Bitcoin: Economics, Technology, and Governance

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Bitcoin: Economics, Technology, and Governance

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Bitcoin: Economics, Technology, and Governance

Rainer Böhme, Nicolas Christin¹, Benjamin Edelman², Tyler Moore²•Institutions (2)

Carnegie Mellon University¹, Harvard University²

15 Jul 2014-Social Science Research Network-

TL;DR: In this paper, the authors present the design principles and properties of Bitcoin for a non-technical audience, reviews its past, present and future uses, and points out risks and regulatory issues as Bitcoin interacts with the conventional financial system and real economy.

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Abstract: Bitcoin is an online communication protocol that facilitates virtual currency including electronic payments. Since its inception in 2009 by an anonymous group of developers, Bitcoin has served tens of millions of transactions with total dollar value in the billions. Users have been drawn to Bitcoin for its decentralization, intentionally relying on no single server or set of servers to store transactions and also avoiding any single party that can ban certain participants or certain types of transactions. Bitcoin is of interest to economists in part for its potential to disrupt existing payment systems and perhaps monetary systems, and also for the wealth of data it provides about agents’ behavior and about the Bitcoin system itself. This article presents the platform’s design principles and properties for a non-technical audience, reviews its past, present and future uses, and points out risks and regulatory issues as Bitcoin interacts with the conventional financial system and the real economy.

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Journal Article•DOI•

Bitcoin, gold and the dollar – A GARCH volatility analysis

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Anne Haubo Dyhrberg¹•Institutions (1)

University College Dublin¹

01 Feb 2016-Finance Research Letters

TL;DR: In this article, the authors explored the financial asset capabilities of bitcoin using GARCH models and found that bitcoin can be classified as something in between gold and the American dollar on a scale from pure medium of exchange advantages to pure store of value advantages.

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1,050 citations

Cites background from "Bitcoin: Economics, Technology, and..."

...Furthermore Bohme et al. (2015) found that transactions could be delayed for up to an hour which greatly diminishes the liquidity possibilities....
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...Furthermore Bohme et al. (2015) found that transactions could be delayed for up to an hour which greatly diminishes the liquidity possibilities. However, the bitcoin protocol does not restrict transfers due to watch-lists or embargoed countries as the identities of its users are not known. This gives bitcoin an immense flexibility and speed of international transfer compared to other currencies managed by banks. Glaser et al. (2014) found that the majority of users treat their bitcoin investments as speculative assets rather than as a means of payment....
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Other•DOI•

Blockchain Technology: Principles and Applications

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Pilkington Marc

30 Sep 2016-Social Science Research Network

TL;DR: The main principles behind blockchain technology are expounded and the core concepts at the heart of the blockchain are presented, and the main features of decentralized public ledger platforms are exposed.

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Abstract: This paper expounds the main principles behind blockchain technology and some of its cutting-edge applications. Firstly, we present the core concepts at the heart of the blockchain, and we discuss the potential risks and drawbacks of public distributed ledgers, and the shift toward hybrid solutions. Secondly, we expose the main features of decentralized public ledger platforms. Thirdly, we show why the blockchain is a disruptive and foundational technology, and fourthly, we sketch out a list of important applications, bearing in mind the most recent evolutions.

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1,009 citations

Cites background from "Bitcoin: Economics, Technology, and..."

...Although the emergence of major players in the mining industry is conducive to novel centralization trends (Sams, 2014, Böhme et al. 2015, 219-220), Bitcoin was initially designed as a decentralized network (Nakamoto, 2008, p.4)....
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...When systemwide mining power increases, so does the difficulty of the computational problems required to mine a new block (Böhme et al, 2015, p. 218)....
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Journal Article•DOI•

The inefficiency of Bitcoin

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Andrew Urquhart¹•Institutions (1)

University of Southampton¹

01 Nov 2016-Economics Letters

TL;DR: In this article, the authors study the market efficiency of Bitcoin and find that returns are significantly inefficient over the full sample, but when split into two subsample periods, some tests indicate that Bitcoin is efficient in the latter period.

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862 citations

Proceedings Article•DOI•

Blockchain technology in healthcare: The revolution starts here

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Matthias Mettler

01 Sep 2016

TL;DR: In this article, the authors present several starting points for blockchain technology in the healthcare industry, including public healthcare management, user-oriented medical research and drug counterfeiting in the pharmaceutical sector, and illustrate possible influences, goals and potentials connected to this disruptive technology.

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Abstract: Blockchain technology has shown its considerable adaptability in recent years as a variety of market sectors sought ways of incorporating its abilities into their operations. While so far most of the focus has been on the financial services industry, several projects in other service related areas such as healthcare show this is beginning to change. Numerous starting points for Blockchain technology in the healthcare industry are the focus of this report. With examples for public healthcare management, user-oriented medical research and drug counterfeiting in the pharmaceutical sector, this report aims to illustrate possible influences, goals and potentials connected to this disruptive technology.

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819 citations

Cites background from "Bitcoin: Economics, Technology, and..."

...Furthermore, since all transactions are processed by users via a particular pseudonym, the information contained in the Bitcoin Blockchain is completely anonymous [4] [5]....
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...The underlying principle of decentralized, transparent and instant access to information represents a starting point for many market sectors [5] [6]....
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...Put simply, the solution of ownership associated with Bitcoins as published by Satoshi Nakamoto [3], therefore, lies in consolidating all necessary information in a single database, which is then publicly distributed [4] [5]....
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...Due to this continuous sequence of blocks of information, the information with respect to all transactions made in the past, at any given time, are completely transparent and literally tamper-proof [4] [5]....
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Journal Article•DOI•

The Economics of Privacy

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Alessandro Acquisti¹, Curtis R. Taylor², Liad Wagman³•Institutions (3)

Carnegie Mellon University¹, Duke University², Illinois Institute of Technology³

08 Mar 2016-Social Science Research Network

TL;DR: The authors summarizes and draws connections among diverse streams of theoretical and empirical research on the economics of privacy, focusing on the economic value and consequences of protecting and disclosing personal information, and on consumers' understanding and decisions regarding the tradeoffs associated with the privacy and the sharing of personal data.

