Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data
Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data
Editor: Lee Kuo Chuen, David
Publication Year: 2015
Publisher: Elsevier Science & Technology
Single-User Purchase Price:
$180.00

Unlimited-User Purchase Price:
$270.00
ISBN: 978-0-12-802117-0
Category: Business, Finance & Economics - Economics
Image Count:
131
Book Status: Available
Table of Contents
An award-winning reference work that provides complete coverage on the emerging phenomenon of digital currencies.
This book is found in the following Credo Collections:
Table of Contents
- Contributors
- Preface and Acknowledgments
- Part 1 Digital Currency and Bitcoin
- Section One Bitcoin and Alternative Cryptocurrencies
- Introduction to Bitcoin
- 1.1 The Next Generation of Money and Payments
- 1.2 Digital Currency as Alternative Currency
- 1.2.1 “Digital” versus “virtual”
- 1.2.2 Classifying alternative currencies
- 1.2.3 Why alternative currencies
- 1.3 Cryptocurrency
- 1.3.1 The nature of cryptocurrency
- 1.3.2 The beginning: eCash
- 1.3.3 Pioneering Internet payments with digital gold
- 1.3.4 Revival of cryptocurrency
- 1.3.5 The rise of Bitcoin
- 1.4 General Features of Bitcoin
- 1.4.1 Network and digital currency
- 1.4.2 Genesis and decentralized control
- 1.4.3 How Bitcoin works
- 1.4.4 Buying and storing bitcoins
- 1.4.5 Mining to create new bitcoins and process transactions
- 1.4.6 Security and cryptography
- 1.4.7 Pseudoanonymity
- 1.5 Benefits and Risks
- 1.5.1 Freedom of payments
- 1.5.2 Merchant benefits
- 1.5.3 User control
- 1.5.4 Platform for further innovation
- 1.5.5 Internal change and volatility
- 1.5.6 Facilitation of criminal activity
- 1.5.7 Legal regulatory attitude
- 1.5.8 Economic risk
- 1.6 Impact of the Digital Currency Revolution
- 1.7 Conditions for a Successful Cryptocurrency
- 1.7.1 Ecosystem
- 1.7.2 Incentives
- 1.7.3 Identification
- 1.8 Future Prospects and Conclusion
- Acknowledgments
- References
- Is Bitcoin a Real Currency? An Economic Appraisal
- 2.1 Introduction
- 2.2 History and Background of Bitcoin
- 2.3 Bitcoin’s Weaknesses as a Currency
- 2.3.1 Medium of exchange
- 2.3.2 Unit of account
- 2.3.3 Store of value
- 2.4 Conclusion: Obstacles Faced by Bitcoin
- Acknowledgments
- References
- Bitcoin Mining Technology
- 3.1 Introduction
- 3.1.1 A distributed or decentralized network?
- 3.2 Technology Behind Bitcoin
- 3.2.1 Block
- 3.2.2 Blockchain
- 3.2.3 Block-hashing mechanism
- 3.2.4 Bitcoin address
- 3.3 Mining Process
- 3.4 Mining Possibilities
- 3.4.1 Solo mining
- 3.4.2 Hardware
- 3.4.3 Software
- 3.4.4 Factors to consider
- 3.4.5 Mining contracts
- 3.5 Mining Pools
- 3.5.1 Reward types
- 3.6 Threats to Mining
- 3.7 Recent Advancements
- 3.8 Conclusion
- References
- Further Reading
- National Cryptocurrencies
- 4.1 The First Wave
- 4.1.1 AuroraCoin
- 4.1.1.1 SpainCoin
- 4.1.1.2 PesetaCoin
- 4.1.1.3 GreeceCoin
- 4.1.1.4 ScotCoin
- 4.1.2 AphroditeCoin
- 4.1.3 GaelCoin
- 4.1.4 IrishCoin
- 4.1.5 CryptoEscudo
- 4.1.6 Deutsche eMark
- 4.1.7 Ekrona
- 4.1.8 eGulden
- 4.1.9 MazaCoin
- 4.1.10 MapleCoin
- 4.1.11 IsraCoin
- 4.2 The Future of National Cryptocurrency
- 4.2.1 More than currency
- 4.3 Conclusion
- Sources
- Evaluating the Potential of Alternative Cryptocurrencies
- 5.1 Introduction
- 5.2 Different Types of Altcoins
- 5.3 Launching an Altcoin
- 5.4 Data Collection and Altcoin Evaluation Strategy
- 5.5 Altcoin Evaluation Results
- 5.5.1 Community support
- 5.5.2 Developer activity
- 5.5.3 Liquidity
- 5.5.4 Market capitalization
