Introduction to Bitcoin and Cryptocurrency
But of course, these financial benefits can only be achieved if it is possible to manage the environment under which Bitcoin thrives. While solutions can be found for most problems, a ‘one-size-fits-all’ approach is never feasible. Founder, CPU mining, threats from Quantum Computing, number of Bitcoins, and Regulation are just some of the areas which need to be fully understood but might require different solutions for different countries.
It is important that it should be the countries that regulate these areas differently and not different self-interest organizations. The paper provides the arguments in the quest for operating guidance and by so doing allows us to examine some of the problems and opportunities that Bitcoin represents.
Bitcoin has the ability to offer an entirely new financial landscape for the whole world. By being able to eliminate or decrease the impact from the traditional costs of money transfer, this could be of great benefit to many economies.
At the same time, it can eliminate or decrease the impact from the apparent excesses of quantitative easing, thereby preventing hyperinflation. It can provide a store of wealth and a means of building capital and starve off civil insurrection caused by wealth distortions.
It can provide safe haven assets by allowing the economy to provide assets whenever and wherever there is demand, rather than allowing the financial industry to create assets and then bet on their viability and goodness, thereby removing the impact of management greed and creating assets where the risks are not understood but the secure function burden is carried by the sovereign.
Background and Definition of Bitcoin and Cryptocurrency
Bitcoin is the first fully decentralized peer-to-peer digital currency without the need for any third-party intermediaries. It was created as an open-source software by an unknown entity, allowing its users the possibility to produce, transfer, and send worldwide.
Studies highlight that the use of Bitcoin is less secure against fraud and theft, and that it can easily be transacted with anyone within the Bitcoin network so that people can make transactions and use software that follows certain rules to secure and fulfill the transactions.
A number of e-commerce merchants and several service providers accept this virtual currency, as well as many international companies that use the Bitcoin network to perform transactions. Technically, the Bitcoin network relies on shared ledgers to record transactions and holds cryptographic signatures to provide firm evidence that they hold the owner’s Bitcoins, protect them against theft, prevent double-spending, create automatic contracts between authorities, protect the user’s privacy, and prevent the owners from tampering with the network.
Definition and Characteristics of Cryptocurrencies
In this paper, we study cybersecurity issues related to the use of cryptocurrencies. We review the built-in technological security measures present in blockchain technology and how they differ from the ones used in traditional banks.
We aim to contribute to understanding whether the built-in technological security measures present in blockchain technology justify cryptocurrencies’ sky-high valuations. Our results suggest that market valuations indeed provide incentives for a stronger and hence more secure blockchain technology. However, other socioeconomic factors such as excessive speculation driven in part by the so-called “FOMO” (fear of missing out) syndrome could also be contributing to high valuations regardless of the distinction between the security problems faced by traditional banks and blockchain.
Cryptocurrency is defined as a digital or virtual currency that uses cryptography for security and operates on a decentralized system. Cryptocurrencies are built from a technology called blockchain. Despite an increasing number of ICOs, Bitcoin and other digital coins reached new highs and nadirs, suffered serious security breaches, were used as a store of value and payment of taxes, and received a lot of attention from the traditional financial community.
Enthusiasm around Bitcoin and cryptocurrencies in general has been compared to the famous Dutch tulips speculation in the 17th century known as Tulip Mania. Critics also point out the disruptive nature of cryptocurrencies with respect to central banks’ monetary policy.