Bitcoin : users’ characteristics, motivations and investment behaviours

In less than a decade, the cryptocurrency known as Bitcoin has gone from a fringe phenomenon to a topic of increasing interest to academia and mainstream investors. However, despite the growing body of research seeking to understand Bitcoin, the pseudonymous, decentralised, and globally-diffused nature of its user base means that the individuals who use it remain poorly understood. In particular, the motivations, risk-appreciation, and investment behaviours of early adopters and innovators are subject to supposition in the absence of data derived from the user base. This thesis seeks to address this gap in knowledge by employing a multi-stage, mixed methodology approach and a theoretical framework to understand the Bitcoin user base. Utilising semantic analysis, a survey of online cryptocurrency communities, and econometric time-series analysis, this thesis addresses the extent and nature of Bitcoin in hedging; how individual users perceive their own motivations, uses, and risks that have driven their behaviour; and the nature of the relationship between the prices of cryptocurrency and indices of confidence. Analysis of the data determined that the use of Bitcoin as an instrument of hedging is limited, and influenced by political and institutional factors. Likewise, its motivations, uses, and risks are reflective of the users’ political ideology, with the community and marketplace becoming more sophisticated as they evolve over time. Additionally, despite several case studies demonstrating risk-averse adoption of Bitcoin, there is no relationship between its prices and confidence.Doctor of Philosoph

The New Wild West: Preventing Money Laundering in the Bitcoin Network

Bitcoin is the most popular, decentralized virtual currency in the world. Businesses both large and small have begun to accept bitcoins as a legal form of payment. In addition, Bitcoin currency exchanges, which trade bitcoins for real currency, have quickly arisen because of the currency’s growing popularity. But Bitcoin’s evolution has also been marred with criminality. Hundreds of millions of dollars’ worth of bitcoins have been stolen from businesses and large Bitcoin currency exchanges. The infamous “Silk Road”—an illegal, online drug market, which the FBI took down in 2013—dealt in this currency. The use of bitcoins for illicit purposes not only facilitates criminal activity throughout the world, but also undermines the security of individuals using bitcoins for legitimate purposes, such as users who send remittances to family members abroad. The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, stands at the forefront of Bitcoin regulation. FinCEN was the first federal agency to address convertible virtual-currency regulation, providing legal guidance (the Guidance) explaining how the Bank Secrecy Act applies to convertible virtual currencies. For this reason, this Article analyzes and evaluates the Guidance’s standards regarding convertible virtual currencies. This Article proposes a refined regulatory framework that both deters money laundering in Bitcoin—a pervasive problem in the world of decentralized virtual currencies—and allows the recognized benefits of this virtual currency to develop free from innovation- stifling regulation. Among other benefits, Bitcoin increases access to financing in impoverished areas, provides an avenue for low-cost remittances, lowers transaction costs for businesses burdened with high credit-card fees, and perhaps most importantly, creates a global platform for financial and technological innovation to flourish. While authorities recognize these advantages, the potential for criminal abuse nevertheless remains salient. This Article seeks to provide the optimal balance between these often-conflicting interests

Cashless Societies and the Rise of the Independent Cryptocurrencies: How Governments Can Use Privacy Laws to Compete with Independent Cryptocurrencies

Many individuals (including governments) envision living in a future world where physical currency is a thing of the past. Many countries have made great strides in their efforts to go cashless. At the same time, there is increasing awareness among citizens of the decreasing amount of privacy in their lives. The potential hazards cashless societies pose to financial privacy may incentivize citizens to hold some of their money in independent cryptocurrencies. This article argues that in order for governments in cashless societies to keep firm control over their money supply, they should enact stronger privacy law protections for its citizens in order to decrease the real or perceived loss of (financial) privacy. This paper compares the privacy laws that exist today in both the United States and the European Union and suggests combining elements of both legal systems in order create a more privacy-friendly legal framework that can enable governments to complete against independent cryptocurrencies

Advancing a Framework for Regulating Cryptocurrency Payments Intermediaries

This Article looks at competing models for regulating providers of services to individuals and businesses that take cryptocurrencies in payment for goods and services, including operators of online wallets and exchanges, and other cryptocurrency market intermediaries whose functions resemble money service businesses or money transmission. We conclude that, in addition to whatever money services or money transmission prudential regulation the States or federal government may adopt, the operation of wallets and exchanges requires a new commercial law that lays out rights and liabilities of cryptocurrency users in a robust and transparent fashion. We use Article 4A of the Uniform Commercial Code as a model for regulating cryptocurrency transactions in which intermediaries play a role

Evolving Bitcoin Custody

The broad topic of this thesis is the design and analysis of Bitcoin custody systems. Both the technology and threat landscape are evolving constantly. Therefore, custody systems, defence strategies, and risk models should be adaptive too. We introduce Bitcoin custody by describing the different types, design principles, phases and functions of custody systems. We review the technology stack of these systems and focus on the fundamentals; key-management and privacy. We present a perspective we call the systems view. It is an attempt to capture the full complexity of a custody system, including technology, people, and processes. We review existing custody systems and standards. We explore Bitcoin covenants. This is a mechanism to enforce constraints on transaction sequences. Although previous work has proposed how to construct and apply Bitcoin covenants, these require modifying the consensus rules of Bitcoin, a notoriously difficult task. We introduce the first detailed exposition and security analysis of a deleted-key covenant protocol, which is compatible with current consensus rules. We demonstrate a range of security models for deleted-key covenants which seem practical, in particular, when applied in autonomous (user-controlled) custody systems. We conclude with a comparative analysis with previous proposals. Covenants are often proclaimed to be an important primitive for custody systems, but no complete design has been proposed to validate that claim. To address this, we propose an autonomous custody system called Ajolote which uses deleted-key covenants to enforce a vault sequence. We evaluate Ajolote with; a model of its state dynamics, a privacy analysis, and a risk model. We propose a threat model for custody systems which captures a realistic attacker for a system with offline devices and user-verification. We perform ceremony analysis to construct the risk model.Comment: PhD thesi