Cryptocurrency and its underlying technology, blockchain, have changed the way money is sent, stored, and transacted. These technologies have attracted considerable attention since the inception of Bitcoin in 2009 and have been the focus of much research, experimentation, and development since. Cryptocurrency continues to gain interest with increased accessibility of blockchain technologies and ecosystem development [1]. The Australian Government has also taken steps to develop the cryptocurrency domain with the Australian Digital Currency Industry Report and The Australian Government Response to the Financial Sector Working Group on Digital Currency. Both the report and response outline issues impacting the Australian cryptocurrency industry and recommendations for regulatory improvements. Many big players from the traditional financial sector have recently been diversifying their operations by entering the cryptocurrency landscape with the intention to provide cryptocurrency-related products and services. This has also sparked interest from regulators to consider regulations currently in place that might also apply to cryptocurrencies. Recent events highlighting the scams and risk of loss associated with ICOs (Initial Coin Offerings) and the hacks from cryptocurrency exchanges such as the Mt Gox hack illustrated the vulnerability and volatility of cryptocurrencies and has led government officials in many countries to express concerns towards cryptocurrencies [2].
1. Introduction
The essay aims to assess cryptocurrency adoption and provide an understanding of the positive implications, challenges, and doubts of widespread cryptocurrency adoption, specifically Bitcoin in this case, affecting individuals and organizations. Bitcoin has been chosen as the focus because it is the oldest and most well-known cryptocurrency. In order to assess the implications of Bitcoin adoption, a thorough examination of its technological, economic, societal, technical, and legal characteristics has been conducted. The theory that cryptocurrency will democratize finance with the implication of reducing or eliminating government control has also been investigated.
2. Understanding Cryptocurrencies
There’s a lot of talk about Bitcoin, XRP, Ether and other coins, but exactly what are cryptocurrencies? What does it mean to be a member of the “cryptocurrency community”? What are its characteristics, and what do they mean for users and Governments? Aren’t cryptocurrencies nothing but online money that’s being used to speculate or to trade on the black market? Is there something more to them? More generally (and programmatically), what is the future of cryptocurrencies? Will they wither away or will they reshape the world we live in? In this review, an attempt will make to answer these questions and to shed some light on cryptocurrencies and the growing community around them.
The net result is a sort of handbook of cryptocurrencies: their definitions and basics, all kinds of them and their characteristics and how they differ from currency and stocks. A conclusion on what should be best done (and avoided) with them is attached, summing up the insights gained throughout these pages. Cryptocurrencies combine the best features of both stocks and cash. While stocks are controlled by a centralized entity and price can be adjusted by this entity, cryptocurrencies are pro-cash in the sense that there is no central entity to control monetary policy or the supply of coins. On the other hand, cryptocurrencies provide interest (in the form of dividends) and appreciation potential, comparable to stocks. Currency doesn’t provide anything but control over transaction costs, since coins cannot appreciate in value. [3]
2.1. Definition and Basics
Cryptocurrencies are a form of digital asset that use cryptographic techniques to form and secure transactions. Transactions are stored on an expanding database called a blockchain that is shared by the entire network of users after being verified. These processes are conducted by individuals called miners who fortify a network against fraud and abuse while simultaneously generating coins [4]. All networks have their own unique coin, though not all have their own native currency. Coindesk as well as the data aggregator coinmarketcap sent out a report on December 31st, 2017 stating in aggregate that there were over 1,300 distinct cryptocurrencies being traded across 20 exchanges, capturing an aggregate market cap of over $600 billion. There are over 1,000 more that were currently inactive keeping the number of known cryptocurrencies at over 2,300. Just by looking over the listing found on either of these sites, a person can find catalogs of cryptocurrency brands that are difficult if not impossible to simply make sense of.
