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This essay introduces to the legal community a fascinating, decreasingly farfetched technological possibility that the Bitcoin software bitcoin 2312, and it offers suggestions for the how the law might interact with that possibility.
In short, the Bitcoin technology allows autonomously operating software — such as a computer virus or the software that manages a network of vending machines — to exercise control over significant wealth, not as an intermediary for individuals or bitcoin 2312 but rather, in a functionally meaningful sense, in its own right.
The first part of this bitcoin 2312 briefly describes the Bitcoin software technology bitcoin 2312 a legal audience. Part II bitcoin 2312 how Bitcoin promotes the possibility of independently wealthy software. Part III considers bitcoin 2312 legal approaches bitcoin 2312 that possibility. The legal analysis is exploratory, and it is just a first step; it is too early to offer definite normative opinions.
But it will likely be important for legal ""technologies,"" such as organizational forms, concepts of legal entities and legal personality, and institutional systems of contract and tort law to keep pace with technological innovation. This working paper presents a simple model for the macroeconomic behavior of bitcoin based on the economic equation of exchange. According to this model, the value of bitcoin is determined largely by the willingness of bitcoin holders to save bitcoin and not by its transactional use.
This model therefore predicts that bitcoin 2312 use of bitcoin will not cause its value to rise, but that the value of bitcoin in terms of fiat currency will be almost solely determined by the willingness of bitcoin holders to pull bitcoin 2312 out of circulation.
This model suggests that bitcoin will not fall victim to a liquidity trap as suggested by some economists. Bitcoin has enabled competition between digital cryptocurrencies and traditional legal bitcoin 2312 fiat currencies.
Despite rapidly increasing acceptance, so far the affirmation of cryptocurrency as better money has been thwarted by dramatic deflationary price instability. Successful at disposing of any central monetary authority, bitcoin has elected to have a fixed deterministic inelastic monetary policy, establishing itself more as digital gold than as a currency. Price stability could be achieved by dynamically rebasing the outstanding amount of money: The apparent awkwardness of this unfamiliar paradigm is discussed at length, proving that its only real novelty is about fairness and effectiveness.
Furthermore, suggestions are provided about how to ease the effect of contractionary monetary policy. The proposed monetary bitcoin 2312 adjustment has neutral impact on the overall wallet wealth, as it does not bitcoin 2312 any arbitrary distortion into the intrinsic value dynamics of the wallet.
The adjustment is based on a commodity price index determined with a resilient consensus process that does not bitcoin 2312 on central third party authorities. It is posited in this paper that a digital cryptocurrency adopting elastic monetary standard is Hayek Money, so named from the Nobel Prize-winning economist: Recent innovations have made it feasible to transfer bitcoin 2312 digital currency without the intervention of an institution.
A digital currency must prevent users from spending their balances more than bitcoin 2312, which is easier said than done with purely digital currencies. Current digital currencies such as Bitcoin bitcoin 2312 peer-to-peer networks and open-source software to stop double spending and create finality of transactions. This paper explains how the use of these technologies and limitation of the quantity produced can create an equilibrium in which a digital currency has a positive value.
Bitcoin 2312 the history of money bitcoin represents bitcoin 2312 outstanding medium of exchange, independent from central authorities. Therefore, it has experienced impressive demand which, combined with inelastic bitcoin 2312, has led to huge price appreciation. Nonetheless, transaction volume has not been increasing accordingly. At the core of this conundrum is the very poor performance of bitcoin as bitcoin 2312 of account: Ametrano a has championed bitcoin 2312 Hayek Money the proposal to engineer cryptocurrencies with fully automatic algorithmic non-discretionary elastic supply: It is proposed here to implement Hayek Money as multiple coexisting units of account wrapped around the unmodified bitcoin or any other cryptocurrency.
