How to Price a Digital Currency? Empirical Insights on the Influence of Media Coverage on the Bitcoin Bubble

Digital currencies are gaining more and more attention against the backdrop of latest events triggered by the ongoing economic crisis. While digital currencies face enhancing popularity, the currencies’ prices are free floating and subject to high volatility as a result of lacking fundamental valuation methods. On the basis of an overview over the most prominent currency — Bitcoin — and an economic literature review we propose an econometric model that incorporates the basic components of the current price discovery process of a digital currency’s exchange rate. On the basis of our empirical validation we further display that, in the case of Bitcoin, price volatility is significantly influenced by the media coverage and positive sentiment.

Authors

  • Florian Glaser
  • Martin Haferkorn
  • Moritz Christian Weber

Related open reserach

Teleport: anonymity through off-blockchain transaction information transfer. A Dark Paper for BTCD

Alice acquires a treasure map drawn by pirate Jack Sparrow. Understanding that some pirates may be untrustworthy, Alice digs up the treasure and moves it to a different chest in another location. She copies the map and updates it with a fresh X marks the spot, crossing out the previous one and discarding the old […]

Bitcoin as a reaction to the conventional-monetary system

Bacher, Phillip Crilles; Ussing, Jonatan Henriquez; Mathias Bak; Nelbom,Mathies Raaskou

Bitcoin: Tempering the Digital Ring of Gyges or Implausible Pecuniary Privacy

Bitcoin is a peer-to-peer cryptocurrency; which is entirely decentralized, open-source, and non-institutional. A comprehensive history of Bitcoin transactions is permanently distributed among users, while partial anonymity is accomplished through public/private key transactions. Bitcoin differs from digital currencies like Zynga, 2nd Life, and E-Gold, because no central authority issues fresh currency, instead it is ‘mined’ by […]

Quasi-Commodity Money (Original version of the later ‘Synthetic Commodity Money’)

Nerdy Money: Bitcoin, the Private Digital Currency, and the Case Against Its Regulation

This Comment investigates the lawfulness of using bitcoin, a privately-issued currency transacted on a peer-to-peer network, and the capability of the federal government to bar transactions inbetween two willing parties. While there are no cases yet challenging the capability of parties in the United States to make transactions using bitcoins, there are policymakers who have […]

More Money, More Problems: The Bitcoin Virtual Currency and the Legal Problems that Face It

Open-source, virtual currencies may be niche today, but could become mainstream in the near future. This Comment provides a provisional reaction to the fundamental question of Bitcoin’ s legality. Part I gives a brief overview of the mechanics behind Bitcoin. Part II chronicles the currency’s lifespan so far. Eventually, Part III considers the potential influence […]

A Structural Analysis of Bitcoin

There is no formal framework for describing the core structural concepts of Bitcoin or for attempting a correctness proof of the algorithm. This contribution presents several elements which may serve as building blocks. A distributed model for describing the states enclosed in a Bitcoin network is provided. Concepts for modeling the swarm behavior of Bitcoin […]

Is Bitcoin Money? Bitcoin and Alternate Theories of Money

In 2009, a nosey fresh virtual currency called Bitcoin made its very first appearance on the Internet. While it remains a “niche” currency relative to other major denominations like the U.S. dollar, Bitcoin has experienced significant growth since its inception. The total number of Bitcoins in circulation is about 12.Five million, with a latest market price […]

Bits and Bets: Information, Price Volatility, and Request for Bitcoin

Before the peak of the Bitcoin price bubble, volatility had a statistically significant positive effect on price. This makes sense because the market bubble implies that, coupled with the positive spirits of a market bubble, speculators, arbitragers, miners, and other market participants caught in the hype viewed the volatility in a positive light as a […]

Economics of Bitcoin: is Bitcoin an alternative to fiat currencies and gold?

This paper presents an economic analysis of Bitcoin from a libertarian point of view. The theoretical part analysis the applicability of the Austrian School of Economics at Bitcoin. Of particular interest are the evolution of money, competition among media of exchange, and the concept of money supply. The empirical part analysis the following variables; price, […]

Bitcoin – The Political ‘Virtual’ of an Intangible Material Currency

This paper concerns the open source software project Bitcoin. Bitcoin is often described as virtual cash and this paper asks what the term ‘virtual’ represents when applied to ‘cash’ and in turn what ‘virtual cash’ says about Bitcoin. Bitcoin is related to the 1990s activist movement of libertarian cryptographers known as ‘cypherpunks’ and to the […]