- 5.5.5 Overall rank
- 5.6 Empirical Research Using Social Network Data
- 5.7 Empirical Analysis Using Time Series and Cross-Section Data
- 5.8 Conclusion
- Appendix: Empirical Analysis of Bitcoin and Altcoins
- 5A.1 Time Series Data Analysis of Bitcoin: Cointegration Analysis Through VECM and Granger Causality Test
- 5A.1.1 Data
- 5A.1.2 Methodology
- 5A.1.2.1 Unit root test
- 5A.1.2.2 Cointegration test
- 5A.1.2.3 Vector error-correction model
- 5A.1.3 Empirical results
- 5A.1.3.1 Unit root test results
- 5A.1.3.2 Granger causality test on developer activity and community strength system
- 5A.1.3.3 VECM for liquidity system
- 5A.2 Cross-Sectional Data Analysis on Altcoins: Linear and Quantile Regression
- 5A.2.1 Data
- 5A.2.2 Methodology
- 5A.2.2.1 Linear regression
- 5A.2.2.2 Quantile regression
- 5A.2.3 Linear regression estimation
- 5A.2.4 Quantile regression estimation
- Key Factors’ Analysis
- 5A.3 Conclusion and Issues
- Appendix
- Key Factors’ Analysis
- References
- Section Two E-Payment and Security
- The Effect of Payment Reversibility on E-commerce and Postal Quality
- 6.1 Introduction
- 6.2 The Model
- 6.3 Basic Case
- 6.4 Results with Postal Quality
- 6.5 Conclusion
- References
- Blockchain and Digital Payments: An Institutionalist Analysis of Cryptocurrencies
- Acknowledgments
- 7.1 Introduction
- 7.2 Definition
- 7.3 The Structure and the Incentives Behind the Supply and Demand of Cryptocurrencies
- 7.4 Understanding Institutional Change
- 7.5 The Ceremonial Encapsulation of Cryptocurrencies in the Established Model of Regulation for Digital Payments
- 7.6 Cryptocurrencies as Mature Payment Technologies: Challenges in the Near Future
- 7.7 Conclusions
- References
- Counterfeiting in Cryptocurrency: An Emerging Problem
- 8.1 Chapter Overview
- 8.2 Introduction: Cryptocurrency Has Virtually Evolved from Hard Currency
- 8.3 The Basic Function of Currency: A Medium of Exchange
- 8.3.1 Ownership and transferability
- 8.3.2 The ability to store value
- 8.3.3 Security in property rights
- 8.4 Counterfeiting: Methods, Motivation, and Opportunities
- 8.5 The Global Anticounterfeiting Initiative
- 8.6 Deterring Counterfeiting in the Future
- 8.7 Summary
- References
- Section Three Big Data and Network Effect
- Emergence, Growth, and Sustainability of Bitcoin: The Network Economics Perspective
- 9.1 Network Economics and Cryptocurrencies
- 9.1.1 Gaining critical mass
- 9.1.1.1 Direct externalities
- 9.1.1.2 Indirect externalities
- 9.1.1.3 Other implications of network externalities
- 9.2 Sustainability of a Cryptocurrency Network
- 9.2.1 Incentives of mining
- 9.2.2 An agent-based simulation of miners' incentive over time
- 9.2.3 On Bitcoins and red balloons
- 9.3 Discussion/Conclusion
- References
- Cryptocurrencies as Distributed Community Experiments
- 10.1 Introduction
- 10.2 From Bitcoin as Single Cryptocurrency to an Ecosystem of Cryptocurrencies
- 10.3 Altcoins as Evolutionary Problem Solving and “Proof of Concepts”
- 10.4 Overview of the Main Critique and Discourse on Cryptocurrencies
- 10.4.1 From a distributed system to possible centralization: The mining arms race
- 10.4.2 The “Goldfinger Attack” and the “Tragedy of the Commons”
- 10.4.3 Block generation time and transaction speed
- 10.4.4 Energy usage
- 10.4.5 Velocity of circulation and the deflationary spiral
- 10.4.6 Anonymity and privacy in cryptocurrencies
- 10.4.7 Social currencies
- 10.5 The Future of the Blockchain
- 10.5.1 The Bitcoin blockchain does not scale (yet)
- 10.6 Conclusion
- References
