No / The surprise advent of the peer-to-peer payment system Bitcoin in 2009 has raised various
concerns regarding its relationship to established economic market ideologies. Unlike fiat
currencies, Bitcoin is based on open-source software; it is a secure cryptocurrency, traded as
an investment between two individuals over the internet, with no bank involvement.
Computationally, this is a very innovative solution, but Bitcoin’s popularity has raised
a number of security and trust concerns among mainstream economists. With cities and
countries, including San Francisco and Germany, using Bitcoin as a unit of account in their
financial systems, there is still a lack of understanding and a paucity of models for studying
its use, and the role Bitcoin might play in real physical economies. This project tackles
these issues by analysing the ramifications of Bitcoin within economic models, by building
a computational model of the currency to test its performance in financial market models.
The project uses established agent-based modelling techniques to build a decentralised Bitcoin
model, which can be ‘plugged into’ existing agent-based models of key economic and financial
markets. This allows various metrics to be subjected to critical analysis, gauging the progress
of digital economies equipped with Bitcoin usage.
This project contributes to the themes of privacy, consent, security and trust in the digital
economy and digital technologies, enabling new business models of direct relevance to
NEMODE. As computer scientists, we consider Bitcoin from a technical perspective; this contrasts
with and complements other current Bitcoin research, and helps document the realizable
risks Bitcoin and similar currencies bring to our current economic world.
This report outlines a comprehensive collection of risks raised by Bitcoin. Risk management
is a discipline that can be used to address the possibility of future threats which may
cause harm to the existing systems. Although there has been considerable work on analysing
Bitcoin in terms of the potential issues it brings to the economic landscape, this report performs
a first ever attempt of identifying the threats and risks posed by the use of Bitcoin from
the perspective of computational modeling and engineering. In this project we consider risk at all levels of interaction when Bitcoin is introduced and transferred across the systems. We look
at the infrastructure and the computational working of the digital currency to identify the
potential risks it brings. Additional information can be seen in our forthcoming companion
report on the detailed modeling of Bitcoin.
| Identifer | oai:union.ndltd.org:BRADFORD/oai:bradscholars.brad.ac.uk:10454/10717 |
| Date | January 2014 |
| Creators | Kiran, Mariam, Stannett, M. |
| Source Sets | Bradford Scholars |
| Detected Language | English |
| Type | Report, No full-text in the repository |
| Relation | http://www.nemode.ac.uk/wp-content/uploads/2015/02/2015-Bit-Coin-risk-analysis.pdf |
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