In order to gain a clear understanding of cryptocurrencies and the potential opportunities they offer, it is important to first outline the significant facts and features of entirely different discussion from what most people may have ever engaged in about the old and formal economies [1]. First, it is of utmost significance to note that cryptocurrencies, and from this point onward bitcoin (the name of the first and most widely known cryptocurrency) will be used to represent cryptocurrencies broadly, have no tangible form or social price. Hence, all transactions must be done electronically, typically by way of a computer application or smart phone. Despite being a digital asset class barely over eight years old, bitcoin’s popularity is on the rise and it has recently become one of the most widely discussed topics in the world, somewhat akin to and reminiscent of what transpired with the dot-com boom in the late 1990’s. However, it is a complicated and intricate world with a lot deception and misinterpretation surrounding it.
2.2. Types of Cryptocurrencies
Cryptocurrencies are a type of digital currency created using cryptographic techniques. All cryptocurrencies employ blockchain technology, though some without blockchain, such as DGB-based coins and Gigcoin, also exist on the market. Cryptocurrencies are also known as altcoins due to the way they derive from bitcoin, the first cryptocurrency launched in 2009. Cryptocurrencies emerged as an accessible technology to avoid financial instruments controlled by third-party organizations [1]. Bonds, shares, fiat money, etc. depend on banks; or in case of commodities, on public entities. In digital currency, nobody owns or controls the blockchain because it is a globally distributed ledger. While need for trust exists, central authorities or mediators are not fit to forge trust in this environment.
Cryptocurrency solutions are numerous, with bitcoin being only one of more than 2,000 cryptocurrencies in the market today. For each major cryptocurrency, many clones or derived cryptocurrencies or cryptotokens exist. Most are unknown, but since 2013, more than 800 cryptocurrencies have been launched yearly. Beginning in 2014, new cryptocurrencies are now launched weekly, meaning that almost any start-up company can introduce its unique cryptocurrency in the market. Though it is complicated and questions its security, any business could create its own currency, determining its use in an initial coin offering (ICO) with specifications of participants and rewards. ICOs are more or less investments, and more and more companies are doing ICOs instead of initial public offerings (IPOs) [5]. Crashing or regressing cryptocurrencies are also multiple, and it is foreseeable that many cryptocurrencies will die when bubbles burst.
3. History of Cryptocurrencies
Bitcoin brought digital currencies to the forefront of the economy’s collective consciousness. Cryptocurrencies, or digital currencies that use complex mathematical algorithms to develop new coins and verify trade between users, are a unique innovation suited for the digital age. Virtual coins/franchises are created and traded directly between users. The transactions are verified through massive computation challenges, which are done using the processing power of personal computers, gaming consoles, and even specialized third-party hardware. If a user successfully solves a problem, a transaction is deemed a accepted, and a set number of coins are created and transferred to the user as a reward for providing a service to the network. Each individual transaction becomes part of a blockchain, a permanent record of coin creation and distribution. Anyone is free to view the blockchain, a log of every use of currencies like bitcoin since its inception, and with the proper computing skills, to contribute to the verification process [4].
Cryptocurrencies gained widespread attention for the first time in 2017, breaking free of its common “underground” labels attributed to their roots as a black market facilitator [1]. 2017 involved extraordinary gains in the value of the currency, unprecedented media attention, massive spikes in popularity, and some of the most exciting innovations since the industry’s inception. Replacing an obsolete digital mechanism, ether, the currency used on the Ethereum network, had its own cryptocurrency boom during 2017, peaking at $400 per ether, up from less than $10 just one year prior. In keeping with the “skate to where the puck is going to be” mentality, those looking to understand the nature of this recent meteoric rise and the possibilities of how it might look in the future are going to have to look at the industry knowing that it is not like any other.
4. Benefits and Risks of Cryptocurrencies
Cryptocurrencies represent a new and innovative digital financial sector, consisting of a decentralized software-controlled currency and a set of networks built upon blockchain technology. Cryptocurrencies are subject to a host of different risks for investors and users, including volatility, lack of protection, safety & security, illicit use, and lack of regulation and scams, money laundering, frauds, & ponzi schemes [2].
