that bitcoins are mainly used as a speculative investment and not as an alternative currency and medium of exchange. Bitcoin is still small relative to the size of other asset classes and, thus, does not pose an immediate risk for monetary, financial or economic stability.
The Bitcoin system is an anonymous, decentralized crypto-currency. There are some deanonymizating techniques to cluster Bitcoin addresses and to map them to users' identifications in the two research directions of Analysis of Transaction Chain (ATC) and Analysis of Bitcoin Protocol and Network (ABPN). Nowadays, there are also some anonymization methods such as coin-mixing and transaction remote release (TRR) to cover the relationship between Bitcoin address and the user. This paper studies anonymization and de-anonymization technologies and proposes some directions for further research.
To strengthen the anonymity of Bitcoin, several centralized coin-mixing providers (mixers) such as BitcoinFog.com, BitLaundry.com, and Blockchain.info assist users to mix Bitcoins through CoinJoin transactions with multiple inputs and multiple outputs to uncover the relationship between them. However, these mixers know the output address of each user, such that they cannot provide true anonymity. This paper proposes a centralized coin-mixing algorithm based on an elliptic curve blind signature scheme (denoted as Blind-Mixing) that obstructs mixers from linking an input address with an output address. Comparisons among three blind signature based algorithms, Blind-Mixing, BlindCoin, and RSA Coin-Mixing, are conducted. It is determined that BlindCoin may be deanonymized because of its use of a public log. In RSA Coin-Mixing, a user's Bitcoins may be falsely claimed by another. In addition, the blind signature scheme of Blind-Mixing executes 10.5 times faster than that of RSA Coin-Mixing.
Craig K. Elwell, Margaret Murphy, Michael V. Seitzinger
This report has three major sections. The first section answers some basic questions about Bitcoin and the operation of the Bitcoin network and its interaction with the current dollar-based monetary system. The second section summarizes likely reasons for and against widespread Bitcoin adoption. The third section discusses legal and regulatory matters that have been raised by Bitcoin and other digital currencies.
Digital forensics must constantly adapt to new technological developments. The advent of Bitcoin is such a development. Bitcoin represents a new model for financial transactions. In many cash transactions between strangers, the underlying model is parties-unknown/transaction-unknown. There is no ledger record of the transaction. In contrast, PayPal illustrates the parties-known/transaction-known model. An intermediary will record both items of information. Bitcoin differs from both of these models; Bitcoin uses a parties-unknown/transaction-known model. The Bitcoin block chain records the transaction, but the user’s Bitcoin address is not expressly tied to an identity. Thus, Bitcoin users enjoy pseudo-anonymity.As the recent experience with Silk Road demonstrates, there is a downside to this pseudo-anonymity. Precisely because of that feature, Silk Road served a marketplace for vendors to sell illegal narcotics, forged identifications, and other illicit goods and services. Given that danger, law enforcement authorities have a felt need to develop techniques to penetrate the pseudo-anonymity. To do so, they have turned to digital forensics experts.This article evaluates two techniques that have been proposed for this purpose. The first is traffic analysis. This technique relies on the entry nodes that users employ to access the Internet. The second is transaction graph analysis. This technique clusters transactions to identify natural chokepoints in the Bitcoin economy, that is, service islands where, for example, the user might convert Bitcoins to fiat currency. The chokepoints becomes a target for a law enforcement subpoena to learn the user’s IP address. After describing each technique, the article assesses the research conducted to date. In particular, the article reviews Alex Biryukov’s research into traffic analysis and Sarak Meiklejohn’s work with transaction graph analysis. The article applies the standards announced in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) to determine whether, given the available data, expert testimony based on either technique would be admissible today. The article explains that it is doubtful whether testimony based on either technique would survive a Daubert admissibility challenge. The article concludes that further research is needed to enable law enforcement authorities to effectively penetrate the pseudo-anonymity of the new parties-unknown/transaction-known model.
Ittay Eyal, Adem Efe Gencer, Emin Gün Sirer, Robbert van Renesse
Cryptocurrencies, based on and led by Bitcoin, have shown promise as infrastructure for pseudonymous online payments, cheap remittance, trustless digital asset exchange, and smart contracts. However, Bitcoin-derived blockchain protocols have inherent scalability limits that trade-off between throughput and latency and withhold the realization of this potential. This paper presents Bitcoin-NG, a new blockchain protocol designed to scale. Based on Bitcoin's blockchain protocol, Bitcoin-NG is Byzantine fault tolerant, is robust to extreme churn, and shares the same trust model obviating qualitative changes to the ecosystem. In addition to Bitcoin-NG, we introduce several novel metrics of interest in quantifying the security and efficiency of Bitcoin-like blockchain protocols. We implement Bitcoin-NG and perform large-scale experiments at 15% the size of the operational Bitcoin system, using unchanged clients of both protocols. These experiments demonstrate that Bitcoin-NG scales optimally, with bandwidth limited only by the capacity of the individual nodes and latency limited only by the propagation time of the network.
<p>Bitcoin is a decentralized virtual crypto currency that has attracted attention from technologists, economists, consumers, regulators, black marketeers, venture capitalists and Wall Street commentators to name a few. While many debate issues such as whether or not bitcoin is money, how might it ultimately be regulated and whether or not it represents a truly disruptive innovation, this paper examines the current landscape of bitcoin and identifies some of the early adopters and significant events that have contributed to this unfolding phenomenon.</p>