Blockchain: Moving Beyond Bitcoin into a Digitalized World 

Dr. John Taskinsoy a

ABSTRACT

Little over a decade has passed since Blockchain gave birth to its prodigy Bitcoin, but Bitcoin despite
all the hype (which was referred to as “big bang” by many) failed to become a simple (stable) global
crypto-currency for everyday life to enable users worldwide to purchase products/services online,
transfer money and conduct business with both individuals and entities within seconds without going
through access related issues and financial burden of high transactional costs. Blockchain’s close link
to Bitcoin has been rather negative on the revolutionary technology to live its true potential, but now
it is time for blockchain to move beyond Bitcoin. Blockchain distributed ledger technology (DLT) can
be used in many areas that are traditionally under government control. In fact, numerous tools and
applications we are so accustomed to using or seeing around could be decentralized via blockchain
to create a paperless digitalized world; as a side goal, this could possibly help reduce global warming
as well. Internet, marketing (advertisement), asset management, traffic control, utilities (electric, gas,
and water) and social security (retirement benefits) can all be decentralized through blockchain to
provide more efficient and unrestricted access to personal and public records. Blockchain possesses
immense opportunities and has the capacity to take unimaginable forms in the future, but only if
regulators, law makers, central banks and other branches of governments allow it to happen.

Keywords: Blockchain; Decentralized; Permissionless; Cryptocurrency; Bitcoin

JEL classification: O31, G12, G21, E42, E51, D40, C40, C52

 This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
a Corresponding author email address: [email protected]
Faculty of Economics & Business – Universiti Malaysia Sarawak (Unimas), 94300 Kota Samarahan, Sarawak, Malaysia.

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1.0 Introduction

Few people may understand it, but blockchain is a misunderstood revolutionary technology by many.
In fact, blockchain was an arcane topic prior to the launch of Bitcoin in January 2009 by a mysterious
creator under the alias Satoshi Nakamoto (2008).1 Because Bitcoin and Blockchain are inseparable, it
is unclear whether blockchain enabled the birth of Bitcoin or vice versa. Regardless, blockchain’s
close association with Bitcoin has adversely affected its future growth resulted from illicit ecommerce
activities involving bitcoins. Consequently, regulators, lawmakers, and central banks across the world
(Bain & Weinstein, 2019) have called for a greater scrutiny of Bitcoin on terrorism-financing, money-
laundering, illegal drugs (Silk Road2) and human trafficking (Bonneau et al., 2015; Gudgeon et al.,
2019; Christin, 2013). Despite difficulty to get a grasp on the Bitcoin phenomenon (see Franco, 2014;
Sovbetov, 2018; Grech & Camilleri, 2017), Bitcoin and blockchain have gained immense popularity
and become household names after the 2008 global financial crisis (Wallace, 2011).

However Bitcoin has been quite volatile (Table 1) since inception (Berentsen & Schär, 2018; Blundell-
Wignall, 2014); Baek and Elbeck (2015) examine whether it is an investment asset or a speculative
vehicle. Nonetheless, investors worldwide kept pouring $billions of dollars into cryptocurrencies. In
the absence of an official exchange at its launch in January 2009, Bitcoin’s arduous existence began
with particularly $0.00 (Bouoiyour & Selmi, 2016; Cermak, 2017 Chiu & Koeppl, 2017). However, Dec.
27, 2010 marked a historic moment for Bitcoin and provided hope for all altcoins as Bitcoin hit $0.29
BTCUSD (David, 2014; DeVries, 2016). Bitcoin reached $10 in January 2013 ($13.96), surpassed $100
in August 2013 ($108), and reached $1,100 before stabilizing in the $700 – 800 range (Dwyer, 2014;
Hayes, 2017). Bankruptcy filing by then the largest Bitcoin exchange Mt. Gox in early 2014 shocked
investors and triggered the price of bitcoin to plummet 87%. When the price of Bitcoin hit the $1,000
mark, investors became frenzy; this soon turned into Bitcoin mania when the price passed $10,000
for the first time. Bitcoin’s inaugural trading on the Chicago Mercantile Exchange (EMC)3 made price
of Bitcoin reach the unprecedented $19,475 in December 2017 (intraday high of $20,089), this made
ordinary folks become avid Bitcoin enthusiasts/investors (Katsiampa, 2017; Kelly, 2014). At its all-
time peak in December 2017, the combined market cap of cryptocurrencies hit $830 billion, Bitcoin
alone had a market cap of $321 billion; currently, $224 billion and $150 billion respectively.