Bitcoin Security

Bitcoin Security master’s thesis gives an overview of peer-to-peer cryptographic currencies security model. This paper introduces Bitcoin and its design principles and cryptographic primitives used to create the system. Main concentrate of the thesis is on Bitcoin security. It seeks to develop a better understanding of how Bitcoin is secured by analyzing different attack methods […]

Bitcoin & Gresham’s Law – the economic inevitability of Collapse

The Bitcoin economy exhibits remarkable and predictable stability on the supply side based on the power costs of mining. However, that stability is challenged if cost-curve assumption is not solely voiced by the fair cost of power. As there is at least one major player, the botnets, that can operate at a power-cost-curve of zero, […]

BitDeposit: Deterring Attacks and Manhandles of Cloud Computing Services through Economic Measures

Dependability in cloud computing applications can be negatively affected by various attacks or service manhandles. To come ahead of this threat, we propose an economic measure to deter attacks and various service manhandles in cloud computing applications. Our proposed defense is based on requiring a service user to pay a petite deposit, using digital currency, […]

The False Premises and Promises of Bitcoin

Designed to contest with fiat currencies, bitcoin proposes it is a crypto-currency alternative. Bitcoin makes a number of false claims, including: bitcoin can be a reserve currency for banking; hoarding equals saving, and that we should believe bitcoin can expand by deflation to become a global transactional currency supply. Bitcoin’s developers combine technical implementation proficiency […]

Practical Aspects of the Bitcoin System

Digital payment schemes demonstrate an ever enhancing importance. Out of the uncountable different schemes available this article concentrates on the popular Bitcoin system. The authors provide a description of Bitcoin’s unique technological basis and its accompanying ecosystem of users, miners, trading platforms and vendors. Furthermore, this article discusses Bitcoin’s currency-like features and the very first regulatory […]

Bitcoin and Beyond: Exclusively Informational Monies

The famous fresh money Bitcoin is classified as a technical informational money (TIM). Besides introducing the idea of a TIM, a more extreme notion of informational money will be developed: exclusively informational money (EXIM). The informational coins (INCOs) of an EXIM can be in control of an agent but are not possessed by any agent. […]

Currency in transition: An ethnographic inquiry of Bitcoin adherents

The Internet and other telecommunications systems have reshaped the means by which markets are accessed, generated, and transformed. Latest innovations in computer science have led to the development of a virtually strapped, decentralized, encrypted currency system known as bitcoin. Unlike conventional currency systems, the Bitcoin protocol is cryptologically defined with a virtual structure that permits […]

SAT solving – An alternative to brute force bitcoin mining

Digital Money Substitutes in a Two Sided Marked Perspective – A Case Investigate on Bitcoin

In January two thousand nine a payment system that enabled transactions in a fresh digital currency, called bitcoin, were launched. Bitcoin is based on a peer-to-peer (P2P) network where users in the network collectively process and verifies the transactions. One of the main attributes in Bitcoin is independency from financial institutions and trusted third parties. Hence, no […]

Virtual Currencies and Physical Posts: A Flawless Match

Decentralized Anonymous Credentials.

Anonymous credentials provide a powerful device for making assertions about identity while maintaining privacy. However, a limitation of today’s anonymous credential systems is the need for a trusted credential issuer — which is both a single point of failure and a target for compromise. Furthermore, the need for such a trusted issuer can make it […]

Virtual money laundering: the case of Bitcoin and the Linden dollar

This paper presents an analysis of the money laundering risks of two virtual currencies, the Linden dollar, the in-world currency of the interactive online environment 2nd Life, and Bitcoin, an experimental virtual currency that permits for the transfer of value through peer-to-peer software. The paper will demonstrate that albeit these virtual currencies have money laundering […]

The Dark Side of Cyber Finance

Digital technology has created a fresh playing field for illicit financial transactions. Governments and industry will have to be as fast-moving and adaptable as the criminals and terrorists to meet the threat.

Bitter to Better — How to Make Bitcoin a Better Currency

Bitcoin is a distributed digital currency which has attracted a substantial number of users. We perform an in-depth investigation to understand what made Bitcoin so successful, while decades of research on cryptographic e-cash has not lead to a large-scale deployment. We ask also how Bitcoin could become a good candidate for a long-lived stable currency. […]

A Fistful of Bitcoins: Characterizing Payments Among Boys with No Names

Bitcoin is a purely online virtual currency, unbacked by either physical commodities or sovereign obligation; instead, it relies on a combination of cryptographic protection and a peer-to-peer protocol for witnessing settlements. Consequently, Bitcoin has the unintuitive property that while the ownership of money is implicitly anonymous, its flow is globally visible. In this paper we […]

