This paper describes a study to understand what differentiates organization adopters of Bitcoin from nonadopters by comparing their IT-readiness, innovativeness and social media presence. The craze over cryptocurrency such as Bitcoin has been likened to a modern-day gold rush, yet academic research has not caught up. Governments are struggling with the very idea of cryptocurrency systems. After the price of Bitcoin fell from $1,200 to $300 in 2014, consumer interest flagged, leaving the future of Bitcoin adoption uncertain despite a slow and steady increase of organization adopters. Organization adoption is more important than consumer, because consumers canât use cryptocurrency if organizations donât accept them as payment. This research serves as a basis for future research on Bitcoins and Bitcoin adoption by highlighting some important hurdles to its adoption as a new innovation, in the hope that such endeavors move us ever closer to the vision of a true âpeopleâs currency.â
Bitcoin is a new financial system that has the potential to have a big impact on the way the world does business. Its open ledger system and distribution network make it a valuable system. Although it is still in its infancy, as bitcoin becomes larger and more sophisticated, it may very well provide solutions to many of the current financial systemâs problems.
Bitcoin is the most popular, decentralized virtual currency in the world. Businesses both large and small have begun to accept bitcoins as a legal form of payment. In addition, Bitcoin currency exchanges, which trade bitcoins for real currency, have quickly arisen because of the currencyâs growing popularity.\nBut Bitcoinâs evolution has also been marred with criminality. Hundreds of millions of dollarsâ worth of bitcoins have been stolen from businesses and large Bitcoin currency exchanges. The infamous âSilk Roadââan illegal, online drug market, which the FBI took down in 2013âdealt in this currency. The use of bitcoins for illicit purposes not only facilitates criminal activity throughout the world, but also undermines the security of individuals using bitcoins for legitimate purposes, such as users who send remittances to family members abroad.\nThe Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, stands at the forefront of Bitcoin regulation. FinCEN was the first federal agency to address convertible virtual-currency regulation, providing legal guidance (the Guidance) explaining how the Bank Secrecy Act applies to convertible virtual currencies. For this reason, this Article analyzes and evaluates the Guidanceâs standards regarding convertible virtual currencies.\nThis Article proposes a refined regulatory framework that both deters money laundering in Bitcoinâa pervasive problem in the world of decentralized virtual currenciesâand allows the recognized benefits of this virtual currency to develop free from innovation- stifling regulation. Among other benefits, Bitcoin increases access to financing in impoverished areas, provides an avenue for low-cost remittances, lowers transaction costs for businesses burdened with high credit-card fees, and perhaps most importantly, creates a global platform for financial and technological innovation to flourish. While authorities recognize these advantages, the potential for criminal abuse nevertheless remains salient. This Article seeks to provide the optimal balance between these often-conflicting interests.
Judith Lee Smith, Arthur Long, Marcellus McRae, Jeff Steiner ¡ 5 authors
In the past five years, virtual currencies, or 'cryptocurrencies' have evolved tremendously and are quickly establishing themselves as a payment system. Today, virtual currencies are a multibillion-dollar venture with dual potential as both an investment and an electronic medium of exchange.* 1 2 3 Increasingly, mainstream retailers are announcing plans to accept Bitcoins, Bitcoin ATMs are growing in prominence,' the first Bitcoin debit cards have been delivered ' and the first Bitcoin derivative transactions have been executed on a US-regulated exchange.4 Yet, there remain numerous risks and challenges associated with virtual currencies. In addition to experiencing significant volatility in exchange rates and susceptibility to attacks from and illicit use by cybercriminals, the virtual currency marketplace remains largely unregulated. Governments around the globe are taking widely divergent actions-or taking no action at all - to define and regulate virtual currencies. This article will provide an overview of the virtual currency landscape, including legislative, regulatory and law enforcement developments.What are virtual currencies?Virtual currencies are decentralised peer-to-peer payment systems that are digital representations of value and can be transferred, stored and traded electronically. At their core, they are distinct from other digital payments (eg, PayPal, Facebook credits, airline miles, etc) because they provide a means to transfer value between two parties without needing an intermediate party. They do not have legal tender status; they operate with no central authority or banks, and their issue is carried out collectively by a distributed network. While the transaction between buyer and seller is direct, the identities of the parties are encrypted and therefore no personal information is transferred. However, virtual currency transactions such as Bitcoin transactions are not fully anonymous. A transaction record of every Bitcoin and every Bitcoin user's