Volatility is perhaps the fundamental and most widely discussed risk of cryptocurrencies. The value of cryptocurrencies tends to vary greatly and rapidly fluctuates within short periods of times and this aspect makes predicting crypto price and value extremely difficult. Several cryptocurrencies have experienced rapid surges and equally rapid down requests, causing major losses to many investors. Not having anyone, a government, nor any financial institution that regulates cryptocurrencies at this time, is another very clear indication that there won’t be any protection or oversight from fraud, mismanagement, or financial malfeasance. Cryptocurrencies and private blockchains are vulnerable to hacking. Most of the high-profile hacks have occurred on crypto exchanges and wallets that do not apply appropriate security. Blockchain as the underlying technology of crypto is as secure as it has been described. However, new projects do not meet the security requirements because there are no cybersecurity standards. Most of theft has been on crypto bridges, pools, and on other instruments unrelated to the blockchain technology themselves.
4.1. Advantages
Cryptocurrencies are peer-to-peer networks based on blockchain technology, where participants can conduct transactions using virtual tokens representing economic value. Cryptocurrencies can accurately track ownership with distributed databases and timestamps on electronically signed transactions. Security is ensured through hashing and replicated storage. The emergence of cryptocurrencies has overturned fixed monetary policies and market-determined financial prices, with the 2008 financial crisis serving as the catalyst for change [6]. Cryptocurrencies are seen as emerging money due to their responsive, flexible, and decentralized digital nature, valuing the autonomy of transacting parties. Compared to government-issued money, cryptocurrencies exhibit a quasi-fixed supply curve determined by their underlying algorithms. Bitcoin, introduced in 2009, has gained widespread recognition and discussion among economics and finance scholars. The pioneering cryptocurrency, bitcoin, is a purely digital representation of wealth unanchored to any underlying asset. Cryptocurrencies are semi-anonymous monetary systems where wealth is represented by unique digital keys stored in software wallets. Transfers involve the online signing of transactions to reassign token ownership recorded on globally accessible public databases (or blockchains). Official concerns about the potential use of cryptocurrencies to bypass controls and launder funds, alongside the growing illicit digital economy, have resulted in calls for regulation. Furthermore, the state of confusion regarding the legal nature of cryptocurrencies remains, as there is a lack of clarity regarding whether they represent currencies, commodities, financial products, or mere points of access to quasi-public networks. This lack of clarity underscores the inappropriateness of applying existing monetary regulations to cryptocurrencies. The nature of investing is defined as the answer regarding potential future income from current expenditure. There are three major types of asset classes: equities, debt, and cash. Apart from these traditionally accepted asset classes, project finance, venture capital, hedge funds, insurance, commodities, and collectibles (antique furniture, wines, art) are also seen as alternative investments. Cryptocurrencies are a new class of assets that emerged in the late 2000s. The two primary categories of cryptocurrencies are currencies (e.g., Bitcoin) and tokens (traded on Ethereum blockchain). Cryptocurrencies may not constitute legal money forms or a monetary system, yet they undeniably act as global means for wealth transfer, storage, and accumulation.
4.2. Disadvantages
In order to assess the adequacy of cryptocurrency for extensive use in the real estate sector, it is vital to investigate the potential drawbacks and deficiencies attached to its use, and evaluate their relevance to the real estate market and its participants.
Extreme price hikes and drops have created skepticism surrounding cryptocurrency. Bitcoin’s original price was negligible and less than one cent up to February of 2011. Thereafter, its price swiftly approached $30 a coin, dropping to $2 only months later, and subsequently rising to $1200 in late 2013. A similar surge occurred in the course of 2017 with Bitcoin’s price jumping from approximately $1,000 a coin to $20,000 within a year. Such price volatility has spurred caution toward the use of cryptocurrency as a means of exchange or store of value and cast doubt on its suitability for use in long-term contracts [6].
Funds stored on cryptocurrency wallets can theoretically be misplaced or stolen and thus vanish from circulation entirely. Unlike bank deposits, cryptocurrency wallets do not come with insurance against sudden losses. Once the information regarding the private key of cryptocurrency stored in a hardware wallet is lost, e.g. due to accidental destruction of the storage device, the virtual coins are lost permanently [7]. Such situational occurrences underpin the need for a very high level of security of cryptocurrency wallets. There is a dire necessity to ensure the protection of private keys in such wallets especially because, in theory, they allow access to vast amounts of money. However, such measures, if at all foolproof, would undoubtedly create inconveniences for the users.