Myth, machinery and cryptocoin avarice

Cryptocoins are peer-to-peer monetary assets emitted not by a central authority but by a decentralised network of economy’s participants. Their existing implementations combine the state of the art cryptographic methods with notions of « transparency of coin’s history » and « pseudonymity of usage ». While the market value of Bitcoin -which was the very first […]

Transactions as Proof-of-Stake

The concept behind Proof-of-Stake is that a block chain should be secured by those with a financial interest in the chain. This paper will introduce a fresh treatment to Proof-of-Stake that utilizes coin-daysdestroyed by every transaction as a substitute for the vast majority of the security presently provided by Proof-of-Work. Unlike prior Proof-of-Stake systems in […]

On the origins of Bitcoin: Stages of monetary evolution

Below is the very first public version of a fresh work I have just written on Bitcoin and monetary theory. It addresses in a more systematic way than I have before issues relating to the interpretation of the origins of Bitcoin in terms of the monetary regression theorem and the application of some central integral-theory principles […]

Anonymity of Bitcoin Transactions: An Analysis of Mixing Services

Bitcoin, a distributed, cryptographic, digital currency, gained a lot of media attention for being an anonymous e-cash system. But as all transactions in the network are stored publicly in the blockchain, permitting anyone to inspect and analyze them, the system does not provide real anonymity but pseudonymity. There have already been studies displaying the possibility […]

Bitcoin: A primer for policymakers

Bitcoin is the world’s very first fully decentralized digital currency. Four brief years ago, skill of it was restricted to a handful of hobbyists on Internet forums. Today, the bitcoin economy is larger than the economies of some of the world’s smaller nations. The value of a bitcoin (or BTC) has grown and fluctuated greatly, from […]

BitCoin meets Google Trends and Wikipedia: Quantifying the relationship inbetween phenomena of the Internet era

Digital currencies have emerged as a fresh fascinating phenomenon in the financial markets. Latest events on the most popular of the digital currencies – BitCoin – have risen crucial questions about behavior of its exchange rates and they suggest a field to explore dynamics of the market which consists practically only of speculative traders with […]

Zerocoin: Anonymous Distributed E-Cash from Bitcoin

Bitcoin is the very first e-cash system to see widespread adoption. While Bitcoin offers the potential for fresh types of financial interaction, it has significant limitations regarding privacy. Specifically, because the Bitcoin transaction log is totally public, users’ privacy is protected only through the use of pseudonyms. In this paper we propose Zerocoin, a cryptographic extension […]

‘Surfing the Silk Road’: A examine of users’ practices

Introduction The online drug marketplace called ‘Silk Road’ has operated anonymously on the ‘Deep Web’ since 2011. It is accessible through computer encrypting software (Tor) and is supported by online transactions using peer to peer anonymous and untraceable crypto-currency (Bit Coins). The probe aimed to describe user motives and realities of accessing, navigating and purchasing […]

The Bitcoin Project and the Free Market

The human innovation in the field of monetary freedom takes form in the virtual communities. Developed and implemented through a decentralized algorithm, the bitcoin project has so far proved itself a success in the field of virtual currency. Beyond the technical part of operation, in this paper we will analyse the theoretical principles underlying the […]

The Nature of the Form: Legal ad Regulatory Issues Surrounding the Bitcoin Digital Currency System

We are at the beginning of a mighty fight for control of the Internet-the web links everything and very soon it will mediate most human activity-because the Internet has fashioned a fresh and complicated environment for an age-old dilemma that pits the requests of security with the desire for freedom.

Halting a Shift in the Paradigm: The Need for Bitcoin Regulation

Bitcoin is an Internet currency very first established in 2009. It is anonymous, downright decentralised and its continued existence relies upon peer-to-peer networking and a dedicated base of online ‘miners’.

Overview of Bitcoin Community Survey 2013

Accelerating Bitcoin’s Transaction Processing: Rapid Money Grows on Trees, Not Chains

Bitcoin is a potentially disruptive fresh crypto-currency based on a decentralized opensource protocol which is step by step gaining popularity. Perhaps the most significant question that will affect Bitcoin’s success, is whether or not it will be able to scale to support the high volume of transactions required from a global currency system. We investigate the confinements […]

Why Bitcoin?: Structure and Efficiency of Markets for Online Game Currency

Multi-player online games have own virtual currencies. These game currencies are similar to other virtual currencies like Bitcoin, in that both of the currencies are created and managed by non-government entities. Competitions in multi-player online games naturally formed markets that exchanges game currency with real currency. These markets have liquidity and efficiency comparable to that […]