- Extracting Market-Implied Bitcoin's Risk-Free Interest Rate
- 11.1 Introduction
- 11.2 A Model for the Determination of Bitcoin's Risk-Free Interest Rate
- 11.2.1 Uncovered interest rate parity
- 11.2.2 Monetary economic theory
- 11.2.3 A time-varying premium model
- 11.3 Application to US$ and Euro Data
- 11.4 Perspective on Bitcoin Interest Rate
- 11.5 Conclusion
- References
- A Microeconomic Analysis of Bitcoin and Illegal Activities
- Acknowledgments
- 12.1 Introduction
- 12.2 The Baseline Model
- 12.2.1 Compliant consumers
- 12.2.2 Noncompliant consumers
- 12.2.3 Production technologies
- 12.3 Market Equilibrium
- 12.4 Demand for Bitcoins
- 12.5 Extensions
- 12.5.1 Variable fines
- 12.5.2 Bitcoin theft
- 12.6 Concluding Remarks
- References
- Part 2 Finance Markets and Bitcoin
- Section Four Regulation and Taxation
- Legal Issues in Cryptocurrency
- 13.1 Introduction
- 13.2 Legality Versus Illegal
- 13.2.1 Validity of transaction as a currency
- 13.2.2 Validity of transaction as a foreign currency
- 13.2.3 Tax incidences and stamp duty
- 13.2.4 Filing suit in cases of legal disputes
- 13.2.5 Organizational status of promoters and participators
- 13.2.6 Monetary and fiscal policies
- 13.3 Global Regulatory Movement
- 13.4 Conclusion
- References
- How to Tax Bitcoin?
- 14.1 Introduction
- 14.2 Characteristic and Nature of Bitcoin
- 14.3 Income Tax
- 14.3.1 Concept of taxable income
- 14.3.2 Challenges to income tax compliance
- 14.4 Consumption Tax
- 14.4.1 Initial comments
- 14.4.2 Taxable person
- 14.4.3 Taxable transaction
- 14.4.4 Place of supply
- 14.4.5 Exemptions
- 14.5 National Approaches
- 14.6 Conclusions
- References
- Cryptocurrency and Virtual Currency: Corruption and Money Laundering/Terrorism Financing Risks?
- 15.1 Corruption: A Social Evil
- 15.2 Review of Financial Action Task Force on Money Laundering Compliance on PEPs
- 15.2.1 Noncompliant and partially compliant jurisdictions
- 15.2.2 Recommendations
- 15.3 Cryptocurrencies and Virtual Currencies and Their Potential to be Misused for Money Laundering
- 15.4 The Way Forward: A Conceptual Intelligence-led AML/CTF Strategy
- References
- A Light Touch of Regulation for Virtual Currencies
- 16.1 Introduction
- 16.1.1 Virtual currency
- 16.1.2 Decentralized cryptocurrency
- 16.1.3 Market participants in a virtual currency system
- 16.2 Legitimate Uses
- 16.3 Potentially Regulated Risks
- 16.3.1 Counterparty risk in a virtual, decentralized system
- 16.3.2 Consumer protection: loss and theft
- 16.3.3 Financial crime
- 16.3.4 Risk of facilitating money laundering and terrorist financing
- 16.4 Survey of Regulatory Approaches in Tackling These Risks
- 16.4.1 Restrictive regulation
- 16.4.2 Discourage participation to allow time to develop comprehensive regulation
- 16.4.3 Regulate under existing structures
- 16.4.4 Encouragement with self-regulation
- 16.4.5 Active engagement for multicurrency coexistence
- 16.4.6 Laissez-faire or no regulation yet
- 16.4.7 Lack of international uniformity
- 16.5 Highlight on US Regulation
- 16.5.1 FinCEN
- 16.5.2 New York's BitLicense
- 16.5.3 Commentary on BitLicense
- 16.6 Toward a Light-Touch Approach to Regulation
- 16.6.1 General policy considerations
- 16.6.2 A light touch with three lenses
- 16.6.3 This is only the beginning
- References
- Real Regulation of Virtual Currencies
- 17.1 Introduction
- 17.2 Background
- 17.2.1 How Bitcoin works
- 17.2.1.1 The public ledger
- 17.2.1.2 Mining
- 17.2.1.3 Peer-to-peer network
- 17.2.1.4 Cryptography
- 17.2.1.5 Speculation
- 17.2.1.6 Wallets