5. Cryptocurrency Regulation
Regulation is a critical aspect of the cryptocurrency ecosystem, with implications for all players involved. Stakeholders must not only be aware of existing legislation and regulation but also continue to monitor developments. Early-stage ventures in the sector face an evolving regulatory environment. Regular exchanges of views among all stakeholders are needed to clarify boundaries and a warehouse for information on existing market infrastructures, regulation, national legislation, and private initiatives should be set up to arbor discourses on all core topics and issues [6].
The regulatory landscape is going through a lengthy process of development. This process varies from country to country and often lags behind the growth of the cryptocurrency sector. Initially, there were efforts to design a decentralized, innovative, fast, low-cost payment mechanism that would function outside the fiat banking system, with no regulation at all. In this setting, the original Bitcoin protocol governed the classical Bitcoin functionality. However, real-world events, perception, and attitudes shaped the development of the cryptocurrency market in the early stages. Criminal activities relating to Silk Road Bitcoin payments marked cryptocurrency use, and attention turned to other aspects, such as the benefits of lower transaction costs [5].
5.1. Global Perspectives
This section describes the approaches and stances adopted by different countries and regions in the regulation of cryptocurrencies within those regions. There appears to be a two-tiered approach, with many countries attempting to accommodate the blockchain technology while meeting some “acceptable” form of compliance regarding the effects of cryptocurrencies, such as AML, CFT, consumer protection, and tax concerns.
The treatment of cryptocurrencies in each country is presented (e.g., whether cryptocurrencies are viewed as money, property, securities, commodities, etc.), as is the stance with regulators as observer or enactors of regulation. Four classes are established based on these two approaches: 1. “Business as Usual” Countries, 2. Compliant Observer Countries, 3. Activist Regulation Countries, and 4. Underground Dinosaur Countries. In addition, the developing position of the European Union states in comparison to some Member States is presented [6].
5.2. Key Regulatory Bodies
There are several influential institutions and organizations that play pivotal roles in shaping the regulatory framework for cryptocurrencies at the international level. These institutions, often referred to as regulatory bodies, authorities, councils, organization bodies, or committees, consist of associations formed by the governments of sovereign states or group of states for the purpose of cooperation and coordination in regulating particular political, economic or cultural problems. The focus here is on major central banks, organizations for economic cooperation, and standard-setting bodies. In addition to country specific regulations by central banks, such institutions have a day to day effect on the development and implementation of national regulation on cryptocurrencies by states, especially small ones with little or no experience with such financial instruments [8].
There are several bodies focusing on analyzing, monitoring and reporting financial stability issues with cryptocurrencies to foster international cooperation and data sharing. Cryptocurrencies have the potential to change the financial system, with risks and benefits for financial stability; therefore, a special working group under the auspiciousness of the Basel Committee on Banking Supervision was formed. The Bank for International Settlements Committee monitored risks from international banking and financial market developments for central banks. Working group reports, and recommendations from the Committee on Payment and Settlement Systems address some aspects of cryptocurrencies. Further, the International Monetary Fund and the World Bank monitored risks of global financial markets and published data on financial statistics [6].
6. Cryptocurrency Adoption Trends
In the last decade, cryptocurrencies, also broadly known as virtual currencies (VCs), have gained significant traction globally. Their capitalizations increased from virtually صفر in 2009 to more than US$2 trillion in April 2021 and over US$1 trillion in March 2022. More than 18,000 cryptocurrencies are traded in various public exchanges, and millions of people hold cryptographic coins or tokens, fueling ambitions for profit, investment diversification, and transforming the financial system. Also, more than 250 popular decentralized applications or “DApps,” built on blockchains like Ethereum, TRON, and EOS, realizing use cases like gaming, NFTs, gambling, and DeFi have been developed, each with millions of unique users [7].