Of Bitcoins, Independently Wealthy Software, and the Zero-Member LLC

This essay introduces to the legal community a fascinating, decreasingly farfetched technological possibility that the Bitcoin software promotes, and it offers suggestions for the how the law might interact with that possibility. In brief, the Bitcoin technology permits autonomously operating software — such as a computer virus or the software that manages a network of […]

As Certain as Death and Taxes: Consumer Considerations of Bitcoin Transactions for When the IRS Comes Knocking

Bitcoin is the very first decentralized digital-currency. Due to the infancy and only latest popularity, consumers transacting in bitcoins are likely unaware of the tax implications involved. At this time, there are no known legal decisions on how Bitcoin transactions should be taxed. This paper examines the likely tax implications for everyday consumers exchanging bitcoins for […]

Internet Protocol Adoption: Learning from Bitcoin

This position paper discusses two related questions: 1. Using the framework of network economics, what are success factors behind the adoption of Bitcoin (a cryptographic curreny), and can we copy them for other protocols? Two. Can we design more successful protocols if we have inband payment mechanisms to internalize the externalities that emerge during adoption […]

I’ll gladly trade you two bits on Tuesday for a byte today: Bitcoin, regulating fraud in e-conomy of hacker cash

Trust, Identity, and Disclosure: Are Bitcoin Exchanges the Next Virtual Havens for Money Laundering and Tax Evasion?

This Note discusses the relationship of Bitcoins, a cyber-currency, to the Bank Secrecy Act and discusses money laundering and tax evasion. This Note highlights the use and potentially problematic implications of Bitcoins in commerce and discusses their current regulation by the government, both within the United States and internationally, to guard against these threats. This […]

A Entire Fresh World: Income Tax Considerations of the Bitcoin Economy

In latest years, the use of virtual economies has skyrocketed. These virtual economies include their own virtual currencies, the most well-known of which is the “bitcoin.” There are an estimated eleven million bitcoins in use today, valued at up to $237 per bitcoin in 2013. Because these bitcoins can, in some circumstances, be used to […]

Are Cryptocurrencies ‘Super’ Tax Havens?

I describe the mechanisms by which cryptocurrencies — a subcategory of virtual currencies — could substitute tax havens as the weapon-of-choice for tax-evaders. I argue such outcome is reasonably expected in the foreseeable future due to the contemporary convergence of two processes. The very first process is the enhancing popularity of cryptocurrencies, of which Bitcoin is […]

The Bitcoin Virtual Currency: A Safe Haven for Money Launderers?

This write-up among other things seeks to analyse the nature of the ‘BITCOIN’ crypto-currency, especially the destabilizing effect and dangers it poses to the financial sector, the regulators and the anti-money laundering regime as a entire. It will also look at the possibility of effectively regulating the currency ‘Bitcoin’ in its virtual environment in order […]

Stateless Virtual Money in the Tax System

Money has been affected by technological developments, especially by the widespread use of e-commerce and the emergence of virtual worlds. Stateless digital currencies have emerged and raised a series of legal questions, especially in the area of taxation. The challenge, for the tax administration, is how to treatment a system that is outside the traditional […]

Violating Out of the Bank in Europe – Exploring Collective Emergent Institutional Entrepreneurship Through Bitcoin

In latest years, the Bitcoin community has collectively developed an open source platform that permits for the mining of the Bitcoin currency as well as instant global peer-to-peer payments and financial transactions using Bitcoins – without any central authority. With its theoretical roots in the Austrian School of Economics, the community can be seen as […]

The Bitcoin Protocol as Law, and the Politics of a Stateless Currency

This paper will discuss and evaluate the design features of Bitcoin in relation to the libertarian and metallist philosophies that have shaped the cryptocurrency. Bitcoin has failed to be ideally decentralized or particularly anonymous. Furthermore, its hyperdeflationary design features have made Bitcoin a currency dependent on outside, more stable currencies (e.g., the U.S. dollar), which […]

The Legal Status of Online Currencies: Are Bitcoins the Future?

Bitcoin has been described as a decentralised virtual currency. Virtual currencies such as Bitcoins are a form of money and a payment system. However, being a decentralised system, there is no central issuer, authority or register-keeper. Bitcoin is unique not because it is a virtual currency, but because it is proof of concept of a […]

Virtual Uncertainty: Developments in the Law of Electronic Payments and Financial Services

This article surveys developments in the laws relating to virtual currencies and their regulation by the Department of Treasury’s Financial Crimes Enforcement Network, and enforcement deeds taken by the Departments of Treasury, Homeland Security and Justice against funds held in deposit accounts wielded by Dwolla, Mt. Gox, and Mutum Sigillum, LLC, and DOJ’s activity against […]

How to Price a Digital Currency? Empirical Insights on the Influence of Media Coverage on the Bitcoin Bubble – Smith Crown