1 Satoshi Nakamoto (a pseudonym, his identity is unknown) supposedly worked about two years for writing the codes of
Bitcoin. Once writing of codes was completed, he registered the domain name bitcoin.org on 18 August 2008 and published
his White Paper on 31 October 2008, “Bitcoin: A peer-to-peer Electronic Cash System”. Next, he kicked off Bitcoin project
on November 9, 2008. On January 3, 2009, he created the genesis block (first block); a week later on January 9, 2009,
Bitcoin v0.1 was released. As a symbolic first Bitcoin peer-to-peer transaction took place on January 12, 2009 when Satoshi
sent 10 BTC to a computer programmer by the name of Hal Finley (see Nakamoto, 2008).
2 On October1, 2013 the FBI shut down the black market website Silk Road and seized its assets including 26,000 bitcoins.
3 In the United States, Bitcoin and other cryptocurrencies are legally accepted as commodities not currencies.

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 Table 1: Historical Corrections of Bitcoin (BTCUSD)

Correction Correction # Days in Bitcoin high Bitcoin low Decline Decline

start date end date correction price $ price $ % $
12 Jan 2012 27 Jan 2012 16 7.38 3.80 -49% 3.58
17 Aug 2012 19 Aug 2012 3 16.41 7.10 -57% 9.31
6 Mar 2013 7 Mar 2013 2 49.17 33.00 -33% 16.17
21 Mar 2013 23 Mar 2013 3 76.91 50.09 -35% 26.82
10 Apr 2013 12 Apr 2013 3 259.34 45.00 -83% 214.34
19 Nov 2013 19 Nov 2013 1 755.00 378.00 -50% 377.00
30 Nov 2013 14 Jan 2015 411 1,163.00 152.40 -87% 1,010.60
10 Mar 2017 25 Mar 2017 16 1,350.00 891.33 -34% 458.67
25 May 2017 27 May 2017 3 2,760.10 1,850.00 -33% 910.10
12 Jun 2017 16 Jul 2017 35 2,980.00 1,830.00 -39% 1,150.00
2 Sep 2017 15 Sep 2017 14 4,979.90 2,972.01 -40% 2,007.89
8 Nov 2017 12 Nov 2017 5 7,888.00 5,555.55 -30% 2,332.45
17 Dec 2017 2 Feb 2018 48 19,666.00 8,094.80 -59% 11,571.20
5 Sep 2018 16 Dec 2018 100 7,361.46 3,236.27 -56% 4,125.19
Source: Author; data is from https://www.ccn.com/bitcoin-crash-the-history-of-bubble-bursts

Bitcoin’s valuation comes from trust, acceptance, and speculation; however, the extreme volatility has
had a damaging effect on Bitcoin’s store of value aspect and blockchain’s future growth (Katsiampa,
2017; Souza at al., 2017; Wallace, 2011; Wolla, 2018). Through 14 episodes of corrections (Table 1),
Bitcoin had a rollercoaster ride during the past decade due to its extreme volatility, making the price
of bitcoin decline on average 52.42%. Among altcoins, Tether (USDT) backed by dollar has been the
least volatile; in terms of high volatility, Bitcoin, Ethereum, Ripple, Bitcoin Cash, Stellar, and Cardano
are correlated but Litecoin and Bitcoin SV are closely and positively correlated (Table 2 and 3).