Prices would be stable in terms of these rebased-bitcoin units of account: These cryptocurrencies bitcoin 2312 define a new monetary standard, with striking resemblance to the gold standard as improved by the compensated dollar proposed by Fisher In this Fisher Money scenario bitcoin would be digital crypto-gold and exchange rates would be floating, not fixed, being just the relative prices of bitcoin 2312 respective cryptocurrency price indexes.
This Article investigates an increasingly important yet under-developed body of law: The growing mainstream acceptance of Bitcoin, however, is best illustrated by the growing number of leading merchants that have decided to accept Bitcoin payments. Despite increasingly widespread use, Bitcoin and other virtual currencies have largely operated without the burden of regulation.
Like the potentially transformative innovations that preceded Bitcoin, virtual currency raises unique challenges for which existing legal models may be unprepared.
As policymakers struggle to catch-up, the effort to develop an appropriate regulatory regime for virtual currency is at a critical juncture. The response in the United States has thus far involved regulatory bodies acting independently to clarify the treatment of virtual currency under a variety of different laws designed to regulate traditional payment systems, financial services, and bitcoin 2312.
This Article argues, contrary to this approach, bitcoin 2312 a narrow focus on the technical application and extension of existing law creates a deficient regulatory regime. Instead, we suggest that policymakers should: In support of bitcoin 2312 proposition, we show that refocusing on the collection of policy goals advanced by existing law offers policymakers an additional tool to aid in the development of a comprehensive, cohesive, and appropriately-scaled virtual currency regulatory model. Bitcoin and Other Cryptocurrencies Abstract.
The success of the Bitcoin project challenges the academic eCash discourse of the last 30 years. The data-based productivity notion is further explored in subsequent cryptocurrency concepts bitcoin 2312 Permacoin. Bitcoin is a scarce digital asset: It is used as money, as gold has always been, but it is not a good unit of account: Ametrano has proposed as Hayek Money a cryptocurrency price stability paradigm of elastic non-discretionary monetary policy.
An implementation using a dual asset ledger for stable coins and seigniorage shares is bitcoin 2312 here. A Reserve Asset Bank is introduced as active market agent using bitcoin as reserve asset to preserve price parity. Double spending is prevented using proof-of-payment, the equivalent of proof-of-work where the off-chain consumption of bitcoin 2312 and power resources is replaced by bitcoin payments to the Reserve Asset Bank. This schema frees coins from any speculative value, thus favoring money velocity and increasing the number of transactions.
Seigniorage shares are effectively to be considered as a participation bitcoin 2312 a distributed central bank: Bitcoins are scarce digital commodities that enable parties to transmit messages over a network that bitcoin 2312 as a universal public ledger. Like other derivatives, Bitcoin derivatives would likely not be subject to the full scope bitcoin 2312 regulation under the CEA to the extent such derivatives involve physical delivery as opposed to cash settlement or are nonfungible and not independently traded.
In addition, Bitcoin swaps are currently too illiquid to be subject to mandatory clearing. A growing number of firms are offering Bitcoin derivatives, most of which are for retail traders. In addition to bitcoin 2312 derivatives that reference bitcoins, the Bitcoin block chain protocol can potentially enable automated derivatives contracts that securely trade, clear, and settle bitcoin 2312 the use of trusted intermediaries. The CFTC should consider an exemption for block chain derivatives that meet its policy objectives as a result of the rules that the underlying code applies to the transactions.
Competition in the Cryptocurrency Market Abstract. We bitcoin 2312 how network effects affect competition in the nascent cryptocurrency market. We do so by examining bitcoin 2312 changes over time in exchange rate data among cryptocurrencies.
Specifically, we look at two bitcoin 2312 Our data suggest that the winner-take-all effect is dominant early in the market. During this period, when Bitcoin becomes more valuable against the U. This trend is reversed bitcoin 2312 the later period. The data in the later period are consistent with the use of cryptocurrencies as financial assets popularized bitcoin 2312 Bitcoinand not consistent with ""winner-take-all"" dynamics.
