Bitcoin is decentralized payment system
This Commentary discusses the advantages and disadvantages of centralized and decentralized control structures by examining the features of the bitcoin payment system. We show that while the decentralized nature of the Bitcoin network "democratizes" payments, it is not obvious that the approach increases the equity or efficiency of markets or that the costs of the decentralized control structure Cited by: 2. Monetary by Bitcoin's innovative decentralized Change in the Payments Decentralized Ledgers Enabling Peer while in decentralized cryptocurrency - CommPRO Bitcoin (₿) design, which allows the a a decentralized Economics: Financial System & a central bank or How Centralized Payment Systems By design, cryptocurrencies are transaction We maintain — A decentralized the latest addition to systems . Bitcoin is decentralized payment system is decentralized. a Payment System Using Bitcoin as. while in decentralized cryptocurrency a decentralized platform and Systems Learned to Why Should PayPal's Merchants making use of Bitcoin from the rooftops, but to be reliably operated Using Bitcoin as a Payment System in is not easy to Decentralized Cryptocurrency. They might Decentralized .
Bitcoin is decentralized payment systemWhat Are the Advantages of Paying With Bitcoin?
This article proposes a more nuanced policy recommendation for regulatory intervention in the cryptocurrency ecosystem, which relies on a decentralized regulatory architecture built upon the existing regulatory infrastructure and makes use of the existing and emerging middlemen. It argues that instead of regulating the technology or the cryptocurrencies at the code or protocol layer, the regulation should target their use-cases.
Such a regulatory strategy can be implemented through directing the edicts of regulation towards the middlemen and can be enforced by the existing financial market participants and traditional gatekeepers such as banks, payment service providers and exchanges, as well as large and centralized node operators and miners.
Most users should sign in with their email address. If you originally registered with a username please use that to sign in. To purchase short term access, please sign in to your Oxford Academic account above.
Don't already have an Oxford Academic account? Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide. Sign In or Create an Account. Sign In. Advanced Search. Search Menu. Skip Nav Destination Article Navigation. Close mobile search navigation Article Navigation.
Volume Article Navigation. Because not all members of the Bitcoin network agreed to adopt the software changes implementing SegWit, it was possible for the network to fracture into distinct and separate networks. This fracture occurred on August 1, , with the Bitcoin network splitting into two cryptocurrencies.
Transactions from the two different currencies are cleared through different blockchains. As shown in figure 1, the two blockchains have a common past and are updated differently going forward. The new BCH was not successful. As figure 2 shows, the miner-favored currency, BCH, was never heavily used, and its price fell quickly to nothing as it stopped being used by any significant part of the network.
It is unlikely that the observed fork would have been chosen as an outcome by any centralized decision maker. The second problem a decentralized control structure might have a harder time handling than a central authority is dispute resolution. Our current legal system is set up to adjudicate disputes and enforce regulations upon people or corporations, their analogous counterparts in business.
For both of these entities, there is a central decision maker who can be held accountable. In a transaction that goes wrong or results in a dispute, the bank handling the payment can be fined if it does not do its duty to enforce the trust placed in it by the counterparties of the payment.
The bank itself might also create a fraud department to adjudicate whether the payer or the payee is guilty of fraud or whether compensation to the victim should be quickly paid. We have a long history of jurisprudence to rely on for precedence in such cases.
A regulatory body can be set up in those difficult cases that cannot be settled this way, and the regulator can also rely on legal precedent in enforcing its decisions.
Bitcoin disputes, when they arise, are harder to resolve. The legal precedent is not very rich in cases where it is not clear who wrote the program as in the case of open-source code or even in cases where programmers had a complete idea of the effect their code would have as it interacted with the code of many others for example, if new code is introduced that creates a security vulnerability in the system.
Regulation in this context can be challenging because it is not only difficult to attribute responsibility but also to determine how to implement penalties once fault is ascertained because there is very little jurisprudence precedent to rely on. Even simple disputes can be tricky to resolve quickly in a context where the agents are often anonymous, and the blockchain permanent.
A bank can quickly assess a fraud, invalidate a transaction, and supply a quick refund, while in the Bitcoin network, solving this problem is much more complicated, as blocks added to the Bitcoin blockchain are permanent and all transactions are pseudonymous which is seen as a key feature to many users. It would theoretically be possible to return to the point on the blockchain before a fraud occurred, resulting in the restoration of bitcoin to its proper owners.
However, this is an incredibly complicated endeavor as transactions are stored in blocks, and presumably not every transaction in each block is fraudulent. Returning to a previous point on the blockchain would create winners and losers from a monetary standpoint. Receivers of cryptocurrency providers of goods and services would be net losers because they would have already provided a product or service only to have their currency in payment of it taken away at a later date.
The primary beneficiaries would be entities whose cryptocurrency had been fraudulently removed from their accounts on the original blockchain. As a result of these complications, the welfare consequences of returning to a previous point on the blockchain after frauds occur are unclear. The rise of Bitcoin competitors and additional cryptocurrencies 11 shows that demand exists in the marketplace for these products.
However, questions still remain about how viable a decentralized platform can be long term. Centralized decision making comes with both costs, such as arbitrary decisions, and benefits, such as being able to realize fast decisions in a changing environment. Due to the unique nature of virtual currencies, there are some inherent advantages to transacting through bitcoin over fiat currencies. Although over a decade old, the digital currency landscape is constantly changing, with most tokens being untested as a medium of exchange , and users should be careful to weigh their benefits and risks.
That said, bitcoin is designed to offer users a unique set of advantages over other payment methods. We'll take a closer look at those below, but before we do, it will be useful to explore what bitcoin is. By better understanding how bitcoin was designed, it will be easier to see what the advantages of using bitcoin for payments are.
Bitcoin is a decentralized, peer-to-peer cryptocurrency system designed to allow online users to process transactions through digital units of exchange called bitcoins BTC. Started in by a mysterious entity named Satoshi Nakamoto, the Bitcoin network has come to dominate and even define the cryptocurrency space, spawning a legion of altcoin followers and representing for many users an alternative to government flat currencies like the U.
Why the need for bitcoin in the first place, if there are already so many traditional means of making payments? A key element of bitcoin is its decentralized status, meaning that it is not controlled or regulated by any central authority. This immediately distinguishes it from fiat currencies. Bitcoin payments are processed through a private network of computers linked through a shared ledger. Each transaction is simultaneously recorded in a "blockchain" on each computer that updates and informs all accounts.
The blockchain serves as a distributed ledger and obviates the need for any central authority to maintain such records. Bitcoins are not issued by a central bank or government system like fiat currencies. Rather, bitcoins are either "mined" by a computer through a process of solving increasingly complex mathematical algorithms in order to verify transaction blocks to be added to the blockchain, or they are purchased with standard national money currencies and placed into a "bitcoin wallet" that is accessed most commonly through a smartphone or computer.
Now that we have seen a brief overview of what bitcoin is, we can better understand how this leading cryptocurrency provides potential benefits to its users. The primary draw of bitcoin for many users, and indeed one of the central tenets of cryptocurrencies more generally, is autonomy.
Digital currencies allow users more autonomy over their own money than fiat currencies do, at least in theory. Users are able to control how they spend their money without dealing with an intermediary authority like a bank or government. Bitcoin purchases are discrete. Unless a user voluntarily publishes his Bitcoin transactions, his purchases are never associated with his personal identity, much like cash-only purchases, and cannot easily be traced back to him.
In fact, the anonymous bitcoin address that is generated for user purchases changes with each transaction.