Source: Author; data is from CoinMarketCap; https://coinmarketcap.com/

Figure 1: Market Capitalization of Top 12 Cryptocurrencies

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Table 2: Descriptive Statistics of Top 12 Cryptocurrencies (January 1, 2017 to October 10, 2019)
BTC ETH XRP USDT BCH* LTC EOS* BNB* BSV* XLM TRX* ADA*
Mean 6195.23 307.62 0.41 1.00 662.56 77.19 5.45 12.79 107.33 0.14 0.03 0.14
Standard Error 114.17 7.92 0.01 0.00 20.50 1.90 0.13 0.32 2.70 0.00 0.00 0.01
Median 6319.41 229.37 0.32 1.00 442.98 59.73 4.88 10.95 88.09 0.10 0.02 0.08
Mode 1179.97 10.25 1.14 1.00 625.32 3.84 5.38 1.58 64.98 0.00 0.00 0.04
Standard Deviation 3631.85 251.79 0.38 0.01 583.54 60.60 3.74 9.10 49.41 0.14 0.02 0.17
Sample Variance 13190307.76 63399.92 0.15 0.00 340521.57 3672.06 13.98 82.79 2440.92 0.02 0.00 0.03
Kurtosis 0.32 2.29 17.47 15.60 4.54 2.80 1.52 -0.03 -0.07 2.66 15.88 8.90
Skewness 0.63 1.52 3.43 -2.08 1.97 1.54 1.20 0.79 0.99 1.47 2.94 2.77
Range 18719.64 1388.04 3.37 0.17 3845.70 354.63 21.05 38.72 195.59 0.89 0.22 1.09
Minimum 777.76 8.38 0.01 0.91 77.37 3.71 0.49 0.10 42.75 0.00 0.00 0.02
Maximum 19497.40 1396.42 3.38 1.08 3923.07 358.34 21.54 38.82 238.34 0.90 0.22 1.11
Sum 6269575.16 311309.63 410.24 1012.92 536674.08 78117.68 4537.24 10332.40 36064.07 143.10 22.90 105.20
Count 1012 1012 1012 1012 810 1012 832 808 336 1012 758 740
Source: Author; data is from CoinMarketCap; https://coinmarketcap.com/
Notes: BTC: Bitcoin; ETH: Ethereum; XRP: Ripple; USDT: Tether; BCH: Bitcoin Cash; LTC: Litecoin; EOS: EOS; BNB: Binance Coin; BSV: Bitcoin SV; XLM: Stellar; TRX:
TRON; ADA: Cardano. The data covers the period between January 1, 2017 and October 10, 2019 (1012 data points for BTC, ETH, XRP, LTC, and XLM).
* BCH data (07/23/2017 – 10/10/2019), EOS (07/01/2017 – 10/10/2019), BNB (07/25/2017 – 10/10/2019), BSV (11/09/2017 – 10/10/2019), TRX (09/13/2017 –
10/10/2019), ADA (10/01/2017 – 10/10/2019).

Table 3: Correlation of Top 12 Cryptocurrencies

BTC ETH XRP USDT BCH LTC EOS BNB BSV XLM TRX ADA
BTC 1
ETH 0.691942 1
XRP 0.655304 0.825564 1
USDT 0.161656 0.109389 0.106844 1
BCH 0.695856 0.874 0.772874 0.069626 1
LTC 0.857552 0.86689 0.799326 0.160793 0.847725 1
EOS 0.520906 0.729524 0.65289 -0.11192 0.637912 0.675895 1
BNB 0.388287 -0.0619 0.066187 -0.07991 -0.1322 0.188539 0.306879 1
BSV 0.737952 0.781898 0.399067 -0.25536 0.685057 0.721114 0.539548 0.688332 1
XLM 0.620041 0.83127 0.874366 0.034507 0.686074 0.736429 0.83133 0.065721 0.039395 1
TRX 0.42595 0.705733 0.824535 -0.03873 0.608267 0.633662 0.814124 0.220335 0.414952 0.819154 1
ADA 0.601626 0.895035 0.952865 0.029157 0.839824 0.807726 0.709386 -0.02766 0.46302 0.88413 0.826058 1
Source: Author; data is from CoinMarketCap; https://coinmarketcap.com/

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Table 4 shows 60-day volatility of daily returns of BTC/USD (7.64%) and compares it with LTC/USD
(9.29%), ETH/USD (9.55%), USD/GBP (0.48%), USD/EUR (0.57%), Gold/USD (0.81%), BRL/USD
(0.97%), CNY/USD (0.12%), JPY/USD (0.57%), and THB/USD (0.31%). The data reveals that Litecoin
(LTC) and Ethereum (ETH) among cryptocurrencies have been more volatile than Bitcoin. Gold/USD
(0.81%) has been less volatile in this decade than the historical average of circa 1.2%. The volatility
of major fiat currency pairs is moderately low, which averages between 0.5% and 1.0%. Excluding
Chinese yuan (CNY), only 0.12% of volatility against dollar due to ongoing government control; and
Thailand’s baht (THB) that has been the best performing currency against the dollar among the main
South East Asian nations (Indonesia, Malaysia, Philippines, Singapore, and Thailand), currencies of
Brazil, Japan, and the UK have been more volatile against the U.S. dollar than other major currency
pairs since 2013; however, Brazil’s currency is the only one that has depreciated almost 1% against
dollar, and the volatility of BRL/USD exchange volatility is very close to that of Gold/USD.

