Bitcoin Research Paper
Introduction
In 2009, an anonymous individual named Satoshi Nakamoto published “Bitcoin: A Peer-to-Peer Electronic Cash System,” a whitepaper that described a new type of money and medium of transaction called Bitcoin. Bitcoin is a “purely peer-to-peer version of electronic cash allowing online payments to be sent directly from one party to another without going through a financial institution” (Nakamoto, 2009, p. 1). While the identity of the author remains nebulous, his motivation behind the creation of Bitcoin–a new currency and novel method of transacting–is evident: an engineered subversion of the existing financial system.
Centralization is a ubiquitous paradigm. The existence of singular, authoritative sources upon which trust must be placed is an ancient precept. However, this is an uncontested reality that runs counter to the philosophy of Bitcoin. Regarding our current financial system, Nakamoto puts forth that “it suffers from the inherent weaknesses of the trust based model” (2009, p. 1). That is, to the detriment of those without power in the financial system, trust is routinely placed in centralized authoritative agents. For example, currency is issued and backed by a government (a private ruling body), trade and commerce occurs through self-governing agents (private companies, corporations and “middlemen”) and transactional data is stored on centralized servers controlled by a single entity or group.
Bitcoin curbs centralization through the creation of a network without a central concentration of power. It is a digital representation of value that is not arbitrarily assigned. It is a network that is controlled by no one and usable by everyone. It employs mathematical cryptography to achieve security. Consequently, its decentralized nature gives rise to a paradigm shift in, among other things, the notion of centralization, function of currency, protection of information and simplicity of commerce. Bitcoin encompasses a currency, speculative commodity, protocol, network, programming platform and transaction medium.
As a rich ecosystem it accomplishes the following: I) decentralization of the notion of “trust” that is implicit is in commerce and finance, II) distribution of consensus and veracity of transactions, III) decentralization of currency issuance and IV) establishment of a publically verifiable ledger. This research paper will investigate what Bitcoin is, its function and purpose, motivations and impact on finance. Moreover, this paper will research and report on its five-year price trend, market capitalization and strategic goals, in addition to its impact on commerce and other industries. Lastly, this paper will investigate Bitcoin’s relationship with government, litigation and proposed regulation.
Bitcoin: The Social Experiment
What is Bitcoin?