How to Price a Digital Currency? Empirical Insights on the Influence of Media Coverage on the Bitcoin Bubble

Digital currencies are gaining more and more attention against the backdrop of latest events triggered by the ongoing economic crisis. While digital currencies face enlargening popularity, the currencies’ prices are free floating and subject to high volatility as a result of lacking fundamental valuation methods. On the basis of an overview over the most prominent currency — Bitcoin — and an economic literature review we propose an econometric model that incorporates the basic components of the current price discovery process of a digital currency’s exchange rate. On the basis of our empirical validation we further display that, in the case of Bitcoin, price volatility is significantly influenced by the media coverage and positive sentiment.

Authors

  • Florian Glaser
  • Martin Haferkorn
  • Moritz Christian Weber

Related open reserach

Teleport: anonymity through off-blockchain transaction information transfer. A Dark Paper for BTCD

Alice acquires a treasure map drawn by pirate Jack Sparrow. Understanding that some pirates may be untrustworthy, Alice digs up the treasure and moves it to a different chest in another location. She copies the map and updates it with a fresh X marks the spot, crossing out the previous one and discarding the old […]

Bitcoin as a reaction to the conventional-monetary system

Bacher, Phillip Crilles; Ussing, Jonatan Henriquez; Mathias Bak; Nelbom,Mathies Raaskou

Bitcoin: Tempering the Digital Ring of Gyges or Implausible Pecuniary Privacy

Bitcoin is a peer-to-peer cryptocurrency; which is entirely decentralized, open-source, and non-institutional. A comprehensive history of Bitcoin transactions is permanently distributed among users, while partial anonymity is accomplished through public/private key transactions. Bitcoin differs from digital currencies like Zynga, 2nd Life, and E-Gold, because no central authority issues fresh currency, instead it is ‘mined’ by […]

Quasi-Commodity Money (Original version of the later ‘Synthetic Commodity Money’)

Nerdy Money: Bitcoin, the Private Digital Currency, and the Case Against Its Regulation

This Comment probes the lawfulness of using bitcoin, a privately-issued currency transacted on a peer-to-peer network, and the capability of the federal government to bar transactions inbetween two willing parties. While there are no cases yet challenging the capability of parties in the United States to make transactions using bitcoins, there are policymakers who have […]

More Money, More Problems: The Bitcoin Virtual Currency and the Legal Problems that Face It

Open-source, virtual currencies may be niche today, but could become mainstream in the near future. This Comment provides a provisional response to the fundamental question of Bitcoin’ s legality. Part I gives a brief overview of the mechanics behind Bitcoin. Part II chronicles the currency’s lifespan so far. Eventually, Part III considers the potential influence […]

A Structural Analysis of Bitcoin

There is no formal framework for describing the core structural concepts of Bitcoin or for attempting a correctness proof of the algorithm. This contribution presents several elements which may serve as building blocks. A distributed model for describing the states enclosed in a Bitcoin network is provided. Concepts for modeling the swarm behavior of Bitcoin […]

Is Bitcoin Money? Bitcoin and Alternate Theories of Money

In 2009, a nosey fresh virtual currency called Bitcoin made its very first appearance on the Internet. While it remains a “niche” currency relative to other major denominations like the U.S. dollar, Bitcoin has experienced significant growth since its inception. The total number of Bitcoins in circulation is about 12.Five million, with a latest market price […]

Bits and Bets: Information, Price Volatility, and Request for Bitcoin

Before the peak of the Bitcoin price bubble, volatility had a statistically significant positive effect on price. This makes sense because the market bubble implies that, coupled with the positive spirits of a market bubble, speculators, arbitragers, miners, and other market participants caught in the hype viewed the volatility in a positive light as a […]

Economics of Bitcoin: is Bitcoin an alternative to fiat currencies and gold?

This paper presents an economic analysis of Bitcoin from a libertarian point of view. The theoretical part analysis the applicability of the Austrian School of Economics at Bitcoin. Of particular interest are the evolution of money, competition among media of exchange, and the concept of money supply. The empirical part analysis the following variables; price, […]

Bitcoin – The Political ‘Virtual’ of an Intangible Material Currency

This paper concerns the open source software project Bitcoin. Bitcoin is often described as virtual cash and this paper asks what the term ‘virtual’ indicates when applied to ‘cash’ and in turn what ‘virtual cash’ says about Bitcoin. Bitcoin is related to the 1990s activist movement of libertarian cryptographers known as ‘cypherpunks’ and to the […]