Table 4: 60-Day Volatility of Bitcoin, Lite Coin, Gold, and Fiat Currencies 4
2011 2012 2013 2014 2015 2016 2017 2018
Average
Jun 13 Aug 27 May 6 Jan 1 Nov 16 Mar 7 May 22 Jan 29
USD-BTC 14.40 6.91 11.39 11.31 3.49 3.63 2.72 7.30 7.64
USD-LTC* ------ ------ 6.63 18.16 5.49 2.26 10.68 12.50 9.29
USD-ETH** ------ ------ ------ ------ 11.54 10.32 6.80 ------ 9.55
GOLD/USD 0.89 0.74 1.00 0.94 0.74 0.99 0.64 0.53 0.81
USD-EUR 0.75 0.67 0.49 0.47 0.67 0.68 0.40 0.40 0.57
USD-GBP 0.53 0.46 0.42 0.38 0.52 0.59 0.43 0.53 0.48
BRL/USD 0.75 0.51 0.49 0.77 1.60 1.18 1.73 0.72 0.97
CNY/USD 0.12 0.08 0.08 0.04 0.15 0.13 0.09 0.26 0.12
JPY/USD 0.49 0.37 0.83 0.47 0.48 0.93 0.54 0.43 0.57
THB/USD 0.23 0.30 0.44 0.22 0.45 0.31 0.25 0.28 0.31
Source: https://www.buybitcoinworldwide.com/volatility-index
Notes: * Litecoin (LTC) began trading in June 2013; ** a fork took place in Ethereum in 2016 due to the fact that
DAO (decentralized autonomous organization) was hacked. The fork created Ethereum and Ethereum Classic. The
data shows that cryptocurrencies have been significantly more volatile.

Magro (2016) emphasizes that Bitcoin’s fixed maximum supply of 21 million bitcoins in the absence
of a Fed like central authority provides shield against inflation. Fostel and Geanakoplos (2012) point
out that Bitcoin’s price boom is driven by optimistic investors till pessimists enter the market causing
a decline in Bitcoin’s value. Poyser (2017) suggests three price drivers for Bitcoin; supply and demand
(mining cost, reward, and coins entering circulation); exchanges for cryptocurrencies (speculation,
trend, and popularity); and political (legalization or curtailing acceptance via restrictions).

4 USD: US Dollar, BTC: Bitcoin, LTC: Lite Coin, GBP: Great Britain Pound, EUR: Euro in European Union, CNY: Chinese Yuan,
JPY: Japanese Yen, THB: Thailand Baht; * LTC began trading in June 2013.

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The U.S. dollar will not leave its throne as the most dominant reserve currency since WWI (Figure 2),
which was solidified by the 1944 Bretton Woods Conference and President Nixon’s decision to delink
the dollar from gold in 1971. Since 1970s, attempts by major currencies have only made a trivial dent
to dollar’s unblemished hegemonic status. Due to the massive success of Bitcoin, many wishful folks
began to believe that the dollar’s days were actually numbered and Bitcoin could become a viable
alternative as a reserve currency (Cermak, 2017). San Francisco Fed President John Williams argues
that Bitcoin fails to meet three basic functions of money; medium of exchange, store of value, and unit
of account (for Bitcoin as real currency, see David, 2014). Although Bitcoin is used as a medium of
exchange for goods and services purchased online (Dwyer, 2014; Eichengreen, 2009; Kelly, 2014), it
is still not used in everyday transactions or accepted by everyone like a fiat currency. Bitcoin serves
as a store of value, however unlike all fiat currencies, Bitcoin is decentralized and its intrinsic value is
not set by a Fed like central authority (Katsiampa, 2017; Souza at al., 2017). For further discussion on
whether Bitcoin is a currency or a speculative asset, see Baek and Elbeck (2015), Blundell-Wignall
(2014), Ciaian et al (2016), David (2014), Kasper (2017), Kelly (2014), and Kristoufek (2015).

Source: http://bmg-group.com/irreversible-trends-driving-gold-10000/
Figure 2: Global Reserve Currencies since 1450

There are mixed views regarding adverse effects of a single reserve currency; advocates argue that
the U.S. dollar will continue to dominate the global economy due to network externalities (contagion
or network effects). Opponents (including the influential British economist John Maynard Keynes)
refute the notion of a single dominant reserve currency (see, Côté, 1994; Rose, 1999, 2000).

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2.0 Literature Review

Contemporaneous crises in the new millennium, mostly originated in the United States, have cost the
world’s economies over $20 trillion.5 Increasing financial turmoil due to repeated financial/economic
crises along with ever more abuse of sanction power6 by the U.S. had speeded up money’s inescapable
evolution triggering a shift from credit money to cryptocurrency. Severely negative macroeconomic
environment following the global financial crisis (GFC) of 2008 warranted the inception of the first
successful cryptocurrency Bitcoin in January 2009. A study by the Government Accountability Office
(GAO) reveals that the GFC in systemic nature has cost the U.S. economy7 alone over $22 trillion
(Beachy, 2012; Blinder, 2013; Laeven & Valencia, 2008, 2010; Gorton, 2008).8