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Abstract: This article summarizes and draws connections among diverse streams of theoretical and empirical research on the economics of privacy. We focus on the economic value and consequences of protecting and disclosing personal information, and on consumers' understanding and decisions regarding the trade-offs associated with the privacy and the sharing of personal data. We highlight how the economic analysis of privacy evolved over time, as advancements in information technology raised increasingly nuanced and complex issues associated with the protection and sharing of personal information. We find and highlight three themes that connect diverse insights from the literature. First, characterizing a single unifying economic theory of privacy is hard, because privacy issues of economic relevance arise in widely diverse contexts. Second, there are theoretical and empirical situations where the protection of privacy can both enhance, and detract from, individual and societal welfare. Third, in digital economies, consumers' ability to make informed decisions about their privacy is severely hindered, because consumers are often in a position of imperfect or asymmetric information regarding when their data is collected, for what purposes, and with what consequences. We conclude the article by highlighting some of the ongoing issues in the privacy debate of interest to economists.

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665 citations

Cites background from "Bitcoin: Economics, Technology, and..."

..., Böhme et al. 2015). In response to increasing concerns regarding identity theft, many US states have adopted data-breach disclosure laws. By and large, these laws require firms to notify consumers if their personal information has been lost or stolen. Romanosky, Telang, and Acquisti (2011) use FTC data to estimate the impact of data-breach disclosure laws on identity theft over the years 2002 to 2007....
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References

PDF

Open Access

More filters

Journal Article•DOI•

New Directions in Cryptography

[...]

Whitfield Diffie¹, Martin E. Hellman¹•Institutions (1)

Stanford University¹

01 Nov 1976-IEEE Transactions on Information Theory

TL;DR: This paper suggests ways to solve currently open problems in cryptography, and discusses how the theories of communication and computation are beginning to provide the tools to solve cryptographic problems of long standing.

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Abstract: Two kinds of contemporary developments in cryptography are examined. Widening applications of teleprocessing have given rise to a need for new types of cryptographic systems, which minimize the need for secure key distribution channels and supply the equivalent of a written signature. This paper suggests ways to solve these currently open problems. It also discusses how the theories of communication and computation are beginning to provide the tools to solve cryptographic problems of long standing.

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14,980 citations

Report•DOI•

Tor: the second-generation onion router

[...]

Roger Dingledine, Nick Mathewson, Paul Syverson¹•Institutions (1)

United States Naval Research Laboratory¹

13 Aug 2004

TL;DR: This second-generation Onion Routing system addresses limitations in the original design by adding perfect forward secrecy, congestion control, directory servers, integrity checking, configurable exit policies, and a practical design for location-hidden services via rendezvous points.

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Abstract: We present Tor, a circuit-based low-latency anonymous communication service. This second-generation Onion Routing system addresses limitations in the original design by adding perfect forward secrecy, congestion control, directory servers, integrity checking, configurable exit policies, and a practical design for location-hidden services via rendezvous points. Tor works on the real-world Internet, requires no special privileges or kernel modifications, requires little synchronization or coordination between nodes, and provides a reasonable tradeoff between anonymity, usability, and efficiency. We briefly describe our experiences with an international network of more than 30 nodes. We close with a list of open problems in anonymous communication.

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3,960 citations

"Bitcoin: Economics, Technology, and..." refers methods in this paper

...Silk Road was hosted as a “hidden service” on Tor, a system which is purpose-built for anonymity of both visitors and operators....
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...When Bitcoin is used with tools to anonymize network traffic such as Tor (Dingledine, Mathewson, and Syverson 2004), marketplaces could provide stronger assurances of anonymity....
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...Mixers have been used to promote anonymity in online communications, most famously by the Tor network, so their limitations are now widely known (Danezis and Diaz 2008)....
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Book Chapter•DOI•

Blind Signatures for Untraceable Payments

[...]

David Chaum¹•Institutions (1)

University of California, Santa Barbara¹

01 Jan 1983

TL;DR: Automation of the way the authors pay for goods and services is already underway, as can be seen by the variety and growth of electronic banking services available to consumers.

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Abstract: Automation of the way we pay for goods and services is already underway, as can be seen by the variety and growth of electronic banking services available to consumers. The ultimate structure of the new electronic payments system may have a substantial impact on personal privacy as well as on the nature and extent of criminal use of payments. Ideally a new payments system should address both of these seemingly conflicting sets of concerns.

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3,308 citations

Book•

A program for monetary stability

[...]

Milton Friedman

01 Jan 1959

TL;DR: The only really sure way to beat inflation is to cut off inflation at the root as mentioned in this paper, and this is controversial stuff, and Professor Friedman doesn't blanch at what he feels is his call of duty.

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Abstract: "[T]he only really sure way to beat inflation is to cut off inflation at the root. . . Milton Friedman [presents his strategy against] inflation in his penetrating . . . book . . . This is controversial stuff, and Professor Friedman . . . doesn't blanch at what he feels is his call of duty. And many a banker will just see red . . . [This book] can be recommended for a good look at the real roots of inflation-the look that thus far has not been widespread enough, among enough people."-The Wall Street Journal

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1,564 citations