The underlying technology of cryptocurrencies is a broadly discussed subject. In Sweden, a growing interest for digital assets and payment methods can be observed. The fact that this coincides with an increasing acceptance for cryptocurrencies creates interesting possibilities. Some claim that cryptocurrency could be the future mean of payment. The objective of this report is therefore to examine whether a cryptocurrency could replace the Swedish krona, and what such a transition would imply for the Swedish society. To deliver a thorough analysis, the delimitation to exemplify with the cryptocurrency bitcoin and its protocol was made. Primarily, a literature study was conducted to determine the protocol’s structure, security and usability, as well as its possibility to fulfil the functions of the Swedish krona. In addition, an interview with Björn Segendorf at the Riksbank was held, in order to obtain the Riksbank’s interest and standpoint in the questions of matter. A transition to cryptocurrency is associated with both advantages and disadvantages. The infrastructure behind Bitcoin creates a possibility to process certain payments more time and cost efficiently, and simultaneously provides open and decentralized participation as well as increased payer integrity. However, the Bitcoin protocol has limitations that should be considered and dealt with before a transition should be initialized. The large energy consumption required to process transactions could be considered the largest obstacle for Bitcoin’s further growth. There are also security concerns, that could affect users of the protocol, that should be considered. Sweden fulfils the technical prerequisites for Bitcoin, and any other cryptocurrency with similar structure. However, a cryptocurrency does not fulfil the functions of a traditional currency. A transition to cryptocurrency would also affect the Riksbank’s possibility to conduct monetary policies. Following, the report concludes that a complete transition to cryptocurrency in Sweden seems unfavourable as of today. Cryptocurrencies are likely to grow continuously, and gain new market shares, but will coexist with traditional currencies and payment systems. It is not unlikely that a transition to cryptocurrency will occur in the future, when the market has matured, and solutions to problems highlighted in this report have been presented. / Tekniken bakom kryptovalutor har blivit ett hett diskuterat ämne. I Sverige urskiljs ett allt merväxande intresse för digitala tillgångar och betalmetoder, och att detta sammanfaller med enökande acceptans för kryptovalutor skapar intressanta möjligheter. Vissa menar attkryptovaluta kan vara framtidens betalmedel. Rapportens frågeställning avhandlar därförhuruvida en kryptovaluta skulle kunna ersätta den svenska kronan och vad det skulle innebäraför det svenska samhället. För att utreda frågan har en avgränsning gjorts till att exemplifieramed kryptovalutan bitcoin och dess protokoll. Primärt har en litteraturstudie utförts kring såvälprotokollets uppbyggnad och säkerhet som dess användarvänlighet och möjlighet att axla densvenska kronans funktioner. Dessutom har en intervju genomförts med Björn Segendorf påRiksbanken i syfte att ta del av Riksbankens intresse och ställningstagande i frågan. Det finns såväl fördelar som nackdelar med en övergång till kryptovaluta. Infrastrukturenbakom bitcoin skapar möjlighet att tids- och kostnadseffektivisera betalningar inom vissaområden, och erbjuder samtidigt ett öppet, decentraliserat deltagande, samt ökadanvändarintegritet. Protokollet har dock begränsningar som bör tas i beaktande innan enövergång kan ske. Den höga energikonsumtion som krävs för att bearbeta transaktioner kananses utgöra störst hinder för Bitcoins fortsatta framväxt. Dessutom finns flerasäkerhetsaspekter som riskerar påverka användare av valutan negativt. Sverige har tekniska förutsättningar för att övergå till en kryptovaluta med tekniska kravliknande de för Bitcoin. Emellertid kan en kryptovaluta inte anses uppfylla de krav som ställspå en valuta. En övergång till kryptovaluta skulle även påverka Riksbankens möjlighet attbedriva penningpolitik. Slutsatsen blir således att en total övergång till kryptovaluta i Sverige ter sig ogynnsam med dagens förutsättningar. Kryptovaluta kommer med största sannolikhetatt fortsätta växa och ta marknadsandelar, men kommer att samexistera med traditionellavalutor och betalningssystem. Det känns inte osannolikt att en övergång till kryptovalutakommer att ske i framtiden när marknaden mognat och lösningar, på i rapporten belystaproblem, presenterats.