Intensifying the U.S. – China trade war and growing concerns with more sanctions on Iran (and fear
of a global scale war) have reemerged the interest in search for a viable alternative to the U.S. dollar.
Blockchain pioneer Nick Szabo9 says that “The use of censorship-resistant cryptocurrencies will rise
in countries sanctioned from trade and economies suffering from failed monetary planning,” he also
argues that the world’s central banks might turn to cryptocurrency reserves in the future in order to
supplement national gold reserves. Szabo asserts Russian and Chinese “central banks may attempt to
hoard Bitcoin reserves over gold” (Andolfatto, 2018; Chiu & Wong, 2014; Duffie, 2019; Fung et al.,
2014; Kahn & Roberds, 2009; Kocherlakota, 1998). Recently published studies show that the refuge
to Bitcoin and Ethereum has risen noticeably in countries like China, Russia, Turkey, Venezuela, Iran,
North Korea, and India that have been subject to US sanctions and its unorthodox use of its currency
as a weapon of mass economic destruction. Economists and historians are inclined to believe that not
only sanctions are counterproductive, but damaging for economies of involved nations. Since 1990s,
repeated U.S. sanctions imposed on Iran, Russia, North Korea, and Turkey have proved to be non-
deterrent in the behavioral change of offenders (Martin, 1990; Rogers, 1996; Pape, 1997).

5 The IMF estimated the cost of the GFC as $11.9 trillion ($10.2 trillion in the U.S. and $1.7 trillion in developing countries).
https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5995810/IMF-puts-total-cost-of-crisis-
6 The U.S. sanctions and the use of dollar as a weapon of mass economic destruction have become at the center of foreign

policy and caused political tensions between the U.S. and a number of countries. The U.S. – China trade war is the latest
example to exemplify how the United States is determined and willing to continue its use of sanctions as a foreign policy.
7 During 2007-10, the unparalleled damage caused by the 2008 crisis in the U.S. was 8 million foreclosures and close to 9

million lost jobs; moreover, the median households lost 40% of their assets. Between 0.5% and 1% of the world population
slipped into poverty as a result of rising unemployment and falling wages (see Beachy, 2012).
8 Developments in technology and financial sectors have played an important role in the evolution of money. In the 1990s,

the Asian crisis of 1997-98 prompted introduction of the Financial Sector Assessment Program (FSAP) jointly developed
by the IMF and World Bank in 1999 and stress testing became a mainstay in banking regulation and supervision. The GFC
of 2008 marked the birth of Basel III, macro stress testing, and the first successful cryptocurrency Bitcoin. China, Russia,
Turkey, and Iran have been searching alternative mediums of exchange since The US’ abuse of sanction power and its use
of dollar as a weapon of mass economic destruction have been at the center of US foreign policy that caused political
tensions (Taskinsoy, 2012; 2013a, b; 2018a, b, c, d; 2019a, b, c, d, e, f, g, h, i, j, k, l, m, n, o, p, r).
9 Szabo (2005), “Bit Gold” available at: http://unenumerated.blogspot.rs/2005/12/bit-gold.html

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Before Blockchain (still misunderstood, see Cascarilla, 2015; Ferguson et al., 2012; Levy, 2001; Laurie
& Clayton, 2004), traditional e-commerce relied on financial intermediation provided by trusted third
parties in an environment governed by regulators, law-makers, and central banks. However, virtually
all of the earlier electronic cash schemes and online payment systems had failed to see a widespread
deployment. Bitcoin’s permissionless blockchain (i.e. trusted machine), a purely peer-to-peer system
of electronic cash without trusted third-party (Nakamoto, 2008), enables network participants (i.e.
nodes) to mint bitcoins through a mining process, validate blocks and transact between individuals
and entities. Although blockchain as a revolutionary technology has great potential to solve a host of
problems, believing that blockchain will solve all humans’ glitches may lead to unforeseeable hazards
to this prophecy (Clarke, 1962). The concept of untraceable electronic cash is not new, research dates
back to early 1980s which gained momentum with advent of the Internet.