- 17.2.1.7 Using Bitcoins
- 17.2.2 Major vendors dealing bitcoins
- 17.3 Bitcoin Prosecutions
- 17.3.1 E-gold
- 17.3.2 Liberty Reserve
- 17.3.3 Western Express
- 17.3.4 Silk Road
- 17.4 FinCEN Regulation of Virtual Currencies
- 17.4.1 Virtual currency and Money Service Businesses
- 17.4.2 Real currency and virtual currency
- 17.4.3 Regulated persons and entities
- 17.4.4 Users, exchangers, and administrators
- 17.4.4.1 Users of virtual currency
- 17.4.4.2 Administrators and exchangers of virtual currency: generally
- 17.4.5 Persons and entities excluded from regulation
- 17.4.6 Duties of money transmitters
- 17.4.7 Recent FinCEN administrative rulings
- 17.4.7.1 The hotel payment system
- 17.4.7.2 The convertible virtual currency trading system
- 17.5 SEC Regulation of Virtual Currencies
- 17.5.1 What is a security?
- 17.5.2 Is Bitcoin a security?
- 17.5.3 SEC treatment of Bitcoins
- 17.5.4 The SEC's concerns
- 17.5.5 The SEC's focus
- 17.6 CFTC Regulation of Virtual Currencies
- 17.6.1 Bitcoins as commodity futures
- 17.6.2 Bitcoins as foreign exchange, currency swaps, or forwards
- 17.6.3 Regulation of Bitcoin “Spot” transactions
- 17.6.4 Bitcoin as foreign exchange or derivatives
- 17.6.5 CFTC and BSA compliance
- 17.6.6 Recent CFTC statements on Bitcoin
- 17.6.7 CFTC approval of TeraExchange
- 17.7 IRS Treatment of Virtual Currencies
- 17.8 FINRA Concerns Regarding Virtual Currencies
- 17.9 Congressional Concerns Regarding Virtual Currencies
- 17.10 Conclusions
- References
- A Facilitative Model for Cryptocurrency Regulation in Singapore
- 18.1 Introduction
- 18.2 Background to Cryptocurrencies
- 18.2.1 Bitcoin
- 18.2.2 The ecosystem
- 18.2.3 Benefits and future applications
- 18.3 Clear and Targeted Regulation
- 18.3.1 Antimoney laundering and counter-terrorist financing
- 18.3.1.1 Justification for AML/CTF regulation
- 18.3.1.2 AML/CTF regulation in Singapore
- 18.3.2 Securities and financial regulation
- 18.3.3 Theft or misappropriation
- 18.4 A Self-regulatory Framework
- 18.5 International Coordination and Harmonization
- 18.6 Conclusion
- References
- Section Five Financial Innovation and Internet of Money
- Advancing Egalitarianism
- 19.1 Introduction
- 19.2 Development of Centrally Controlled Money Systems
- 19.3 A New Paradigm: Decentralization of Authorities
- 19.4 Practicalities
- 19.4.1 Blockchains
- 19.4.2 Cryptographic hashing
- 19.4.3 The blockchain as consensus data
- 19.4.4 Proof-of-work and proof-of-stake voting
- 19.4.5 Public-private key pair cryptography aka digital signatures
- 19.5 The Future of Blockchain-Based Systems
- 19.6 Conclusion
- References
- How Digital Currencies Will Cascade up to a Global Stable Currency: The Fundamental Framework for the Money of the Future
- 20.1 Introduction
- 20.2 Commodity-Backed Digital Mint
- 20.3 Derived Commodities
- 20.4 Cascading
- 20.4.1 Composite backing (ground cascading)
- 20.4.2 Digital cascading
- 20.4.3 Illustration
- 20.4.4 Cascading stability
- 20.5 Outlook
- 20.5.1 Financial Panacea
- References
- Bitcoin-Like Protocols and Innovations
- 21.1 The Bitcoin System and the Element of Trust
- 21.2 A New Digital Commodity
- 21.3 Pseudonymous Ownership and Trades
- 21.4 An Open and Decentralized Ledger System
- 21.5 Blockchain, Mining, Block Time, and Forks
- 21.6 Validation of Transaction Over a Peer-to-Peer Network
- 21.7 Operation via Open-Source Protocols
- 21.8 The Anatomy of Bitcoin
- 21.8.1 Key components of bitcoin
- 21.8.2 Uniqueness of bitcoin
- 21.8.3 Monetary anachronism or a harbinger of financial innovations?
