According to conventional wisdom, the cryptocurrency Bitcoin exhibits several improvements compared to the traditional banking system, namely its decentralized structure and a proof-of-work consensus mechanism. However, authors frequently discover problems and propose all kinds of fundamental changes, such as completely new consensus mechanisms by which they want to replace the existing system. That raises the question of how the further development of Bitcoin has to be promoted. We review the most relevant literature concerning Bitcoin’s current role and future potential from different angles. By putting ourselves in the position of involved actors, we find out what they expect from the Bitcoin network and how desirable additional regulatory measures are for them. Although it is generally accepted that appropriate governance can contribute to a more stable and secure currency, cryptocurrencies’ unique characteristics add a new dimension to this idea. That is why we sporadically throw in comparisons to local currency schemes already in existence in order to conclude how the question of regulating a decentralized currency must be addressed.
Table of Contents
1. Introduction
2. Current State of Knowledge
3. Framework
4. Bitcoin’s Role for Different Economic Actors
4.1 Private Households and Investors
4.2 Online Businesses
4.3 Central Banks
4.4 National Governments
4.5 Results
5. Discussion
6. Conclusion
7. References
Research Objective and Topics
This paper aims to investigate the potentials and challenges of Bitcoin, focusing on how different economic actors perceive the cryptocurrency and evaluating the desirability of regulatory measures in the event of its broader adoption.
- The role of Bitcoin for private households and investors
- Impact and business models of online companies regarding cryptocurrency
- Central bank perspectives on financial stability and monetary policy
- Governmental regulatory challenges and sovereignty concerns
- Comparative analysis with local currency schemes
Excerpt from the Book
4.1 Private Households and Investors
Usually, private households use money for daily purchases, such as food, clothing and other common goods. However, although it features several advantages, such as lower transaction fees than traditional transactions using Visa or similar alternatives, Bitcoin is rarely used for everyday shopping for various reasons (Robleh et al., 2014). As a unit of account, it is unreliable due to its extreme price volatility and the prices for goods that cost a rather small amount (if denominated in an official currency like the US-dollar) are always decimal prices, making it unpractical as well. Not being a legal tender, the use of Bitcoin as a medium of exchange depends on the willingness of sellers to accept it as a means of payment. In reality, the cryptocurrency is not widely accepted and up to now, only a few physical stores accept payments with Bitcoin (Yermack, 2015). In addition to that, the broad population is not familiarized with the complicated technology underlying the Bitcoin system, including seemingly difficult verification processes. Even basic knowledge, such as how to make payments using a digital Bitcoin wallet, is missing, leading to asymmetric information. In general, it does not fulfil the functions of money in a satisfying way and even if it did, there might still not be enough arguments to successfully incentivize private households to move away from official currencies.
Summary of Chapters
1. Introduction: Provides an overview of Bitcoin's origin and development, highlighting its unique peer-to-peer structure and the growing interest in its economic potential.
2. Current State of Knowledge: Reviews existing theoretical research regarding scalability issues, lack of consumer protection, and technical vulnerabilities of the Bitcoin network.
3. Framework: Outlines the methodology of the literature review and sets the scope for analyzing Bitcoin's impact on different population segments.
4. Bitcoin’s Role for Different Economic Actors: Systematically evaluates the viewpoints of households, businesses, central banks, and governments on Bitcoin's utility and risks.
5. Discussion: Interprets the findings by highlighting the divergence in interests between stakeholders and the current lack of practical regulatory implementation.
6. Conclusion: Summarizes that while regulation is widely endorsed in case of rapid growth, motivations for such policies vary significantly between private and public sectors.
7. References: Provides a comprehensive list of all scholarly sources and documents cited within the paper.
Key Words
Bitcoin, Cryptocurrency, Blockchain, Regulation, Financial Stability, Peer-to-Peer, Digital Wallet, Monetary Policy, Local Currencies, Decentralization, Scalability, Economic Actors, Consumer Protection, Investment, Transaction Costs
Frequently Asked Questions
What is the core focus of this research paper?
The paper examines the current role of Bitcoin, the problems it faces, and the challenges regarding its potential regulation from the perspective of various economic actors.
What are the primary thematic areas covered in the study?
The study covers private households, online businesses, central banks, and national governments, comparing their expectations for Bitcoin against the lessons learned from local currency experiments.
What is the primary research objective?
The objective is to understand how different groups perceive Bitcoin and to determine if and how regulatory measures are desired to ensure economic stability and network growth.
Which scientific method is utilized in the paper?
The author conducts an extensive literature review, synthesizing existing research and analyzing official statements from financial institutions and governments.
What aspects are addressed in the main body of the paper?
The main body breaks down the perspectives of stakeholders, discusses technical and economic constraints like scalability, and evaluates the influence of current legislation on the network.
Which key terms characterize this work?
Significant terms include decentralization, financial stability, blockchain, regulatory framework, and comparative analysis of complementary currencies.
Why is the comparison to local currencies like the Chiemgauer included?
The comparison serves to illustrate how the success of alternative currency schemes often relies on government support and cooperation, providing a practical benchmark for Bitcoin.
How do online businesses differ in their stance toward Bitcoin?
The paper distinguishes between third-party service providers, which profit from Bitcoin's growth, and mainstream retailers, which are indifferent as long as existing payment volumes remain stable.
- Arbeit zitieren
- Jens Hoffmann (Autor:in), 2019, Bitcoin. Potentials, Problems and Regulatory Issues of the First Mainstream Cryptocurrency, München, GRIN Verlag, https://www.grin.com/document/493411