Critically important research began with Chaum’s proposal of untraceable payments (Chaum, 1982)
and later untraceable electronic cash (Chaum et al., 1998). By the 1990s, the research was extended
by members of the Cypherpunk’s Manifesto (Hughes, 1993)10 and the Crypto Anarchist Manifesto (May,
1992). Nakamoto (2008) had knowledge of the antecedent work and appreciated Back’s Hashcash11
(Back, 2002) and the proof-of-work PoW in the design of Bitcoin (Woodford, 2000; Camenisch et al.,
2005; Okamoto & Ohta, 1992). Two notable attempts at creating a decentralized digital currency
emerged in the late 1990s; “b-money” (proof-of-stake POS) by Wei Dai (Dai, 1998) and Bitgold by
blockchain pioneer Nick Szabo12 (see Goldschlag & Stubblebine, 1998; Vishnumurthy et al., 2003;
Okamoto & Ohta, 1992; Kocherlakota, 1998; Sander & Ta-Shma, 1999). The earlier applications such
as combating spam (Dwork & Naor, 1992; Laurie & Clayton, 2004), internet-based payment systems
(Sirbu & Tygar, 1995) and minting digital coins (Rivest & Shamir, 1997) did not survive long to see
the realm of blockchain and Bitcoin. The skepticism among risk-averse investors caused the notable
attempts by DigiCash (Schoenmakers, 1998; Chaum et al., 1998) and Peppercoin (Rivest, 2004) to fail,
which led to the bankruptcy of DigiCash (1990) in 1998. One of the few successful attempts prior to
Bitcoin had a head on collision with the US regulators, e-gold (founded in 1996) was shut down by
the U.S. government in 2008 after reaching several million users in over a decade of operation.

Nakamoto (2008), in his seminal White Paper Bitcoin: A Peer-to-Peer Electronic Cash System, describes
Bitcoin as a purely peer-to-peer system of electronic cash and explains blockchain as an infrastructure
technology of Bitcoin using a mining process based on cryptographic PoW protocol to validate blocks

10 Eric Hughes (a mathematician), Timothy May (a retired businessman), and John Gilmore (a computer scientist) along with

20 closest friends held a meeting to discuss the world’s cryptographic issues. The group called themselves Cypherpunk
which was derived from the word ‘cipher’ or ‘cypher’ (see Hughes, 1993).
11 Adam Back created Hashcash in 1997 as an anti-spam mechanism to make sending of spam uneconomical (Back, 2002).
12 Szabo (2005), “Bit Gold” available at: http://unenumerated.blogspot.rs/2005/12/bit-gold.html

8
and make them immediately visible to all nodes via distributed ledger. Like dollar (unit of the dollar
system), bitcoin is divisible and the smallest denomination is called Satoshi (0.000000001). Special
knowledge is necessary to gain an understanding of the three elements about Bitcoin (Franco, 2014);
software (language and cryptography), hardware (computer network), and underlying technology
(blockchain). Before sending and receiving bitcoins or executing transactions, each user must have
the following three elements; (i) sender’s own public key (an alphanumeric string), (ii) sender’s own
private key (i.e., password linked to the address), and (iii) the recipient’s public address.

Blockchain, in the simplest terms, is a type of distributed ledger technology (DLT), which is made up
of three parts; blocks store data of any value and keep transaction history in a chronological order;
chain holds all of the blocks together (Baek & Elbeck, 2015; Blundell-Wignall, 2014; Bartos, 2015;
Berentsen & Schär, 2018; Catalini et al., 2019; Chiu & Wong, 2014); and distributed ledger makes data
visible to all nodes in permissionless blockchains and to a group of validators in permissioned private
and consortium blockchains. Blockchain is a decentralized mechanism removing trusted third party,
there is no Fed-like central authority either; moreover, all of the work is based on cryptographic proof
to ensure high security (Berryhill et al., 2018; Cascarilla, 2015; Duffie, 2019; Dwyer, 2014; Pike, 2018).
Blockchain uses a consensus protocol (Ben-Sasson et al., 2014; Buchman et al., 2018; Yin et al., 2018);
any hashed data added to a block becomes chained and is inalterable (could not be changed, modified,
or deleted). Demirors (2017) points to blockchain’s three essential layers; as such, application layer
includes all applications used by the network participants; networking layer contains protocol rules;
and protocol layer contains the programming language and computational rules.

Blockchains and their consensus approaches are distinctly different; for instance, Bitcoin blockchain
uses a proof-of-work (PoW) hashing scheme (i.e. Nakamoto based it on Adam Back’s Hashcash (Back,
2002) using SHA-256 hash function) where transactions are hashed in a Merkle tree (Merkle, 1980,
1987; Eastlake & Hansen, 2011) that verifies and validates the accuracy of the hash value in the block
header. Libra blockchain uses proof-of-stake (PoS) consensus approach (Josefsson & Liusvaara, 2017;
Catalini et al., 2019) based on HotStuff as the basis for Libra’s Byzantine Fault Tolerant13 – LibraBFT
(LA, 2019; Bernstein et al., 1987; Castro & Liskov, 1999; Pfitzmann & Köhntopp, 2001; Reed, 1978;
Wood, 2016; Yin et al., 2018). Also a new programming language “Move” was specifically developed
for Libra to implement smart contracts (Blackshear et al., 2019; Lamport, 1998; Lamport et al., 1982).
In Bitcoin’s permissionless blockchain, trust is decentralized and timestamped data in chronological
order becomes visible to all nodes (Massias et al., 1999; Haber & Stornetta, 1991). In a permissioned

13 Variations of BFT have been developed; as such, a replication of BFT as Practical Byzantine Fault Tolerance (PBFT) , Stellar

Consensus Protocol (SCP), Delegated Byzantine Fault Tolerance (dBFT), see Mazieres (2015), Miguel and Barbara (1999).

