Bitcoin: How Can A Virtual Currency Attain Real Market Value?

By D.N. Salter

Examining how Bitcoin functions as a virtual currency and is able to attract substantial capital investment.

• Language: English
• Publisher: Lulu.com
• Release date: Nov 10, 2016
• ISBN: 9781326840433

Book preview

BITCOIN:

HOW CAN A VIRTUAL CURRENCY ATTAIN REAL MARKET VALUE?

D. N. SALTER

MAY 1, 2014

Table of Contents

BITCOIN:

Introduction

The Alchemist

The Code

Bitcoin

Transaction Chain

Block Chain

Proof of Work

Mining

Double-Spend

Irreversible

HOW CAN A VIRTUAL CURRENCY ATTAIN REAL MARKET VALUE?

The Digital Gold Analogy

Virtual Currency

Get Real

Parting Thoughts

REFERENCES

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BITCOIN:

Introduction

Like the Arab Spring, it was a long time coming, but a viable alternative digital currency has finally arrived.

Within Bitcoin’s code, embedded in the pragmatism of its operational language, there is a subtext as idealistic, as optimistic and powerful as any charter or revolutionary manifesto. For the faithful there simply isn’t hyperbole enough to capture the magnitude of the phenomenon.

It has demonstrated that it can survive—and thrive—where other digital currencies failed to gain traction. Bitcoin has proven itself to be robust enough to withstand the assaults of crooks, software bugs, rampant opportunism, hackers, wary governments, dizzying aerobatic market swings, the reactionaries, the pirates, and the naysayers, and it has established the software protocol upon which most other cryptocurrency variants (or altcoins) more or less depend.

Bitcoin adapts the age-old barter system to a globalised marketplace, while attempting to avoid the limitations of bartering—especially the so-called coincidence of wants problem. It resuscitates the ancient custom of two-party trading and minimises the interference of a third party. This sounds simple enough, but in reality is incredibly difficult to accomplish—an uncomplicated means of exchanging value from one peer to another directly, regardless of geographical location and without recourse to any intermediate agency.

The coincidence of wants problem (often double coincidence of wants) is an important category of transaction costs that impose severe limitations on economies lacking money and thus dominated by barter or other in-kind transactions. The problem