Despite the growth, two fundamental aspects remain understudied and underanalysed. The first is an understanding of the demographics and sentiments of existing cryptocurrency users, like the profile, motivations, and concerns of its users. This is important as cryptocurrencies are gradually becoming a part of most people’s life and examining user characteristics aids in public policy and service strategy formulation and further sustains growth in adoption. With a representative user dataset of over 44,860 cryptocurrency holders and leveraging a combination of machine learning and statistical methods, a nuanced picture of the cryptocurrency user is revealed. Traits such as sex, age, education, economic status, country, digital assets holding, motivations, concerns, and social media sentiment have been investigated [1].
7. Cryptocurrency and Traditional Finance
The notion that Bitcoin could be the answer to the corruption and inefficiency of the traditional finance sector is alluring. If indeed this were true we would be observing a significant global transition from traditional sovereign white elephants to stateless currencies, which can be freely used on a peer-to-peer basis without intermediaries. Unfortunately for the crypto-enthusiasts, such a transition is not taking place. Financial activities outside of the traditional finance sector, and in full compliance with regulations, are increasingly taking place in (international) capital markets, which comprise investment firms, banks, company treasury departments, etc. For statutory cryptocurrencies, it means, by design, that their potential cannot be harnessed. Additionally, those who ignore regulations and take transactions outside the traditional finance sector run important financial and legal risks, particularly if such activities are taking place within developed countries and/or economic zones. The biggest market for Bitcoin is currently Japan and Brazil [6]. As opposed to the Western world, the east is more relaxed regarding financial markets regulations. However, the respective governments and market players will not compromise consumer protection and anti-money laundering standards in the long run in order to facilitate unregulated currencies and cryptocurrency exchanges.
Proposition of this paper is that with regards to traditional commercial banks, cryptocurrencies in their current form work on the periphery of the financial system [2]. Similarly, with regards to central banks, Bitcoin is not regarded as a currency, or as a store of value, but as surrogate gold. Statutory cryptocurrencies would have the potential to become a tracing tool and an efficient payment-thru platform outside of sovereign jurisdictions. However, this potential cannot be harnessed unless the proposal of immediate disengagement from Bitcoin and unregulated currency exchanges, which were in the past used to facilitate illicit activities, or bankruptcy accusations, is accepted.
7.1. Challenges and Opportunities
The preceding chapters highlighted the fast-paced convergence of cryptocurrencies and traditional finance, however, they have so far presented a unilateral perspective by constantly framing this amalgamation as the huge Chaplin-like opportunity for all players involved. The current chapter adopts a more nuanced and ambidextrous lens by investigating both the specific challenges and opportunities stemming from this convergence. Doing so, it aims to present an impartial and realistic outlook on the future of finance.
In the wake of the recent unregulated diffusion of diverse crypto-assets and DeFi protocols, the discussions surrounding the regulation of cryptocurrencies and the underlying technology have increased [1]. Particularly in Europe, various regulatory and supervisory authorities, e.g., European Commission, the European Banking Authority, and European Central Bank, started examining and studying the effects of financial technology and VC on the core values of the financial system and individual economic players, e.g., neutrality, efficiency, integrity, and client-driven [6].
8. Cryptocurrency Investment Strategies
Cryptocurrency investment strategies must be tailored to the unique characteristics and dynamics of the cryptocurrency market. These strategies can include dollar-cost averaging, long-term holding, active trading, diversification, options, and futures trading, investing in cryptocurrency ETFs, or blockchain-related companies. In-depth analysis of each strategy, discussing its pros and cons and providing guidance on how investors can navigate the cryptocurrency market using these strategies, can be found in this section.
Investors have to keep in mind as they start building and managing an investment portfolio: (i) the investment budget; (ii) taking on financial risk; (iii) defining risk tolerance; and (iv) investment horizon. The first three factors help assess the risk return profile of the investor and decide on the share of risky assets in the portfolio. The fourth factor suggests that the financial portfolio structure may change over time as investments, particularly in cryptocurrencies, are often long term and not day trading [9].