9
Libra blockchain, trust is centralized by a de facto central authority the Libra Association comprising
a group of validators who have unrestricted access to govern and validate transactions, but access to
data by non-validators is restricted (Ganne, 2018; Pike, 2018; Hileman & Rauchs, 2017). Staples et al.
(2017) investigate inherent risks and opportunities of blockchain; Vigna and Casey (2016) examine
how blockchain has changed the existing electronic cash and payment systems (Ray, 2017).

Bitcoin permissionless blockchain solves double-spending via a mining process where a maximum
supply is fixed at 21 million, over 17 million bitcoins are already in circulation (e.g. Bayer et al., 1993;
Haber & Stornetta, 1991, 1997; Massias et al., 1999). In Bitcoin’s purely peer-to-peer environment,
bitcoins can be transferred from one user to another only by verifying and digitally signing a hash
created by the previous owner and public key of the next owner, and then these are added to the end
of the coin in its block before making it a permanent record via a distributed ledger. On the other
hand, Libra blockchain executes transactions in six specific steps (LA, 2019); (1) the signature on the
transaction is verified to match the sender’s public key; (2) the sender gets authenticated and his/her
LibraAccount is checked for sufficient Libra coins; (3) a prologue is run to ensure that the account has
enough Libra coins, the Move bytecode verifies the transaction script and modules that no duplication,
double spending, or violation of safety (i.e. type, reference, and resource); (4) modules are published
under the sender’s account (no module with the same name, meaning duplication is not permitted);
(5) successfully completed transaction scripts are committed to the global state, but not the failed
ones; and (6) Move virtual machine (VM) runs the epilogue to finalize the transaction. Libra PoS is a
major improvement over Bitcoin PoW which is slow and inefficient (Bonneau et al., 2015); moreover,
PoS is a more popular alternative to PoW due to its higher transaction throughput14, vast scalability,
lower latency, and lower energy cost (i.e. the cost to mine one Bitcoin is very high).15

2.1 Moving beyond Bitcoin

The launch of the first successful cryptocurrency – Bitcoin in 2009 following the GFC of 2008 had big
bang effect in ecommerce (e.g. Kelly, 2014), this has reemerged a fresh search for a viable alternative
to the dollar (Cermak, 2017; Hileman, 2014; Ciaian et al., 2016). However since the US Congress chose
dollar as its monetary unit in 1792, mark, peso, pound sterling, yen, and yuan have gravely failed to
kill off, deflate, or end the dollar’s hegemony; on that note, euro has only made a minor dent to dollar’s

14 Bitcoin PoW is slowest (7 per second) compared to Ethereum (25+), Ripple (1,500+), Libra (1,000+), and OES (3,000+).
15 The cost of power usage to mint one Bitcoin was calculated based on average electricity rate in each country; the U.S.
ranks 41st ($4,758), Russia ($4,675) and Iceland ($4,746) rank slightly better. South Korea is the costliest ($26,170) and
Venezuela is the cheapest ($531). The average electricity cost for mining one bitcoin is $7,098 across 109 countries, little
over bitcoin’s current price of about $8,500. If the price of bitcoin stays in this level or descend further downward, it is
feared that Bitcoin’s mining activity may stop till bitcoin price justifies staggering energy costs.

10
unblemished hegemonic status it has been enjoying for a century (Beeson & Higgott, 2003; Taskinsoy,
2018a). A growing number of countries are disturbed by this fact but the U.S. dollar’s hegemony is no
fluke, it is backed by other supporting elements of American supremacy; economic power (the world’s
largest economy with GDP of over $20 trillion), technological preeminence (the world’s leading top
multi-billion dollar companies are U.S. origin, Table 5), military might (most advanced with highest
spending budget, Table 6), and petrodollar (oil, gold, and most commodities are traded in USD).16

Table 5: The Most Valuable Nation Brands

US Dollar, Billion ($bn)