encrypted identity is recorded on a public ledger. As a result, it is most appropriate to characterise Bitcoin and many other virtual currencies as 'pseudonymous' as opposed to anonymous. This pseudonymity, combined with its efficient and decentralised nature, makes it appealing to both consumers and criminals alike.''Virtual currencies have grown exponentially in recent years. Today, there are several hundred virtual currencies in existence with a market capitalisation of over $5.75bn.n The Bitcoin system is the most prominent, with an estimated market capitalisation of over $5bn.' The exchange rate of dollars to Bitcoin soared to more than $1,200 at its peak last November, although it has since retreated and was recently less than $400 per Bitcoin.s Ripple, which recently outpaced Litecoin as the virtual currency with the second-largest market capitalisation, has a market capitalisation of over $140m and an exchange rate of about $0.0049.9 Other mineable virtual currencies with a sizeable market capitalisation include BitSharesX, Peercoin and Dogecoin. However, as Bitcoin is the dominant virtual currency, this article (and the attention of regulators and policy-makers) focuses primarily on it.While these descriptions provide a helpful understanding of what a virtual currency is and some of the different virtual currencies in existence today, they do not clarify the role of virtual currencies in the modern financial system. Are they a commodity, a currency or a medium of exchange? Can they be more than one of these? As will be discussed in more depth in the following sections, policy-makers and regulators are still trying to answer these questions. The Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) has defined virtual currency as a 'medium of exchange that operates like currency in some environments, but does not have all the attributes of real currency... [including that it] does not have legal tender status in any jurisdiction'. âŚ
Alexandru PĂŽrjan, Dana-Mihaela PetroČanu, Mihnea Huth, Mihaela NegoiČÄ
In this paper, we research and analyse the main characteristics, the evolution of the Bitcoin and of the Alternative Coins (Alt-Coins) digital currencies, their numerous applications and ramifications. We make an in depth analysis of the Bitcoin digital currency and of the most significant Alternative Coins, taking into account their technical characteristics, their main advantages and limitations. Just as it happened in the past decades with the personal computers and Internet, the impact of these digital currencies will gradually increase in the future, leading to major changes in our lifestyle, redefining our everyday life, economy and society.
Bitcoin has become the de facto 'gold' standard among cryptocurrencies as it is the most widely accepted in commerce, has the largest mining network, and greatest volume of transactions. Because of this, miners of other SHA-256 cryptocurrencies will tend to convert those altcoins into bitcoin in order to transact in a meaningful way with the real economy. The result is that bitcoin mining regulates that of all other SHA-256 blockchains. Specifically, what matters is the expected number of bitcoins produced per day given a unit of hashing (mining) power, whatever the equivalence in the coin being mined. If mining for a different coin would yield a greater return in bitcoins at the margin (per day) for a miner, an apparent arbitrage opportunity will exist to direct mining effort at that cryptocurrency and subsequently exchange those for bitcoin. These opportunities, once taken, quickly eliminate the profitable arbitrage and appear to operate in a fairly efficient and predictable manner. A model is developed in this paper to formalize this process where cryptocurrency miners seeking to maximize production in terms of bitcoins earned in a day will exploit any such opportunities. If no such opportunities exist, they will simply revert to mining bitcoins directly. There are some important implications to this process, such as a tendency for cryptocurrencies to fall in price relative to bitcoin over time, and for changes in bitcoin mining difficulty to indirectly influence the market prices of altcoins. Finally, it seems that those undertaking this process of miners' arbitrage do so at the expense of speculators and noise traders who make decisions regarding buy and sell trades without the use of fundamental data. These participants generally have poor timing, follow trends, and over-react to good and bad news. Altcoins are produced by miners and subsequently offered for sale in the market in order to obtain bitcoins; meanwhile noise traders serve as the only bid-side to the market, on average.
Feng Mai, Qing Bai, Jay Shan, Xin Wang ¡ 5 authors
As the world's first completely decentralized digital payment system, the emergence of Bitcoin represents a revolutionary phenomenon in financial markets. This study examines the dynamic relationships between social media and bitcoin performance. We consider the distinct effects of different social media platforms and different user groups subdivided by posting volume. The results suggest that more bullish forum posts have a positive effect on bitcoin returns, and the effect is stronger when we only include the posts by users who are less likely to contribute. In addition, messages on Internet forum have stronger impacts on future bitcoin market measures at a daily frequency, but microblogsâ effects are more significant at an hourly frequency.