Bitcoin Security

Bitcoin Security master’s thesis gives an overview of peer-to-peer cryptographic currencies security model. This paper introduces Bitcoin and its design principles and cryptographic primitives used to create the system. Main concentrate of the thesis is on Bitcoin security. It seeks to develop a better understanding of how Bitcoin is secured by analyzing different attack methods […]

Bitcoin & Gresham’s Law – the economic inevitability of Collapse

The Bitcoin economy exhibits remarkable and predictable stability on the supply side based on the power costs of mining. However, that stability is challenged if cost-curve assumption is not solely voiced by the fair cost of power. As there is at least one major player, the botnets, that can operate at a power-cost-curve of zero, […]

BitDeposit: Deterring Attacks and Manhandles of Cloud Computing Services through Economic Measures

Dependability in cloud computing applications can be negatively affected by various attacks or service manhandles. To come ahead of this threat, we propose an economic measure to deter attacks and various service manhandles in cloud computing applications. Our proposed defense is based on requiring a service user to pay a petite deposit, using digital currency, […]

The False Premises and Promises of Bitcoin

Designed to challenge with fiat currencies, bitcoin proposes it is a crypto-currency alternative. Bitcoin makes a number of false claims, including: bitcoin can be a reserve currency for banking; hoarding equals saving, and that we should believe bitcoin can expand by deflation to become a global transactional currency supply. Bitcoin’s developers combine technical implementation proficiency […]

Practical Aspects of the Bitcoin System

Digital payment schemes showcase an ever enhancing importance. Out of the uncountable different schemes available this article concentrates on the popular Bitcoin system. The authors provide a description of Bitcoin’s unique technological basis and its accompanying ecosystem of users, miners, trading platforms and vendors. Furthermore, this article discusses Bitcoin’s currency-like features and the very first regulatory […]

Bitcoin and Beyond: Exclusively Informational Monies

The famous fresh money Bitcoin is classified as a technical informational money (TIM). Besides introducing the idea of a TIM, a more extreme notion of informational money will be developed: exclusively informational money (EXIM). The informational coins (INCOs) of an EXIM can be in control of an agent but are not wielded by any agent. […]

Currency in transition: An ethnographic inquiry of Bitcoin adherents

The Internet and other telecommunications systems have reshaped the means by which markets are accessed, generated, and transformed. Latest innovations in computer science have led to the development of a virtually trussed, decentralized, encrypted currency system known as bitcoin. Unlike conventional currency systems, the Bitcoin protocol is cryptologically defined with a virtual structure that permits […]

SAT solving – An alternative to brute force bitcoin mining

Digital Money Substitutes in a Two Sided Marked Perspective – A Case Probe on Bitcoin

In January two thousand nine a payment system that enabled transactions in a fresh digital currency, called bitcoin, were launched. Bitcoin is based on a peer-to-peer (P2P) network where users in the network collectively process and verifies the transactions. One of the main attributes in Bitcoin is independency from financial institutions and trusted third parties. Hence, no […]

Virtual Currencies and Physical Posts: A Flawless Match

Decentralized Anonymous Credentials.

Anonymous credentials provide a powerful instrument for making assertions about identity while maintaining privacy. However, a limitation of today’s anonymous credential systems is the need for a trusted credential issuer — which is both a single point of failure and a target for compromise. Furthermore, the need for such a trusted issuer can make it […]

Virtual money laundering: the case of Bitcoin and the Linden dollar

This paper presents an analysis of the money laundering risks of two virtual currencies, the Linden dollar, the in-world currency of the interactive online environment 2nd Life, and Bitcoin, an experimental virtual currency that permits for the transfer of value through peer-to-peer software. The paper will demonstrate that albeit these virtual currencies have money laundering […]

The Dark Side of Cyber Finance

Digital technology has created a fresh playing field for illicit financial transactions. Governments and industry will have to be as fast-moving and adaptable as the criminals and terrorists to meet the threat.

Bitter to Better — How to Make Bitcoin a Better Currency

Bitcoin is a distributed digital currency which has attracted a substantial number of users. We perform an in-depth investigation to understand what made Bitcoin so successful, while decades of research on cryptographic e-cash has not lead to a large-scale deployment. We ask also how Bitcoin could become a good candidate for a long-lived stable currency. […]

A Fistful of Bitcoins: Characterizing Payments Among Fellows with No Names

Bitcoin is a purely online virtual currency, unbacked by either physical commodities or sovereign obligation; instead, it relies on a combination of cryptographic protection and a peer-to-peer protocol for witnessing settlements. Consequently, Bitcoin has the unintuitive property that while the ownership of money is implicitly anonymous, its flow is globally visible. In this paper we […]