9. Cryptocurrency Use Cases
Cryptocurrency as a payment method has been growing, more so fueled by the COVID-19 pandemic. Despite the growth, there still exists a research gap regarding newer cryptocurrencies and the continued usage of older ones in their market. In an effort to fill this gap, netnographic research consisting of 227 posts in Bitcointalk forums has analyzed social actors, discussions, sentiments, and future expectations blending an online social world with changes in different market settings [1]. The findings suggest that sentiment regarding the future of cryptocurrencies oscillates between hope and skepticism based on regulatory and technological changes in the market setting. More specifically, the hope prevails when social actors adapt to changes in rules and regulations. Meanwhile, skepticism prevails when social actors get obliterated by changes in the underlying technology of the cryptocurrencies.
Cryptocurrency payments are on the uptake with establishments, companies, and organizations. Given its novelty, research regarding its adoption, implementation, use, and how such payment is received is scarce. Moving away from banks was one of the main drivers behind the realization of cryptocurrencies as a means of payment [7]. On the contrary, the banking establishment itself has since switched sides here and started adopting bitcoin (BTC) as an asset while also creating their own cryptos. Retail prices being able to be set with the digital currency is a nice extra but potentially risky since the price per coin isn’t stable.
9.1. E-commerce
Cryptocurrency has continued to gain momentum as a payment option for online purchases. E-commerce sites and digital currencies fit naturally together as they both use cutting-edge technologies. It is only reasonable to expect that cryptocurrencies would also become available for online purchases also known as e-commerce. This is especially with the growing popularity, governmental acceptance, and the various benefits associated with the use of cryptocurrencies [5].
Today, major e-commerce sites are adopting the acceptance of payment in Bitcoin namely Overstock, Dell, Expedia, TigerDirect, and PayPal among others. With cryptocurrency payment systems, a customer’s information is safe from theft, and merchants are assured that the customer has sufficient money to pay for the transaction. Bitcoins and other decentralized cryptocurrencies allow e-commerce to circumvent credit card companies and banks. Overall, decentralized currencies allow e-commerce participants to be free from the high fees they impose.
9.2. Remittances
The innovation of the cryptocurrency ecosystem represented by Bitcoin, wood, and altcoins (coins that use the same principles as Bitcoin, i.e., cryptocurrency “alternative” to Bitcoin) is an emergent and dynamic phenomenon. Within a decade, it has grown from a technological curiosity into a financial instrument worth billions of dollars and shaped the expectations and hopes of developing convened software developers and graphic processors to resolve algorithmic puzzles. The innovation has undergone a series of episodic media-hyped boom-and-bust cycles, accompanied by hyper-volatility, attracting the interest of high-tech “early adopters,” hedge funds and financial institutions, but also policy concerns and skepticism regarding cybercrime and speculative bubbles [10]. The network owned and operated by its users is based on a technology called blockchain, an open and tamper-proof distributed ledger of transactions aggregated in blocks appended to a growing chain of blocks storing the entire transaction history of all the coins issued by a peer-to-peer network of computers (or nodes) [7].
An important application of the cryptocurrency ecosystem is money transfer, remittance in particular. The use of cryptocurrencies will be analyzed “for users at the remittance end of the transfer, in order firstly to retrieve cash from local sources and send it over to other local sources abroad and then receive it at the exit, cashing it out the transfer and returning it in the currency required”. The blockchain-based remittance transaction is depicted and discussed, followed by a description of awareness and participation, demographic, behavioral, average transfer scheme, network basic and contextual characteristics and the respondents’ knowledge of terms and processes related to blockchain, cryptocurrencies and money transfer, as well as the reasons for the use of cryptocurrencies in remittance are described and discussed.
10. Cryptocurrency Security
The emergence and rapid growth of cryptocurrencies in the last decade has got many excited about what the future of currencies may hold. Often hailed as the currencies of the ‘future’, cryptocurrencies have taken on a life of their own apart from any other existing form of currency (Fiat). However, this new form of money is still the subject of much debate both technologically and socioeconomically. The world of cryptocurrency is a fascinating assortment of paradoxes. A world that was literally named for its security but has become infamous for some of its hacks [4]. A world that allows for an unprecedented amount of freedom and anonymity while simultaneously being the basis for a seemingly endless number of scams.