Bitcoin transactions are recorded in a public ledger known as the blockchain. Critical to its security is the distributed system that maintains the blockchain, which is run by individuals known as miners. Bitcoin has a total market capitalization of 273bn US Dollars as of September 2022, and one bitcoin is exchanged at 19,000 US Dollars in the market. Despite its vast market capitalization growth and popularity since its inception, the scalability and efficiency of Bitcoin are still puzzling questions for researchers. This paper used the daily time series data from the inception until September 7, 2022, to analyze the relationship between bitcoin miners' competition and the Bitcoin blockchain's efficiency. The number of daily transactions and average block validation time were used as indicators for the system's efficiency, and the Herfindahl-Hirschman Index (HHI) of miners' hash rate is used as a proxy for mining concentration. Controlling for necessary factors, the econometric analysis in this paper shows that concentration in bitcoin mining is associated with lower system efficiency. Higher competition between miners leads to a higher number of Bitcoin transactions and a lower block validation time.

The interest for blockchains and cryptocurrencies, like Bitcoin, from corporations, policymakers and individuals continues to increase. Due to its rapid growth in adoption, this technology can no longer be ignored. However, researchers have mainly been focused on the technical details of Bitcoin while the business and managerial opportunities have received little attention. This is especially true when looking at Bitcoin mining, the very fundamental operation that protects and maintains the network. Initiatives from the commercial sector are abundant as companies scramble to gain a competitive advantage in this industry but their business models and strategies are unexplored by modern literature. The thesis aims to contribute with knowledge to fill this gap in literature by studying the business models of Bitcoin mining and investigate their sustainability. This thesis is a case study with embedded units of three Swedish companies in the Bitcoin mining industry together with the commissioner company. The findings show that all companies have developed sustainable business models with very different approaches to value creation. In an industry marked by high dependence on volatile externalities, vertical integration of electricity production was shown to be a successful business model strategy for capturing value. Furthermore, the study highlights that such a strategy opens the possibility for a Bitcoin miner to create or take part in a private financial ecosystem of bitcoin that is largely disconnected from the traditional economy of local fiat currencies. The result of this study makes three contributions to literature. Firstly, the findings contribute to knowledge on the economics and the business models of the Bitcoin mining industry. Secondly, the thesis contributes by applying the business model strategy of vertical integration on the Bitcoin mining industry and showing that it can help companies create value. Lastly, the thesis contributes by developing the Business 2 Protocol (B2P) model for describing the dynamics of the Bitcoin mining industry. / Intresset för blockkedjor och kryptovalutor som Bitcoin från företag, lagstiftare och individer fortsätter att öka i snabb takt. Den snabba adoptionstakten som vi nu ser kan denna teknik inte längre förbises. Trots detta har nuvarande forskning främst fokuserat på de tekniska detaljerna kring Bitcoin medan de affärsmässiga möjligheterna i det stora hela har förbisetts. Detta gäller speciellt Bitcoin mining, den fundamentala verksamhet som skyddar nätverket och får det att fungera. Det finns gott om kommersiella initiativ i branschen där företag skyndar sig in i branschen för att etablera sig och försöker etablera marknadsmässiga övertag med affärsmodeller och strategier som är outforskade av den moderna forskningslitteraturen. Målet med denna uppsats är att utforska detta gap i litteraturen genom att studera affärsmodellerna hos Bitcoin mining och undersöka hur hållbara de är ur ett miljömässigt och finansiellt perspektiv. Det här examensarbetet är en studie av tre svenska företag inom Bitcoin mining branschen. Resultaten pekar mot att företagen i studien har arbetat med att utveckla hållbara affärsmodeller genom att närma sig värdeskapande från olika ingångsvinklar. I en bransch som är präglad av högt beroende av volatila externaliteter så har vertikal integration av energiproduktion visats vara en framgångsrik affärsstrategi för att skapa värde. Vidare så visar studien att en sådan strategi möjliggör för en Bitcoin miner att skapa eller ta del av ett privat finansiellt ekosystem av bitcoin som till stor del är frikopplat från den traditionella ekonomin av lokala fiatvalutor. Resultaten från det här examensarbetet gör tre bidrag till den befintliga litteraturen. För det första så bidrar det med kunskap om ekonomin och affärsmodellerna kopplade till Bitcoin mining branschen. Vidare så visas hur en strategi med en vertikalt integrerad affärsmodell kan användas för värdeskapande inom Bitcoin mining. Slutligen så utvecklas modellen Business 2 Protocol (B2P) för att beskriva dynamiken som finns i Bitcoin mining branschen.

Yes / We develop bespoke rational bubble models for Bitcoin and cryptocurrencies that incorporate both heavy tails and the probability of a complete collapse in asset prices. Empirically, we present robustified evidence of bubbles in Bitcoin and Ethereum. Theoretically, we show that liquidity risks may generate heavy-tails in Bitcoin and cryptocurrency markets. Even in the absence of bubbles dramatic booms and busts can occur. We thus sound a timely note of caution.