Myth, machinery and cryptocoin avarice

Cryptocoins are peer-to-peer monetary assets emitted not by a central authority but by a decentralised network of economy’s participants. Their existing implementations combine the state of the art cryptographic methods with notions of « transparency of coin’s history » and « pseudonymity of usage ». While the market value of Bitcoin -which was the very first […]

Transactions as Proof-of-Stake

The concept behind Proof-of-Stake is that a block chain should be secured by those with a financial interest in the chain. This paper will introduce a fresh treatment to Proof-of-Stake that utilizes coin-daysdestroyed by every transaction as a substitute for the vast majority of the security presently provided by Proof-of-Work. Unlike prior Proof-of-Stake systems in […]

On the origins of Bitcoin: Stages of monetary evolution

Below is the very first public version of a fresh work I have just written on Bitcoin and monetary theory. It addresses in a more systematic way than I have before issues relating to the interpretation of the origins of Bitcoin in terms of the monetary regression theorem and the application of some central integral-theory principles […]

Anonymity of Bitcoin Transactions: An Analysis of Mixing Services

Bitcoin, a distributed, cryptographic, digital currency, gained a lot of media attention for being an anonymous e-cash system. But as all transactions in the network are stored publicly in the blockchain, permitting anyone to inspect and analyze them, the system does not provide real anonymity but pseudonymity. There have already been studies demonstrating the possibility […]

Bitcoin: A primer for policymakers

Bitcoin is the world’s very first downright decentralized digital currency. Four brief years ago, skill of it was restrained to a handful of hobbyists on Internet forums. Today, the bitcoin economy is larger than the economies of some of the world’s smaller nations. The value of a bitcoin (or BTC) has grown and fluctuated greatly, from […]

BitCoin meets Google Trends and Wikipedia: Quantifying the relationship inbetween phenomena of the Internet era

Digital currencies have emerged as a fresh fascinating phenomenon in the financial markets. Latest events on the most popular of the digital currencies – BitCoin – have risen crucial questions about behavior of its exchange rates and they suggest a field to investigate dynamics of the market which consists practically only of speculative traders with […]

Zerocoin: Anonymous Distributed E-Cash from Bitcoin

Bitcoin is the very first e-cash system to see widespread adoption. While Bitcoin offers the potential for fresh types of financial interaction, it has significant limitations regarding privacy. Specifically, because the Bitcoin transaction log is entirely public, users’ privacy is protected only through the use of pseudonyms. In this paper we propose Zerocoin, a cryptographic extension […]

‘Surfing the Silk Road’: A probe of users’ practices

Introduction The online drug marketplace called ‘Silk Road’ has operated anonymously on the ‘Deep Web’ since 2011. It is accessible through computer encrypting software (Tor) and is supported by online transactions using peer to peer anonymous and untraceable crypto-currency (Bit Coins). The probe aimed to describe user motives and realities of accessing, navigating and purchasing […]

The Bitcoin Project and the Free Market

The human innovation in the field of monetary freedom takes form in the virtual communities. Developed and implemented through a decentralized algorithm, the bitcoin project has so far proved itself a success in the field of virtual currency. Beyond the technical part of operation, in this paper we will analyse the theoretical principles underlying the […]

The Nature of the Form: Legal ad Regulatory Issues Surrounding the Bitcoin Digital Currency System

We are at the beginning of a mighty fight for control of the Internet-the web links everything and very soon it will mediate most human activity-because the Internet has fashioned a fresh and complicated environment for an age-old dilemma that pits the requests of security with the desire for freedom.

Halting a Shift in the Paradigm: The Need for Bitcoin Regulation

Bitcoin is an Internet currency very first established in 2009. It is anonymous, entirely decentralised and its continued existence relies upon peer-to-peer networking and a dedicated base of online ‘miners’.

Overview of Bitcoin Community Survey 2013

Accelerating Bitcoin’s Transaction Processing: Prompt Money Grows on Trees, Not Chains

Bitcoin is a potentially disruptive fresh crypto-currency based on a decentralized opensource protocol which is step by step gaining popularity. Perhaps the most significant question that will affect Bitcoin’s success, is whether or not it will be able to scale to support the high volume of transactions required from a global currency system. We investigate the confinements […]

Why Bitcoin?: Structure and Efficiency of Markets for Online Game Currency

Multi-player online games have own virtual currencies. These game currencies are similar to other virtual currencies like Bitcoin, in that both of the currencies are created and managed by non-government entities. Competitions in multi-player online games naturally formed markets that exchanges game currency with real currency. These markets have liquidity and efficiency comparable to that […]