Despite some high-profile success stories, the vast majority of people still have no involvement with cryptocurrency, though that is starting to change. The last year has seen an insatiable appetite for new investors clamoring to get their piece of the action [2]. The cryptocurrency marketplace unequivocally had its best year ever in 2017. This holds true from a variety of different vantage points. Most notably, the obvious economic side: the total market capitalization of all cryptocurrencies combined increased by a staggering 3200%, from about $18 billion to over $600 billion. Socially, cryptocurrencies gained widespread and mainstream attention for the first time. Bitcoin (BTC), the first and largest cryptocurrency by market capitalization, was the subject of a wide variety of print, visual, and social media outlets.
11. Cryptocurrency and Blockchain Technology
Blockchain technology is transformational. It allows the creation and management of decentralized databases with distributed consensus and cryptographic security. In 2009, the first such application: bitcoin was launched. It is based on blockchain technology, which allows the creation of decentralized cryptocurrencies free from a central authority. Since then, other cryptocurrencies have emerged. Today, there are over a thousand of them, the total market capitalization of which exceeds 4 trillion USD. Cryptocurrencies, transactions and ownership of which cannot be manipulated by a government or a large corporation, have caused enthusiasm and fears, and countries now rigorously regulate or ban them entirely.
A blockchain, in the simplest terms, is a chain of blocks of data. Each block is linked to another block through a cryptographic hash of the block content. Thus, blocks cannot be deleted: they are interdependent, and if a block is altered, all subsequent blocks must also be altered [2]. Such a dependency, along with a distributed network of computers, ensures consensus: each computer has the same version of a blockchain and the same record of events. Other properties of blockchains — open access to data, a large and often anonymous number of participants, and a huge cost of hacking a chain — allow players (in most cases, individuals) in a given network to verify each other’s transactions, something that cannot be ensured with legacy systems like SWIFT [11].
Despite the apparent simplicity of the scheme, there has never been anything of this kind, at least, on this scale. Blockchains provide the decentralization of the database, enabling the greatest degree of confidence, justifying the absence of a central authority. They also allow for risk-free anonymous transactions. Only the public key of a corresponding user is known, who cannot be associated with the transaction, since the identity of the user is not disclosed on the blockchain. This edge of anonymity led to wild speculation, and in combination with the decentralized nature, distrust of financial authorities turned into a large illegal underground economy.
11.1. Differences and Relationships
In order to have a clearer understanding of cryptocurrencies, blockchain, and the peculiarities of their relationship, three subsequent considerations are examined: differences, relationships, and social perceptions. The differences are divided into two groups. The first group analyses value and non-value characteristics. Value characteristics articulate the intrinsic importance of a phenomenon: usefulness versus uselessness/social welfare versus social cost. Non-value characteristics, in turn, specify the modes of existence of a phenomenon having to do with its technological, structural, functional and behavioral dimensions [1]. The second group examines structural differences and similarities while analysing ownership and control, accessibility, centralisation, and finality of crypto-assets transferring and settlement [2].
There are two main conceptual similarities between cryptocurrencies and blockchain technologies. The first similarity consists of contextual intrinsic characteristics. Value characteristics determine whether a phenomenon is worth perusing. A token can be worthless or worth something. The first case refers to social cost while the second one refers to social welfare. The second similarity encompasses the ascertainment modes of cryptocurrency and blockchain technologies.
12. Cryptocurrency Market Analysis
The cryptocurrency market is an innovative and diverse domain comprising digital programmable assets, digital currencies, cryptocoins, and tokens. It is a new fenced digital asset investment arena, considered a financial experiment funded by many governments of the world. There are only a few effectively functioning cryptocurrency experimental installations monetising digital assets. However, there are a few Cryptocurrency economic models. Digital currencies’ value originating from future streams of income as banknotes coming from different commodities is based on the commodity economic model. There are developments of currencies and Dollar approaches in which value calculation fundamentals are based on dollar and unit for measurement approaches [2].
