computer science concept paper
carmen04
cryptocurrencies.docxRunning head: CRYPTOCURRENCIES 1
CRYPTOCURRENCIES 3
Cryptocurrencies
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Cryptocurrencies
Cryptography can be described as hidden communication or value, as in cryptocurrencies, which is propagated in a secure form. Cryptography is therefore the study or practice in which information is constructed in a manner that is hidden and distributed for decoding so that it can be understood. The need for secure communication and transactions saw an increase in the use of cryptography and its representation as digital currencies. It is very important in this context to define and explore the concept of cryptocurrencies. This analysis will utilize Bitcoin as an example of a cryptocurrency through which the main objectives will be achieved. This example will be used to overview the main characteristics of cryptocurrencies and how they influence the economy. A cryptocurrency is essentially a platform that utilizes concepts of cryptography to enable secure transactions as well as the establishment of new units within the economy. Considering the significance of cryptocurrencies in the contemporary world, it is essential to explore and understand the impact of cryptocurrencies on business, how people trust currencies, their social implications as well as how this technology can be applied in future to develop a more efficient economy.
The Economics of Cryptocurrencies
To properly understand the concept of cryptocurrencies, it is important to utilize a base model to explain how it works. Van Alstyne (2014) defines Bitcoin as a decentralized electronic cash system that uses peer-to-peer networking, digital signatures and cryptographic proof so as to enable users to conduct irreversible transactions without relying on trust. Cryptocurrencies are therefore a form of digital currency that is utilized within the external environment of banking institutions and is distributed through the internet. Increased virtual financial activities in the internet has depicted great potential in Bitcoin and other cryptocurrencies. The technical framework that made provisions under which cryptocurrencies were conceptualized was created by Satoshi Nakamoto.
Banks use what is known as centralized currency systems in which the value of currencies and their amounts available in specific markets are determined by the government or specific companies. On the contrary, decentralized cryptocurrency involves management of ledgers by a community called miners who secure, balance and maintain the integrity of the ledgers. A particular timestamp is used by these individuals to validate transactions and toggle the value of cryptocurrencies. Bitcoin was the very first digital currency of its kind. Therefore, most cryptocurrencies were developed based on the architecture of Bitcoin. Characteristically, more competitive markets have a larger number of cryptocurrencies as compared to others. It is the transfer of Bitcoin coins from one virtual destination to the other that makes up transactions (Gervais, Karame, Capkun, & Capkun, 2014). The security of ledgers within this system is entirely based on trust bestowed upon miners who actuate the transactions.
Impact of Bitcoin on Business
The very design of cryptocurrencies is configured to establish a more efficient way for business transactions to take place. There have been reports detailing the main limitations of centralized currency systems in satisfying the wave of digital migration in contemporary businesses. This has highlighted the need for a decentralized currency system that will ensure ease of virtual transactions while maintaining the integrity of the currency. There is no doubt that digital currencies bring a level of efficiency that a banking economy has not been able to achieve. As a matter of fact, the provision of cryptocurrencies objectifies the limitation of normal currency that will be in circulation. It is therefore a proven fact that cryptocurrencies make business transactions more efficient. Another influence it has is the integrity of currency. The involvement of governments and companies in the control of amount and value of currency in centralized systems raises the question of what conflicting interests do to the integrity of currency.
On the contrary, the use of miners in the Bitcoin system ensures that specific decisions critical to the integrity of currency are distributed to remotely positioned and trusted individuals. The concept of a blockchain makes the Bitcoin system as transparent as possible. Citing from the conceptualization stage of any cryptocurrency, gaining public confidence and trust is very important. Perhaps the most efficient way in which Bitcoin achieves this objective is through blockchain. It is fundamentally a well distributed database of records detailing all ledger transactions that are shared between individuals and parties within the system (Crosby, Pattanayak, Verma, & Kalyanaraman, 2016). It is an efficient way of ensuring that information on transactions is directed to the correct audience who have the stakes to influence the value and characteristics of Bitcoin coins in the market. Businesses need this form of assurance to exchange value in their transactions.