Yes / In this paper we draw upon the close relationship between statistical physics and mathematical finance to develop a suite of models for financial bubbles and crashes. The derived models allow for a probabilistic and statistical formulation of econophysics models closely linked to mainstream financial models. Applications include monitoring the stability of financial systems and the subsequent policy implications. We emphasise the timeliness of our contribution with an application to the two largest cryptocurrency markets: Bitcoin and Ripple. Results shed new light on emerging debates over the nature of cryptocurrency markets and competition between rival digital currencies.

This paper has four chapters. The first chapter serves as an introduction. The second chapter studies the transaction fees in the bitcoin system. The transaction fees and transaction volume in the bitcoin system increase whenever the network is congested and results from a simple VAR show that it is indeed the case. To account for the empirical findings, we build a model where users and miners together determine the transaction fee and transaction volume endogenously. Even though the fluctuating transaction fee mechanism in bitcoin introduces the extra cost of uncertainty to users, a back-of-envelope calculation shows that the cost of using the bitcoin network for transactions is still smaller than the cost of using the current conventional payment system with a fix transaction fee rate. The second chapter studies the time-varying price dispersion among different bitcoin exchanges. We identify the sources of price dispersion using a standard time-varying vector autoregression model with stochastic volatility. The results show that shocks to transaction fees and bitcoin price growth explain on average 20%, and sometimes more than 60%, of the variation of price dispersion. The third chapter studies the relationship between connections and returns in the bitcoin investor network. Using transaction data from the bitcoin blockchain, we reach three conclusions. First, on average, the annualized returns of connected addresses in the network are 20.75% above those of their unconnected peers. Second, returns also differ among those connected addresses. By dividing the connected ad- dresses into ten deciles based on their centrality, we find that addresses in the two most-connected deciles earn higher returns than the other connected addresses. Third, eigenvector centrality is more related than degree centrality to higher returns, implying that quality of connections matters. / Doctor of Philosophy / This paper has four chapters. The first chapter serves as an introduction. The second chapter studies the transaction fees in the bitcoin system. The transaction fees in the bitcoin system can fluctuate given the amount of unconfirmed transactions in the bitcoin network. Our results show that the transaction fees and transaction volume in the bitcoin system increase whenever the network is congested. To account for this findings, we build a model and show that users and miners together can determine the transaction fee and transaction volume. Even though the fluctuating transaction fee mechanism in bitcoin introduces the extra cost of uncertainty to users, a back-of- envelope calculation shows that the cost of using the bitcoin network for transactions is still smaller than the cost of using the current conventional payment system with a fix transaction fee rate. The second chapter studies the price dispersion among different bitcoin exchanges. Our results show that transaction fees and bitcoin price growth can be important explanatory factors for the price dispersion among different bitcoin exchanges. The third chapter studies the relationship between connections and returns in the bitcoin investor network. Using transaction data from the bitcoin blockchain, we reach three conclusions. First, on average, those connected addresses in the network earn higher returns than their unconnected peers. Second, returns also differ among those connected addresses. By dividing the connected addresses into ten groups based on their centrality, we find that addresses in the two most-connected groups earn higher returns than the other connected addresses. Third, eigenvector centrality, which measures the quality of connections, is more related than degree centrality, which measures the quantity of connections, to higher returns, implying that quality of connections matters.

