Blockchain and Cryptocurrencies in Society

The place of Cryptocurrencies and the Blockchain

in Society

Aurélien Ottaviano

CMI-SIC(2nd Year)

University of Cergy-Pontoise

April 22, 2018

Abstract

Cryptocurrencies rely on a public ledger that groups transactions and allow for

verification. This system rewards honest users and makes hijacking really costly

thanks to its structures. Governments reacted to this new technology by either

preventing its usage, ignoring it, or integrating it as a legal mean of payment.

Despite hostile press reviews, Bitcoin appears as the most ecologically viable

currency and is not subject to corruption due to its public nature. Its only

economic drawback is its ever-rising exchange rates that makes it a speculative

tool rather than a proper currency. The Blockchain technology could be used

to perform auto-enforced contracts that can’t be cancelled. These contracts

suppressed the need for a third-party, but no flexible clause can be put in such

contracts. This technology could be used to manage a company or even a

government, through Smart contracts and smart data exchange.

1

Introduction

chain work. In section 3 will be discussed Bitcoin’s place in society, i.e.

the regulations and legislation that apply to it, as well as its sustainability. In

section 4, we will show a broader picture of what the Blockchain technology could (and probably will) achieve,

in the fields of contracts, automated

management and by extension governments.

This article is a follow-up of my previous works on Cryptocurrencies and the

Blockchain technology. In my former

article, i performed an analysis on Bitcoin from a technical standpoint. This

article will be oriented towards the societal impact of Cryptocurrencies and

the potential developments that will arise with the advent of the Blockchain.

In section 2, I will sum up the key

technical parts that are necessary to

understand how Bitcoin and the Block-

1

2

Bitcoin and its un- 3

derlying technologies

Bitcoin simultaneously refers to a dematerialized currency, and to the P2P

exchange protocol that is used to trade

it. It was originally introduced in order to get rid of the trust-based model

that exists within financial institutions

[1], and thus offers a major advantage

over a more classical trading system:

it cut transaction fees due to its lack

of trusted third-party, allowing small

day-to-day transactions to be executed

without loosing a significant amount of

money in the process.

3.1

Bitcoin’s place in society

Regulation and Legislation regarding Bitcoin

The decentralized nature of Cryptocurrencies questions the current place of

governmental institutions, and when they

gained in popularity, Nations had to

react to this new technology. The most

common options were to prohibit the

usage of Bitcoin, to ignore its existence

in the legislation, or to authorize cryptocurrencies [2].

A few year passed since Bitcoin was

Bitcoin relies on a public ledger (cal- first introduced, and the legislation in

led the Blockchain), maintained on a some countries gained in complexity.

P2P server, which contains a list of Here are a few notable examples:

groups of transactions (called blocks),

• The United States, Canada, and

chained together and signed cryptographThe EU among others fully acically [1] to ensure the authenticity of

cept cryptocurrencies as a mean

the block. The system rewards those

of Payment, and its taxation is

that maintain the Blockchain, by asthe same as if it was a regular

signing them new Bitcoins for calcucurrency [2].

lating difficult cryptographic functions

required for signing a block.

• India and Japan treat Bitcoin as

a legal mean of payment for parTo hijack the Blockchain, attackers

ties that accept them, but does

would have to control more than half of

not consider it legal tender [2].

the global ”CPU power” to be able to

• Israel recognizes Bitcoin, but only

calculate those functions fast enough

as a personal asset, and taxes it

...