- 21.9 Bitcoin Ecosystem
- 21.9.1 Bitcoin exchanges
- 21.9.2 Bitcoin wallets
- 21.9.3 Specialized security services
- 21.9.4 Prepaid card, merchant, and ATM solutions
- 21.10 Benefits of Bitcoin: An Assessment
- 21.10.1 Transaction irreversibility
- 21.10.2 Identity theft
- 21.10.3 Cheaper transactions
- 21.10.4 More and faster innovation
- 21.11 Future-Proofing Bitcoin: Addressing Key Risks
- 21.11.1 Stabilizing bitcoin value
- 21.11.2 Regulating bitcoin use
- 21.11.3 Efficiency of the mining process
- 21.11.4 Technical robustness
- 21.12 Potential Demand Drivers for Bitcoin
- 21.12.1 Speculative motive: value appreciation
- 21.12.2 Anonymity motive: privacy
- 21.12.3 Precautionary motive: capital flight
- 21.12.4 Convenience motive: payments
- 21.13 Conclusions: The New Vistas Opened Up by Bitcoin
- References
- Blockchain Electronic Vote
- 22.1 The Problem with Proprietary Voting Systems
- 22.2 Open-Source, Free Software Electronic Transaction and Voting Systems
- 22.2.1 Preelection: Know the list of candidates
- 22.2.2 Check the list of voters
- 22.2.3 Prepare the ballot
- 22.2.4 Counting votes on election day
- 22.2.5 Postelection: Showing independently verifiable results
- 22.3 Conclusion
- References
- Translating Commons-Based Peer Production Values into Metrics: Toward Commons-Based Cryptocurrencies
- 23.1 Introduction
- 23.2 Commons-Based Peer Production
- 23.3 Value Metrics
- 23.3.1 Universal indicator of value
- 23.3.2 Alternative value metrics
- 23.3.3 Competing value systems
- 23.4 Complementary Currencies
- 23.4.1 Commons-based cryptocurrencies
- 23.4.2 Translating CBPP values into metrics
- 23.4.2.1 Systemic value of CBPP
- 23.4.2.2 Value of CBPP contributions
- 23.5 Conclusion
- References
- The Confluence of Bitcoin and the Global Sharing Economy
- 24.1 2008 Stimulus
- 24.2 Confluence of Bitcoin and the Global Sharing Economy
- 24.3 Sharing Economy
- 24.4 Resource Ownership Versus Access
- 24.5 Mental Accounting
- 24.6 Bitcoin
- 24.7 Distributed Network
- 24.8 Token Lifecycle
- 24.9 Device Level Resources
- References
- What Does Cryptocurrency Mean for the New Economy?
