Research Paper Sample about Cryptocurrency
The Significance of Cryptocurrency for a Global Economy
Cryptocurrency is now one of the most controversial and interesting developments in the field of technology. It can simply be characterized as a form of digital money, existing virtually, properly protected from the various financial machinations, and can be exchanged for certain goods as well as regular paper currencies. Despite the fact that the use of the cryptocurrency is being heavily discussed, as well as the principles of its functioning, the sociopolitical side of the issue may be the most controversial one due to the fact that the assigning of the proper legal status to the cryptocurrency can have a variety of implications for the global economy. One of the most significant features of the cryptocurrency is its independence from the national governments. That is, it is currently not assigned to a certain country, the personality of its developers is associated with significant ambiguity, and the overall functioning of the cryptocurrency is not regulated or controlled by human factors. Regarding the fact that the global economy is affected by the ambitious countries who also represent influential players on the international arena, the cryptocurrency undoubtedly has an emancipatory potential, regarding the fact that it is not affected by the will of the national authorities. This is particularly why the governments do not want to assign a legal status to the cryptocurrency: its value is not produced or dependent on the political or economic standing of certain political bodies. The so-called virtual or digital currency excludes third parties from the exchange process, and guarantees transparent peer-to-peer cooperation. It provides an opportunity to omit bureaucracy and fraud, being secured from the interventions of human beings. Despite the fact that cryptocurrency has its disadvantages, and cannot be perceived as ideal (it requires some further improvements in the field of legal regulation), it presents a great opportunity to overcome some sociopolitical complications which emerged as a response to ineffective global capitalism, based on neoliberal guidelines.
One of the major benefits of cryptocurrency is its independence from certain nations and their roles within the international arena. Ideally, the concept of cryptocurrency was developed with great attention to its ability to guarantee transparency. Some researchers report that it is achieved by the so-called “social and solidarity-based finance” (Scott 3). That is, the main feature that will differentiate the innovative cryptocurrency from the common, already existing currency, is its reliability due to the fact that it will not be built upon the current authority, and will only depend on the performance of the market. Scott also reports the following: “The idea is that in removing the need to trust central authorities, blockchains could be platforms upon which build new forms of nonhierarchal cooperation between strangers” (13). Interestingly, with the removal of a person and his or her will from the overall system of the financial flow, based on the cryptocurrency, the possibility of the hegemony of influential political forces can be omitted. Presumably, it will affect the cryptocurrency via the performance of the market and via the creation of certain economic conditions which will have an impact on the financial flow. Scott also observes the issue, emphasizing the role of law enforcement in the global economy of the 21st century. The author stated that cryptocurrency may help to create a system which will be built on trust. Notably, it will neither be built upon person-to-person contact, nor will it be based on law enforcement. Ideally, the cryptocurrency can be a great way to exclude the authorities from the global financial flow, and let the market regulate the relations between several parties which take part in certain financial operations.
Since the concept of Bitcoin was first introduced by its developers, the security which it potentially could guarantee was understood as one of the major benefits of the cryptocurrency. Darlington tracks the history of the digital currency, marking some significant moments which introduced themselves during the process of its development. The author reports the following: “The block chain is Bitcoin’s public transaction record where transactions are documented and verified. Every few minutes, transactions on the Bitcoin network are compiled into a ‘block’” (Darlington 3). Once again, the concept of trust is introduced here: with the commonly known currency, which has existed for decades, people tended to rely on the official representatives of the national governments, who could guarantee them security of financial operations and punish the ones who violated national policies accordingly. However, when Nakamoto (the developer of the Bitcoin digital currency, and who is associated with a great controversy) first introduced the idea of Blockchain, he reported that third parties will be excluded from the process of the exchange. The computerized system, which is entirely impersonalized, will guarantee security, which leaves no room for speculations and the embodiment of ambitions of certain nations within the international arena. Before the idea of the cryptocurrency was developed, the global economy undoubtedly experienced the pressure of those who were considered influential players within the international arena. The digital currency has the ability to limit their influence up to the total exclusion of it from the exchange operations. In this case, the uninterrupted performance of the market will be the only thing which will have the ability to control cryptocurrency.
In the course of the past several decades, since the technological development has become a significant part of the global economy, the ethical side of the issue was greatly discussed, and it still represents a great controversy to intellectuals all over the world. Artificial intelligence, products which aim to facilitate people’s everyday performance and, of course, digital currency, are the developments associated with great suspicion. Gladden reports: “The potential of [the] decentralized digital currencies to contribute to the common good has far been frequently overshadowed by cryptocurrency’s destructive ‘dark side,’ including its use for facilitating human trafficking, paid assassinations, child exploitation, illicit weapons and drug sales…” (86). On the one hand, when Bitcoin was introduced to the global market, its independence from excessive national regulation was observed as a benefit. However, it is also one of the major, if not the only, disadvantages of the digital currency. Law enforcement can be modified according to the demands of the influential authorities, but its ability to regulate performance of the market and at least partially preserve the inviolability of basic human rights should not be underestimated. Money was always considered as initially deprived of ethics and, if uncontrolled, the ones who are in possession of significant capital can ignore the principles of human decency.