Trust and Currencies
People must develop trust and confidence on a currency before it is considered admissible. Bitcoin, besides utilizing a blockchain framework to ensure transparency, has a unique user matching system to ensure that attackers cannot map a profile so as to take advantage of the system. Bitcoin uses public keys as the primary tool users use to access and generate transactions. While a user has the capability of generating as many public-keys as possible, these can only be made through a user’s node only (Reid & Harrigan, 2013). This gives the user full control on the origin of transactions. This generates considerable trust from the people as compared to centralized banking system which distributes information through numerous virtual nodes where people can access their currencies. The use of these unique keys and corresponding addresses where users exchange the ownership of Bitcoin coins as the major selling point of this cryptocurrency (Reid & Harrigan, 2013). Before a cryptocurrency is launched, the public is sensitized on the architecture and functional characteristics of the system. In this context, the consent of the public in the form of acceptance and confidence is used as a pass key to reflect the possible traffic the currency will most likely achieve. This means that for a currency to get the people’s trust, it must demonstrate satisfactorily, how integrity, security, value disposition and diversity will be achieved within the framework. Bitcoin, as a pioneer cryptocurrency in this system has utilized its weak points to revolutionize the approach to creation and disposition of digital currencies.
Social Impact of Bitcoin and other Cryptocurrencies
The introduction of Bitcoin aroused social debates on how it would socially transform the platform of exchange within virtual networks. To begin with, Bitcoin and other cryptocurrencies introduce the use of internet to facilitate transactions throughout the world. However, it is its comparative social form that makes it a game changer (Wallace, 2011). The centralized currency system has been characterized by a particular social groups considering the number of unbanked people in the world. This can be attributed to the types of securities that banks demand or the perspective it has created. On the other hand, Bitcoin introduced a digital platform where individuals can exchange currency beyond the structure of their social systems. The impact this has on people is that it enables transactions in diverse social setups without discriminating anyone. Cryptocurrencies essentially treat every unit as important as a database would to its registries. For instance, Bitcoin makes it possible for users to develop and use public-keys in diverse social contexts. For example, it has been perceived that Bitcoin empowered women to transact and own their own lobbies as a result of its open social framework. Therefore, there is no limit to the impact Bitcoin and other cryptocurrencies have on the social context of the economy.
Cryptocurrencies and the Future
Bitcoin has so far introduced a more efficient system of digital transactions as banks have innovated for very many years. The very idea of cryptography in the management and use of currency introduces some level of simplicity to the common user that banks have not yet achieved. While the idea of cryptocurrencies and the success of Bitcoin have done enough to popularize the idea, it is the new creations like blockchain that will determine the future of cryptocurrencies in business (Crosby, Pattanayak, Verma, & Kalyanaraman, 2016). Advancements in information technology has continued to make the internet a silo of opportunities and a source of markets for millions of businesses. The integration of this development to digital currencies means that the future of centralized currency systems will be determined by the extent to which businesses will embrace a more efficient system, in the form of Bitcoin.
References
Crosby, M., Pattanayak, P., Verma, S., & Kalyanaraman, V. (2016). BlockChain Technology: Beyond Bitcoin. Applied Innovation, 6.
Gervais, A., Karame, G., Capkun, S., & Capkun, V. (2014). Is Bitcoin a decentralized currency? IEEE security & privacy, 12(3), 54-60.
Reid, F., & Harrigan, M. (2013). An analysis of anonymity in the bitcoin system. Security and privacy in social networks, 197-223.
Van Alstyne, M. (2014). Why Bitcoin has value. Communications of the ACM, 57(5), 30-32.
Wallace, B. (2011). The rise and fall of Bitcoin. Wired, 19(12).
Here is the requirement about the second paper
It is time for you to make the world a better place. The second and last portfolio item is non-traditional. You will identify a problem that is relevant and real, build on concepts related to the blockchain and/or cryptocurrency, and you will devise a solution where this technology plays a significant role. You will describe the solution, supporting your ideas with facts and sources. You must convince your reader that, given proper resources (money, people, and talent), it would be possible to solve the problem that you have identified with your technology-based solution.
This assignment requires that you understand the theme rather well because you are called upon to create with these concepts.
Your deliverable is going to be a 1200-1500 word idea paper written for an audience of potential supporters/backers. Your idea must be possible, and not rely exclusively on charity or government subsidies. It does not need to be a for-profit venture and may be a social enterprise. You do not need to be able to implement the idea at this time with your current technical skills, but it must be possible to assemble a team capable to do so if you were to acquire resources.
Who knows, maybe you can take your idea, reassemble as a group and make it happen in the real world in the future.