Regarding recent news impacting cryptocurrency prices, the tendency of most news headlines to impact cryptocurrency prices in the same direction is identifiable. Overall, the potential dropped currency price by means of news events can be formulated as a log basis representation involving weights for individual cryptocurrency price drop. The restriction on news events is cardinality-based in the sense, that at least K threshold cryptocurrencies need to be impacted from the outside. Similarly, it is observable that high externality K-value restricts news domains to the most popular currencies such as Bitcoin, Ether, Litecoin, and Coin. This indicates more profound unknown hidden relations impacting currency prices. In the diversifying scheme of individual orthogonal currencies, only diverse news events variables appear in the model formulation. This indicates relationships between the majority of currencies in these or other common fundamental aspects [12].
13. Future Predictions and Speculations
Despite pessimistic views on cryptocurrencies, the intrinsic characteristics of blockchain technology combined with market demand contribute positively to speculation regarding the future of cryptocurrencies. Blockchain technology has instilled confidence in various levels of transaction latency, ranging from a few seconds to several minutes. Blockchain Disruption Theory holds consequential value, especially regarding the anticipated future of finance and banking, where cryptocurrencies could play an essential role [1]. A future monetary system where cryptocurrency (stable coins) enables value transfer in close to real time, lowering the costs of handling cash and checks, as well as domestic and cross-border remittance markets, is hoped to build a more inclusive financial system.
Potential scenarios for the future of cryptocurrencies can be developed through the lens of an integrated paradigm using three essential building blocks: the technology base/network, the change agent, and the socio-institutional context. Scenarios span from highly positive and optimistic to opposite negative and pessimistic views. Highly positive future scenarios (golden futures) could envision a socio-constructive interaction and close synergy between an emerging global, indigenous, and local cryptocurrency environment and civil societal co-initiatives and counter movements [5]. Despite the chaotic nature and the probability of some systemic collapse, adaptation patterns and the rise of new civilization values with alternative cryptocurrencies as a basis of a more stable and democratized global financial world could also be part of a golden future. A much more critical, risk-taking, and systemic approach on behalf of responsible authorities, regulatory bodies, and established financial institutions is warranted. This encompasses the need for strong and advanced crypto-financial infrastructure to cope and coevolve with societal/civil system change, where new technological innovation could be viewed as the engine of socio-cultural development.
14. Conclusion
The cryptocurrency adoption has been explored alongside the technological, social, and economic changes surrounding it in the 21st century. Several preliminary insights were derived considering the research background, methodology, and findings across different areas of investigation. Understanding cryptocurrency adoption relies heavily upon insights from many disciplines outside of the economic realm. Socio-technical and multi-layer variables have been identified across the societal, industrial, and governmental levels in different countries and regions. As corporations and some governments are deepening ties with cryptocurrencies, and decentralized finance and the Metaverse are on the rise, digital currency acceptance has been widely initiated at various levels of society beyond the realm of academia or experts. New ways of interacting with technology such as social media and artificial intelligence are appearing as social structures evolve alongside blockchain and crypto-asset technologies. Moreover, new social problems surrounding psychology have been emerging, especially due to the wide adoption of ‘non-fungible tokens’ and the ‘play-to-earn’ or Metaverse concept [1].
Considering the hypothesis of technological determinism, and its antitheses such as social constructivism and co-evolution, it is presumed that blockchain and crypto-asset technologies form both ‘imperative’ and ‘middle-out’ fashions of evolution. Technologies evolve independently, entangled with humans through several arrangements and network structures, and this entanglement forms understandings, material capabilities, and social outcomes. The co-evolution of cryptocurrencies with society, business, and government institutions ought to be further studied. Implementing insights and knowledge from agenda-setting theory and the social construction of technology and deliberative policy analysis purports strict hypotheses on how diversity and amplified participatory mechanisms may be considered in research and practical means addressing the wider implications of cryptocurrencies in the public domain [5].
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