35 Pages Posted: 3 Oct 2011 Last revised: 9 Jun 2014
Date Written: October 3, 2011
Bitcoin is a peer-to-peer cryptocurrency; which is entirely decentralized, open-source, and non-institutional. A comprehensive history of Bitcoin transactions is constantly distributed among users, while partial anonymity is accomplished through public/private key transactions. Bitcoin differs from digital currencies like Zynga, Second Life, and E-Gold, because no central authority issues new currency, instead it is ‘mined’ by self-interested individuals. States have an interest in regulating Bitcoin, due to its purported desirability as a medium for funding the drug trade, terrorism, and other subversive activities. Bitcoin’s architecture will encourage continued adoption, which will result in mounting pressure on the legal systems of interested states to codify a solution.
The architecture of the internet leads individuals to perceive themselves as having a greater degree anonymity when online. Bitcoin’s architecture is analogous in that it utilizes peer-to-peer networking and cryptography, resulting in a similar perception of anonymity. But, anonymity on the internet is a function of one’s technical knowledge and ability, and of the amount of resources one is able to dedicate towards that end. States, international bodies, and institutional actors constantly struggle with crafting their laws to mollify this equilibrium.
Anonymity in electronic money was severely diminished after E-Gold. But, money needs to be understood as the basis for price-indexes through which individuals disseminate information to one another. To divorce the concept of the money and the concept of internet would be a wholly incoherent course of action at this point. For these reasons, attempts on the part of international actors and states at regulating Bitcoin will not result in a reduction in its anonymity to a quantum less than that of the internet.
Keywords: Bitcoin, cryptocurrency, virtual currency, telecommunications, banking, currency, peer-to-peer, anonymity, privacy, internet
Suggested Citation: Suggested Citation
Elias, Matthew, Bitcoin: Tempering the Digital Ring of Gyges or Implausible Pecuniary Privacy (October 3, 2011). Available at SSRN: https://ssrn.com/abstract=1937769 or http://dx.doi.org/10.2139/ssrn.1937769