This paper assesses costs and benefits of regulating Bitcoin. A review of the main justifications for regulating it shows that scope for efficient regulation is limited. Private governance structures and fee-based services have already begun addressing many of the known problems. Furthermore, since a regulation would discourage use, the costsâin terms of technological gains forgoneâare potentially high. Nonetheless, there is scope for regulation, to ensure one has recourse in the event of theft, as long as the following are addressed: 1) provide a clear regulatory framework; 2) supervise transactions to dissuade crime, without compromising the medium; 3) regulate exchanges, rather than users; 4) encourage technological progress by committing to an environment of permissionless innovation.
This paper aims to identify the likely determinants for cryptocurrency value formation, including for that of bitcoin. Due to Bitcoinâs growing popular appeal and merchant acceptance, it has become increasingly important to try to understand the factors that influence its value formation. Presently, the value of all Bitcoins in existence represent approximately $7 billion, and more than $60 million of notional value changes hands each day. Having grown rapidly over the past few years, there is now a developing but vibrant marketplace for bitcoin, and a recognition of digital currencies as an emerging asset class. Not only is there a listed and over-the-counter market for bitcoin and other digital currencies, but also an emergent derivatives market. As such, the ability to value bitcoin and related cryptocurrencies is becoming critical to its establishment as a legitimate financial asset.Using cross-sectional empirical data examining 66 of the most widely used cryptocurrencies, a regression model was estimated that points to three main drivers of cryptocurrency value: the level of competition in the network of producers, the rate of unit production, and the difficulty of algorithm used to âmineâ for the cryptocurrency. These amount to relative differences in the cost of production of one digital currency over another at the margin, pointing to differences in relative cost of production â electricity goes in, cryptocurrency comes out. Using that as a starting point, a no-arbitrage situation is established for Bitcoin-like cryptocurrencies followed by the formalization of a cost of production model to determine the fair value of a bitcoin.
Martina Matta, Maria Ilaria Lunesu, Michele Marchesi
In the last decade, Web 2.0 services such as blogs, tweets, forums, chats, email etc. have been widely used as communication media, with very good results. Sharing knowledge is an important part of learning and enhancing skills. Furthermore, emotions may affect decisionmaking and individual behavior. Bitcoin, a decentralized electronic currency system, represents a radical change in financial systems, attracting a large number of users and a lot of media attention. In this work, we investigated if the spread of the Bitcoinâs price is related to the volumes of tweets or Web Search media results. We compared trends of price with Google Trends data, volume of tweets and particularly with those that express a positive sentiment. We found significant cross correlation values, especially between Bitcoin price and Google Trends data, arguing our initial idea based on studies about trends in stock and goods market.
Patrick McCorry, Siamak F. Shahandashti, Dylan Clarke, Feng Hao
Abstract. Bitcoin is designed to protect user anonymity (or pseudonymity) in a financial transaction, and has been increasingly adopted by major e-commerce websites such as Dell, PayPal and Expedia. While the anonymity of Bitcoin transactions has been extensively studied, little attention has been paid to the security of post-transaction correspondence. In a commercial ap-plication, the merchant and the user often need to engage in follow-up corre-spondence after a Bitcoin transaction is completed, e.g., to acknowledge the receipt of payment, to confirm the billing address, to arrange the product de-livery, to discuss refund and so on. Currently, such follow-up correspondence is typically done in plaintext via email with no guarantee on confidentiality. Obviously, leakage of sensitive data from the correspondence (e.g., billing ad-dress) can trivially compromise the anonymity of Bitcoin users. In this paper, we initiate the first study on how to realise end-to-end secure communica-tion between Bitcoin users in a post-transaction scenario without requiring any trusted third party or additional authentication credentials. This is an important new area that has not been covered by any IEEE or ISO/IEC se-curity standard, as none of the existing PKI-based or password-based AKE schemes are suitable for the purpose. Instead, our idea is to leverage the Bit-coinâs append-only ledger as an additional layer of authentication between previously confirmed transactions. This naturally leads to a new category of AKE protocols that bootstrap trust entirely from the block chain. We call this new category âBitcoin-based AKE â and present two concrete protocols: one is non-interactive with no forward secrecy, while the other is interactive with additional guarantee of forward secrecy. Finally, we present proof-of-concept prototypes for both protocols with experimental results to demonstrate their practical feasibility.