However, in the case of the common non-digital currency, an individual could have addressed his or her complaints to the local authorities as a way of seeking justice. The separation of the cryptocurrencies from the national governments and from the international law enforcement agencies can have a variety of negative implications for the global economy. The ethical side of the issue should be further discussed and applied to the interests of cryptocurrency users. The problem is undoubtedly controversial: on the one hand, policy-makers should prevent the national governments from the aggressive invasions into the functioning of the digital currencies, and, on the other, the preservation of the basic ethical values should be reached (cryptocurrency should not contribute to unintervened illicit drug trade, human trafficking, etc.).
The slow adoption of the digital currency by international governments represents a great suspicion of the local policy makers toward the overall concept of Bitcoin as the most famous example of the cryptocurrency. There are several cases where the idea was not well-received by the local authorities, as well as by multinational corporations. Hulburt and Bojanova report several of the cases: “Threatened by bitcoin’s existence, both Apple and PayPal have carefully distanced themselves from fully endorsing it, and Amazon is creating its own digital coinage. Fearing an inability to regulate against fraud, China, Russia, Japan, and other nations have declared bitcoin a rogue currency” (13). The readiness of the global economy to implement the cryptocurrency in its functioning is not associated with significant enthusiasm. While the attitude of large companies can be understood, one should look for a ‘hidden iceberg’ in the motives of the local governments to ban cryptocurrencies.
Presumably, aside from the simple suspicion toward the innovative development that has a potential to disrupt the common functioning of society, they are also afraid to introduce new contributors to illicit trading into the national economies, and they also may be afraid of losing their influential geopolitical positions. There are various benefits for the governments in the existing financial system. Particularly, it is the availability of a third party between an individual or certain establishments and the other individual, representing the receiving end of the exchange process. It opens a variety of possibilities for also introducing other parties to the process, such as, for instance, bankers, regulators, and brokers. It is clear that all those stakeholders are cooperating with the government, and, the more successful the particular establishment, the less the government will be interested in the appearance of some outside invaders into its functioning, such as the digital currencies. Scientists are analyzing the peculiarities of the implementation of the digital currencies without taking the existing tendencies of the sociopolitical processes into account. That is, nowadays cryptocurrency is slowly becoming a part of the global market. However, it will take time for it to become a suitable substitute of the common non-digital currency.
The concept of the digital currency presents a great opportunity to end with the disadvantages of global capitalism, some researchers state. Since the Marxist premise was first introduced, people struggled to find the most suitable way of how it can be implemented into industrialized society. Manski reports that Bitcoin may be the answer: excluding the government from the overall financial flow and preventing the cases of fraud and corruption have been long understood as the major benefits of cryptocurrency, which, notably, represent its emancipatory potential (1). Manski also reports the following: “Blockchain technology is one product of this effort that holds the promise of accelerating economic global transformation” (1). Neoliberal society, with its prioritization of basic human rights and belief in law enforcement as the way to guarantee human safety, is not functioning properly, and it has great economic and social implications. The problems with ecology and the improper living conditions for a great part of the populations in the so-called third world (mostly due to the use of cheap labor by large multinational corporations) represent that the neoliberal world is collapsing, and democracy has become a tool in the hands of the influential political bodies. There now is a critical need to implement an innovative development which will prevent the authorities from embodying their desires via both corruption and fraud. Cryptocurrency can be a proper substituent for non-digital money. Regarding the fact that it was designed and based entirely on impersonalization and mechanized calculations, it now may be understood as the proof that the socialist doctrine is not entirely a utopia, and there is an alternative to neoliberal global capitalism.
Cryptocurrency may reorganize and introduce some positive changes to the cross-border trade and overall international relations. Maupin reports: “The G20 must take decisive steps to harness this technology in service of its policy goals across the core focus areas of economic resilience, financial inclusion, taxation, trade and investment, employment, climate, health, sustainable development, and women’s empowerment” (1). According to the author, G20 should take a decisive part in the implementation of the Blockchain technology into the global economy. It is important for the governments of the political bodies to legitimize cryptocurrency. Presumably, it is the only way to prevent it from being an additional contributor to illicit activity such as drug trade and human trafficking. Also, the introduction of cryptocurrency to both local and global economies may have a positive impact on the small business growth, and can later contribute to the emergence of the effective shared economy. Huckle et al. report on several cases of how it works: “Shared economy applications such as AirBnb and Uber are well-known applications but there are many other opportunities to share the digital economy. With the recent interest in the Internet of Things and Blockchain, the opportunity exists to create a myriad of shared applications, e.g. peer-to-peer automatic payment mechanisms” (461). That is, the reduction of third parties from the exchange process enables various possibilities for people to buy and sell internationally without obstacles. It is critically important to represent an additional opportunity to people to experience personal growth without unnecessary spending to third parties and excessive governmental regulations.