Bakgrund: Riksbanken har haft sedelmonopol sedan 1897, vilket har inneburit att de sedan dess har haft ensamrätt att ge ut pengar. Den teknologiska utvecklingen och den ökade användningen av internet har lett till att virtuella samfund har utvecklats och i vissa fall har dessa samhällen skapat sin egen valuta. Bitcoin är världens första helt decentraliserade valuta och baserades i början av sin existens på teknisk nyfikenhet för en handfull hobbyister. Under de senaste åren har efterfrågan på bitcoins ökat vilket i sin tur har lett till att kursen stigit explosivartat.Syfte: Syftet med uppsatsen är att kartlägga och analysera de transaktionskostnader som kan uppstå när Bitcoin används som betalningsmedel, samt jämföra dessa kostnader med de transaktionskostnader som är förenade med användandet av traditionella betalningsmedel. Genomförande: Studien har genomförts genom en blandning av ett kvalitativt och ett kvantitativt tillvägagångssätt samt genom en bearbetning av transaktionskostnadsteorin inom ramen för ny institutionell teori. Empirin består av tre delar där studien inleds med en litteraturstudie för att läsaren ska få en inblick i vad Bitcoin är och hur valutan fungerar. Därefter presenteras det kvalitativa angreppssättet i form av semistrukturerade intervjuer och avslutningsvis presenteras studiens kvantitativa angreppsätt i form av en enkätstudie för att kartlägga användandet av bitcoin.Slutsats: Studien visar att transaktionskostnaderna för Bitcoin är högre än för traditionella betalningsmedel i och med att valutan i dagsläget är beroende av den traditionella infrastrukturen för betalningar samt att dess användare därutöver frånsäger sig det skyddsnät som traditionella betalningsmedel omfattas av. För att Bitcoin ska bli ett etablerat betalningsmedel krävs det att de grundläggande funktionerna för pengar uppfylls. Något som studien visar är bristfälligt i nuläge / Background: The Swedish central bank has had a currency monopoly since 1897, which has meant that they since then have had exclusive right to issue money. Technological advances and the increasing use of the Internet has led to an evolvement of virtual communities and in some cases these communities created their own currency. Bitcoin is the worlds first fully decentralized currency. In the beginning the currency was based on technological curiosity to a handful of hobbyists. In recent years demand for bitcoins has increased, which has led to a dramatic price increase.Aim: The purpose of this thesis is to identify and analyze the transaction costs that may arise when Bitcoin is used as means of payment, and to compare these costs with the transaction costs associated with the use of traditional means of payment. Completion: The study was conducted through a mixture of qualitative and quantitative approaches as well as a processing of the transaction cost theory in the context of new institutional theory. The empirical material consists of three parts in which the study begins with a literature review for the reader to get a glimpse of what Bitcoin is and how the currency works. The qualitative approach is in the form of semi-structured interviews and finally the study's quantitative approach is presented in the form of a questionnaire to survey the use of bitcoin.Conclusion: The study shows that Bitcoins transaction costs are higher than conventional means of payments when account is taken to the fact that the currency is dependent on the current financial structure. The user furthermore disclaims the safety net that traditional means of payments offer. For Bitcoin to become an established means of payment it requires that the basic functions of money are fulfilled which the study shows is inadequate.

A lo largo de la historia de la humanidad, el dinero ha tomado distintas formas, valores y alcances geopolíticos, ha llegado a situarse como la principal herramienta para engrandecer o destruir naciones. Hoy en día, muchas de las transacciones ya no son, necesariamente, en efectivo; una gran mayoría realiza pagos con dinero electrónico, a través de los aplicativos; y existe también otro grupo de usuarios que utiliza las criptomonedas para hacer sus operaciones. Estas últimas han llamado poderosamente la atención de académicos, financistas y público en general, pues representa un fenómeno de rápido crecimiento. Las criptomonedas, entonces, han respondido a la demanda insatisfecha de usuarios que encuentran grandes barreras en canales tradicionales como, por ejemplo, poca cobertura de las entidades financieras, demoras en las transacciones internacionales, filtración de información personal, exposición a hurtos, entre otros. Por estos motivos, las personas están dispuestas a aceptar nuevas formas de dinero que incorporen tecnología en su funcionamiento y uso, y que acabe con las barreras que presenta el sistema financiero conservador. Sin embargo, aparentemente, para algunos autores, no todas son ventajas en las criptomonedas, sino que presentan algunas características adversas que se califican como nocivas por determinadas fuentes, los bancos centrales principalmente. Esto se ha convertido en tema de discusión e investigación por parte de los gobiernos, que buscan la manera de regular este dinero intangible sobre el cual actualmente no tienen control. En este Paper se analiza, de acuerdo a lo expresado por distintos autores, si las criptomonedas deben ser consideradas dinero. / As has happened throughout the history of humanity, money has taken different forms, values and geopolitical domains, becoming the main tool to magnify or destroy nations. Many of the daily transactions are no longer necessarily in cash; a great majority makes payments with electronic money through the applications; and there is also another group of people who use cryptocurrencies to do their financial operations. The latter have attracted the attention of academics, financiers and the audiences in a powerful way, as it represents a fast growth phenomenon. The cryptocurrencies have responded to the dissatisfied users who find great barriers in traditional channels such as: poor coverage of financial institutions, delays in international transactions, filtering of personal information, exposure to thefts, among others. For these reasons, people are willing to accept new forms of money that incorporate technology in its operation and use, and to break down the barriers that the conservative financial systems has. But, apparently for some authors, not all are advantages when it comes to cryptocurrencies, these might have some adverse characteristics that are qualified as harmful by certain sources, mainly Central Banks. This has become a topic of discussion and research by governments, who seek ways to regulate this intangible money that they currently have no control over. In this Paper we analyze, according to what different authors has been expressed about whether cryptocurrencies should be considered money. / Trabajo de Suficiencia Profesional