- Acknowledgment
- 25.1 Introduction
- 25.1.1 Bank money
- 25.1.2 Company money
- 25.1.3 Community money
- 25.2 Bitcoin
- 25.2.1 Frictionless low-value payments
- 25.2.2 Anonymity
- 25.2.3 Assassination markets
- 25.2.4 Beyond government control
- 25.3 A Money Narrative
- 25.4 Beyond Money
- 25.5 Conclusions
- References
- Bitcoin: A Look at the Past and the Future
- 26.1 Reasons for Success and Failure
- 26.2 A Numismatic Approach
- 26.3 The End of Money
- 26.4 The Role of the Government
- 26.5 The Role of Banks
- 26.6 Future Possibilities
- References
- Sources
- Section Six Investments and Crowdfunding
- Bitcoin IPO, ETF, and Crowdfunding
- Acknowledgment
- 27.1 Introduction
- 27.2 IPO: Digital CC
- 27.2.1 History
- 27.2.2 Effect of Macro Energy acquiring Digital CC
- 27.2.3 Proposed business
- 27.2.3.1 Bitcoin mining
- 27.2.3.2 Digital currencies trading and investment
- 27.2.3.3 Consumer products
- 27.2.3.4 Others
- 27.2.4 Corporate structure and material business contracts
- 27.2.4.1 Share purchase agreement between the company and the vendors
- 27.2.4.2 Loan facility agreement between the company and Digital CC
- 27.2.4.3 CloudHashing agreement between Digital CC and Technology IQ
- 27.2.4.4 Bitfury agreement
- 27.2.4.5 Lease of goods agreement
- 27.2.4.6 Development agreement between Digital CC IP Pty Ltd (a wholly owned subsidiary of Digital CC) and Mpire Media Pty Ltd
- 27.2.4.7 Intellectual property license agreements
- 27.2.4.8 Shareholders’ and directors’ loan agreement and deed of variation between Digital CC and the entities associated with certain vendors and proposed directors
- 27.2.4.9 Facility agreement between Digital CC and one of the vendors, Lydian Enterprises Pty Ltd ATF Lydian Trust
- 27.2.4.10 Trading account agreements between Digital CC Management Pty Ltd (a wholly owned subsidiary of Digital CC) and Alex Karis, NRB International LLC, and William Brindise
- 27.2.4.11 Other agreements
- 27.3 ETF: WBT
- 27.3.1 Introduction
- 27.3.2 How the trust operates
- 27.3.3 Reasons for investing in WBT
- 27.3.3.1 Reduced risks of holding bitcoins
- 27.3.3.2 Transparency
- 27.3.3.3 Cheaper
- 27.3.4 Trust structure
- 27.3.4.1 Roles of the sponsor and the trustee
- 27.3.4.2 Custody of WBT bitcoins in cold storage
- 27.3.4.3 Segregated custody accounts for temporary live storage
- 27.3.4.4 Valuation
- 27.3.4.5 Share arrangements
- 27.3.4.6 Redemption of shares by authorized participants
- 27.3.5 Risk factors
- 27.3.5.1 Private key loss or destruction
- 27.3.5.2 Exchange market and WinkDex risks
- 27.3.5.3 Trust risks
- 27.3.5.4 Conflicts of interest
- 27.3.6 Termination events
- 27.4 Crowdfunding
- 27.4.1 History of crowdfunding
- 27.4.2 Developments in crypto crowdfunding
- 27.4.3 Counterparty
- 27.4.4 Maidsafe, Safecoin, Mastercoin
- 27.4.5 Swarm
- 27.4.6 Ethereum
- 27.4.7 Storj
- 27.4.8 Gems, BitShares Music Foundation
- 27.4.9 Namecoin, BitShares, Colored Coin, and Ripple
- 27.5 Conclusion
- References
- Relevant Websites
- Bitcoin Exchanges
- 28.1 Introduction
- 28.2 Bitcoin Exchanges
- 28.3 Exposure to Risk of Exchange Failure
- 28.3.1 Bitcoin exchange closure due to security breach
- 28.3.2 Lost/stolen BTCs
- 28.4 Survival Time of an Exchange
- 28.4.1 Transaction volume
- 28.4.2 Experiencing a security breach
- 28.4.3 Compliance capabilities
- 28.4.4 Backroom and settlement support
- 28.4.5 Financial strength
- 28.5 Discussion
- 28.6 Conclusion
- References
- Additional Readings