Introduction:
Bitcoin. First, the timing of the release was a direct response to a crisis of confidence in a reserve currency, and there was no better time than 2008. Faced with an era of dis- quiet and a gradual loss of trust in the fiat currency system introduced in 1971, as well as the prospect of massive printing of money known as quantitative easing, the white paper offers a set of feasible alternative solutions to those who have little faith in a centralized monetary system. Cryptocurrency was first introduced in the early 1990s by an academic entrepreneur David Chaum in the form of eCash and DigiCash. The National Security Agency released an analytic report of great significance on the same subject over the Internet in 1996. But few in the financial world paid much attention to the development of cryptocurrency until the global financial crisis. It only caught the attention of many financial experts when successive quantitative easings pushed up asset prices. Given that the reversal of quantitative easing has unknown consequences and that China has started its bilateral swap agreements, the BRICS Development Bank and the Asian Infrastructure Investment Bank begin to challenge the conventional international institutions, and interest has begun to center on alternative monetary systems that include the digital cur- rency system. Cryptocurrency, a special class of digital currency, continues to generate interest among those who are uncomfortable with national currency beleaguered by huge liability, rather than backed by assets, of some central governments.
Second, the white paper of Satoshi was the first paper that proposed a distributed monetary system and challenged the central authority that controlled money supply. The proposed system was designed to address some of the issues that a centralized system could not. In particular, the control was decentralized and the supply of money was pre- determined. Given the open-source nature of the Bitcoin protocol, there are too many participants for anyone to effectively monitor and regulate single-handedly. For the first time, governments realize the decentralized nature poses great problems for anyone who intends to regulate a legal entity or small number of entities, let alone to hold them responsible for any wrongdoing.
Third, there are a lot of unanswered questions about the Bitcoin system, thus creating curiosity among those who follow the development. In particular, the identity of the cre- ator or group of creators of Bitcoin remains a mystery. While there have been many attempts to uncover the mystery surrounding Mr. Nakamoto, including at least one hacker who claimed to know the identity of Mr. Nakamoto after gaining access to his e-mail account, Mr. Nakamoto’s identity is still unknown to the public. The mysterious nature surrounding Bitcoin has generated even more following. The community remains amazed at the foresight of the creator(s) and respects the reason for remaining under the radar.
Fourth, the Bitcoin invention has put regulators on the spotlight. Any attempt to reg- ulate the cryptocurrency protocol has proved to be extremely difficult. However, reg- ulators have managed to study the issues carefully in regulating the intermediaries and have focused in the areas of consumer protection, antimoney laundering, and counter- terrorist financing. The balance between regulation and entrepreneurship has proved to be most challenging to achieve. This has therefore attracted a lot of attention from tax authorities, central bankers, and crime busters. Never before has technology invention attracted so much attention and posed so many challenges as it involves international finance, monetary system, and innovative financial technology with cyber security.
Fifth, the income and wealth inequality of the world has risen rapidly since the quan- titative easings. With six times wealth-to-income ratio, the highest since the late 1930s, governments are focusing on financial incl…
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