Syftet med denna uppsats är att undersöka Bitcoins egenskaper och funktioner samt diskutera dess eventuella påverkan på dagens ekonomiska system. Den forskning som publicerats på ämnet undersöker främst tekniska och säkerhetsmässiga detaljer, det är därför intressant att analysera ur en ekonomisk synvinkel. Genom att använda makroekonomisk teori ska jag försöka klargöra om Bitcoin kan konkurrera med dagens valutor. Bitcoins volatilitet i värde gör det tvivelaktigt, en volatilitet som inte kan kontrolleras. Bitcoin uppfyller delar av de funktioner och egenskaper som definierar en valuta enligt makroekonomisk teori, men inte lika många som fiatpengar och Bitcoin bör därför inte kunna konkurrera med dagens valutor. Fiatpengar är att föredra även i andra områden som acceptans och säkerhet. Bitcoin är bättre ur ett kostnadsperspektiv, dock under specifika omständigheter som sällan uppfylls. Bitcoin kommer därför tills vidare fungera som ett alternativ betalningssystem och valuta för personer och företag som är villiga att ta de risker som medföljer. / The aim of this thesis is to investigate Bitcoins attributes and functions and discuss its effect on today’s economic system. The academic work that been published on the subject investigate technical and safety aspects, it is therefore interesting to analyse from a macroeconomic point of view. By using macroeconomic theory I will try to clarify if Bitcoin can compete with today’s currencies. Bitcoins volatility in value makes it doubtful. Bitcoins volatility in value makes it questionable, a volatility that cannot be controlled. Bitcoin meet part of the functions and characteristics that define a currency as macroeconomic theory, but not as many as fiatmoney and should therefore not be able to compete with today's currencies. Fiatmoney is preferable also in other areas such as acceptance and security. Bitcoin is better from a cost perspective, but under specific circumstances that are rarely met. Bitcoin will therefore until further serve as an alternative payment system and currency individuals and companies that are willing to take the risks included.

Bakgrund: Satoshi Nakamoto kallas gruppen eller individen bakom kryptovalutan Bitcoin. Syftet med valutan är att kunna genomföra transaktioner snabbt, anonymt och kunna hålla tredje part, centralbanker och banker utanför. Syfte: Syftet är att undersöka och analysera svenska bankers inställning till Bitcoin. Det författarna till denna studie vill undersöka är hur bankens inställning ser ut till valutan om den blir allt mer populär att företag och privatpersoner börjar genomföra transaktioner utan inblandning med banken. Metod: För att kunna svara på syftet har studien genomförts med en abduktiv metod. Datainsamling har skett genom att intervjua relevanta personer på banker genom semistrukturerade intervjuer. I analysen förklaras sedan den datainsamlingen utifrån studiens teoretiska referensram. I syfte att få kvalificerade bedömningar om framtiden har studien använt sig av delfi-metoden. Slutsats: Författarna till studien kom fram till att Bitcoin inte utgör något hot mot bankerna eftersom de kan kopiera tekniken och bankens kärnverksamhet handlar inte bara om att genomföra transaktioner. Den underliggande tekniken till Bitcoin tillsammans med en mer legitimerad valuta (exempelvis e-krona) har en möjlighet att användas av banker i framtiden. / Background: Satoshi Nakamoto is the group or person behind the cryptocurrency Bitcoin. The purpose of the currency was to make it possible to send money fast, anonymously and without involvement of third party, banks or national bank. Purpose: The purpose of our study is to be able to answer our theoretical questions through our empirical research. The authors of this study want to investigate how the bank’s attitude looks like if the currency becomes increasingly popular that companies and individuals begin to make transactions without their involvement. Methodology: To make it possible to answer our purpose, we have chosen an abductive method. Our data collection is from semi-structured qualitative interviews from relevant persons on banks. In our analytical part of the study we explain our collected data with help from our theoretical framework. In order to obtain qualified assessments, the study has used the delfi method. Conclusion: Our conclusion was that Bitcoin does not pose a threat against the banks since they can copy the technology behind it right away and as well because the bank’s core business is not about making transactions. The transaction technology Bitcoin relies on, in combination with a legitimate currency (for example the E-krona), has a possibility to be used by banks in the future.