Cryptocurrency, which is based on peer-to-peer trade, if introduced by the national governments into the local law enforcement system, can be a significant contributor to the personal growth of citizens. A person-oriented global economy can be beneficial only if it is based on a shared economy. The latter represents a great example of the successful self-organization of people in order to receive revenue, increase profit, and eliminate the pressure of cross-border regulations. Cryptocurrency represents a way in which people’s cooperation on a peer-to-peer basis can be facilitated.
Another controversy which is associated with cryptocurrency concerns its status. Regarding the fact that the idea is a new one, and is understood as a rather innovative or even revolutionary one, the lively debates are continuing not only concerning the advisability of the introduction of cryptocurrency into legal systems, but also concerning how it can be done. For instance, McKinney et al., when observing how America reacted to the development, reported the following: “As a member of the INTERPOL, the United States has a vested interest in protecting its dollar against counterfeiting acts. While the national framework does not directly outlaw the counterfeiting of virtual currencies, it does outlaw securities and current coin” (184). Assigning to the cryptocurrency certain names, which were listed above, simply means that some countries are not considering it as a currency per se. They are rather ignoring its revolutionary real meaning, and undervaluing it, not wanting to deal with the consequences of the implementation into the local economy. Abboushi explains the ambiguous status of the cryptocurrency as follows: “Virtual currency does not fit the legal concept of real currency because real currency (RC) banknotes and coins are issued by sovereign government whereas VC is not issued nor protected by government” (10). That is, the national governments are not ready to accept the real meaning of the digital currency simply because they are not the ones producing its meaning. Walton reports that cryptocurrency presents a great opportunity to omit the so-called “currency hegemonies” (24). Presumably, this is the reason why the governments are so against the idea of the introduction of the so-called digital money into their legal systems, and against assigning the proper status to it.
So, the idea of the cryptocurrency, which contributed to the appearance of lively debates in the scientific field, is a concept which can be understood rather ambiguously. Despite the fact that its implementation into the legal system has a variety of positive implications (it can guarantee transparent peer-to-peer trading, it is safe, and does not imply the excessive regulatory policies from the government), there are some significant disadvantages associated with the digital currency. The greatest one is undoubtedly its contribution to the illicit drug trading and human trafficking, which can be given an opportunity to omit the legal regulations. Due to this, there is now discussion on the need to involve the law enforcement in cryptocurrency functions, at least to some extent. The innovative idea of the digital currency has a strong emancipatory potential, and undoubtedly is a person-oriented system, contributing to the emergence of the shared economy. However, it requires some adjustments in order to become represented within the global economy.
Abboushi, Suhail. “Britain after Brexit – Brief Overview.” Journal of International Trade Law and Policy, vol. 17, no. 1/2, 2018, pp. 69–84., doi:10.1108/jitlp-12-2017-0052.
Darlington, James. “The Future of Bitcoin: Mapping the Global Adoption of World’s Largest Cryptocurrency Through Benefit Analysis.” University of Tennessee Honors Thesis Projects, 2014, trace.tennessee.edu/cgi/viewcontent.cgiarticle=2741&context=utk_chanhonoproj.
Gladden, Matthew E. “Cryptocurrency with a Conscience: Using Artificial Intelligence to Develop Money That Advances Human Ethical Values.” Annales. Etyka w Życiu Gospodarczym, vol. 18, no. 4, 2015, doi:10.18778/1899-2226.18.4.06.
Huckle, Steve, and Martin White. “Socialism and the Blockchain.” Future Internet, vol. 8, no. 4, 2016, p. 49., doi:10.3390/fi8040049.
Hurlburt, George F., and Irena Bojanova. “Bitcoin: Benefit or Curse?” IT Professional, vol. 16, no. 3, 2014, pp. 10–15., doi:10.1109/mitp.2014.28.
Manski, S. “Building the Blockchain: The Co-Construction of a Global Commonwealth to Move beyond the Crises of Global Capitalism.” 2016, www.democracy.uci.edu/ newsevents/events/gradconference16/CSDpaper-SarahManski.pdf.
Maupin, Julie A. “Blockchains and the G20: Building an Inclusive, Transparent and Accountable Digital Economy.” SSRN Electronic Journal, 2017, doi:10.2139/ssrn.2935261.
Mckinney, Ralph E., et al. “Counterfeiting in Cryptocurrency.” Handbook of Digital Currency, 2015, pp. 173–187., doi:10.1016/b978-0-12-802117-0.00008-4.
Scott, B. “How Can Cryptocurrency and Blockchain Technology Play a Role in Building Social and Solidarity Finance?” Leibniz-Informationszentrum Wirtschaft, 2016, www.econstor.eu/bitstream/10419/148750/1/861287290.pdf.
Walton, Joe. “Cryptocurrency Public Policy Analysis.” SSRN Electronic Journal, 2014, doi:10.2139/ssrn.2708302.