Of Bitcoins, Independently Wealthy Software, and the Zero-Member LLC

This essay introduces to the legal community a fascinating, decreasingly farfetched technological possibility that the Bitcoin software promotes, and it offers suggestions for the how the law might interact with that possibility. In brief, the Bitcoin technology permits autonomously operating software — such as a computer virus or the software that manages a network of […]

As Certain as Death and Taxes: Consumer Considerations of Bitcoin Transactions for When the IRS Comes Knocking

Bitcoin is the very first decentralized digital-currency. Due to the infancy and only latest popularity, consumers transacting in bitcoins are likely unaware of the tax implications involved. At this time, there are no known legal decisions on how Bitcoin transactions should be taxed. This paper examines the likely tax implications for everyday consumers exchanging bitcoins for […]

Internet Protocol Adoption: Learning from Bitcoin

This position paper discusses two related questions: 1. Using the framework of network economics, what are success factors behind the adoption of Bitcoin (a cryptographic curreny), and can we copy them for other protocols? Two. Can we design more successful protocols if we have inband payment mechanisms to internalize the externalities that emerge during adoption […]

I’ll gladly trade you two bits on Tuesday for a byte today: Bitcoin, regulating fraud in e-conomy of hacker cash

Trust, Identity, and Disclosure: Are Bitcoin Exchanges the Next Virtual Havens for Money Laundering and Tax Evasion?

This Note discusses the relationship of Bitcoins, a cyber-currency, to the Bank Secrecy Act and discusses money laundering and tax evasion. This Note highlights the use and potentially problematic implications of Bitcoins in commerce and discusses their current regulation by the government, both within the United States and internationally, to guard against these threats. This […]

A Entire Fresh World: Income Tax Considerations of the Bitcoin Economy

In latest years, the use of virtual economies has skyrocketed. These virtual economies include their own virtual currencies, the most well-known of which is the “bitcoin.” There are an estimated eleven million bitcoins in use today, valued at up to $237 per bitcoin in 2013. Because these bitcoins can, in some circumstances, be used to […]

Are Cryptocurrencies ‘Super’ Tax Havens?

I describe the mechanisms by which cryptocurrencies — a subcategory of virtual currencies — could substitute tax havens as the weapon-of-choice for tax-evaders. I argue such outcome is reasonably expected in the foreseeable future due to the contemporary convergence of two processes. The very first process is the enlargening popularity of cryptocurrencies, of which Bitcoin is […]

The Bitcoin Virtual Currency: A Safe Haven for Money Launderers?

This write-up among other things seeks to analyse the nature of the ‘BITCOIN’ crypto-currency, especially the destabilizing effect and dangers it poses to the financial sector, the regulators and the anti-money laundering regime as a entire. It will also look at the possibility of effectively regulating the currency ‘Bitcoin’ in its virtual environment in order […]

Stateless Virtual Money in the Tax System

Money has been affected by technological developments, especially by the widespread use of e-commerce and the emergence of virtual worlds. Stateless digital currencies have emerged and raised a series of legal questions, especially in the area of taxation. The challenge, for the tax administration, is how to treatment a system that is outside the traditional […]

Violating Out of the Bank in Europe – Exploring Collective Emergent Institutional Entrepreneurship Through Bitcoin

In latest years, the Bitcoin community has collectively developed an open source platform that permits for the mining of the Bitcoin currency as well as instant global peer-to-peer payments and financial transactions using Bitcoins – without any central authority. With its theoretical roots in the Austrian School of Economics, the community can be seen as […]

The Bitcoin Protocol as Law, and the Politics of a Stateless Currency

This paper will discuss and evaluate the design features of Bitcoin in relation to the libertarian and metallist philosophies that have shaped the cryptocurrency. Bitcoin has failed to be ideally decentralized or particularly anonymous. Furthermore, its hyperdeflationary design features have made Bitcoin a currency dependent on outside, more stable currencies (e.g., the U.S. dollar), which […]

The Legal Status of Online Currencies: Are Bitcoins the Future?

Bitcoin has been described as a decentralised virtual currency. Virtual currencies such as Bitcoins are a form of money and a payment system. However, being a decentralised system, there is no central issuer, authority or register-keeper. Bitcoin is unique not because it is a virtual currency, but because it is proof of concept of a […]

Virtual Uncertainty: Developments in the Law of Electronic Payments and Financial Services

This article surveys developments in the laws relating to virtual currencies and their regulation by the Department of Treasury’s Financial Crimes Enforcement Network, and enforcement deeds taken by the Departments of Treasury, Homeland Security and Justice against funds held in deposit accounts possessed by Dwolla, Mt. Gox, and Mutum Sigillum, LLC, and DOJ’s act against […]

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