Rank Rank Brand value Change Brand value Brand rating Brand rating
Nation Brand
2018 2017 2018 ($bn) % 2017 ($bn) 2018 2017
1 1 United States 25,899 23 21,055 AAA AAA-
2 2 China 12,779 25 10,209 AA AA
3 3 Germany 5,147 28 4,021 AAA AAA-
4 5 United Kingdom 3,750 20 3,129 AAA AAA
5 4 Japan 3,598 5 3,439 AAA- AAA-
6 6 France 3,224 9 2,969 AA+ AA+
7 7 Canada 2,224 8 2,056 AAA- AAA-
8 9 Italy 2,214 9 2,034 AA- A+
9 8 India 2,159 5 2,046 AA AA
10 10 South Korea 2,001 8 1,845 AA AA
Source of data: BrandFinance: The annual report on the most valuable nation brands (October 2018)
www.brandfinance.com accessed March 1, 2019)

Table 6: Military Strength Ranking (2017)

World Military Total Fighter Combat Naval Budget

Country
Rank Personnel Aircraft Aircraft Tanks Assets* $billion
United States 1 2,363,675 13,762 2,296 5,884 415 587.8
Russia 2 3,371,027 3,794 806 20,216 352 44.6
China 3 3,712,500 2,955 1,271 6,457 714 161.7
India 4 4,207,250 2,102 676 4,426 295 51.0
France 5 387,635 1,305 296 406 118 35.0
United Kingdom 6 232,675 856 88 249 76 45.7
Japan 7 311,875 1,594 288 700 131 43.8
Turkey 8 743,415 1,018 207 2,445 194 8.2
Germany 9 210,000 698 92 543 81 39.2
Egypt 10 1,329,250 1,132 337 4,110 319 4.4
Source: https://www.businessinsider.com/most-powerful-militaries-in-the-world-ranked-2018-2
The United States has more aircraft carriers than top 24 advanced countries combined; 19 compared to 17. Also the
military spending of the 24 countries in the aggregate is $699 billion whereas the United States’ military budget alone
is almost $588 billion which amounts to 84% of $699 billion of 24 countries.

16 New peripheries in East Asia are addicted to dollar: China, Hong Kong, Japan, Macau, Mongolia, North Korea, South Korea,
and Taiwan. Association of Southeast Asian Nations (ASEAN); founding members are Indonesia, Malaysia, Philippines,
Singapore, and Thailand; other five members; Brunei Darussalam, Cambodia, Laos, Myanmar, and Vietnam. 1 Observer –
Papua New Guinea. The U.S. dollar is also used along with local currencies in Bahamas, Belize, Barbados, Costa Rica,
Nicaragua, Panama, Myanmar, Cambodia, Liberia, St. Kitts and Nevis, territories of the Netherlands (Aruba, Bonaire,
Curacao, St. Maarten, St. Eustatius and Saba), territories of the UK (Bermuda, Cayman Islands).

11
Blockchain gave birth to Bitcoin (Nakamoto, 2008), but not without a great deal of skepticism; skeptic
investors along with opponents to this day still debate whether Bitcoin is a crypto-currency (Blundell-
Wignall, 2014; David, 2014), an asset, or a speculative investment vehicle (Baek & Elbeck, 2015). Only
Japan has passed a law to accept bitcoin as legal payment and treat it similar to fiat currency. Contrary
to the huge hype filled with hopes, Bitcoin has been subject to extreme volatility, therefore failed to
become a simple as well as stable global digital currency for everyday life to enable people across the
world to transfer money, purchase products/services online and conduct business with individuals
and private/public entities within seconds without going through access related issues and financial
burden of high transactional costs. On account of technical shortcomings, negative public perception
and intensifying regulatory scrutiny, it is crystalline that blockchain is bigger than Bitcoin.

Scalability is a serious concern for Bitcoin (and other public) permissionless blockchain, under which
the size of blocks are preset and the average confirmation time for a Bitcoin block is about 10 minutes;
the processing speed of Bitcoin blockchain is 7 payment transactions per second17, this is very low
when compared with Ethereum (25+), Ripple (1,500+), Libra (estimated 1,000+), OES (3,000+), and
Visa (25,000). Another major issue is the level of energy consumption which is the highest for Bitcoin
blockchain; private and consortium permissioned blockchains are an improvement over Bitcoin, not
only they consume less energy but can be easily scaled up. Bitcoin’s lower scalability, higher latency
and massive energy cost make Bitcoin blockchain a less attractive medium of exchange. Moreover,
the predetermined maximum supply of 21 million bitcoins (i.e. a shield against inflation) makes it an
asset or an investment vehicle open to speculative activities (Figure 3). Although Bitcoin blockchain
is highly resilient to attacks (decentralized, distributed ledger, and cryptography) either by malicious
nodes or hackers, it is still susceptible to cyberattacks due to its inherent permissionless access in
combination with numerous technical challenges related to security issues.

Moving beyond Bitcoin; blockchain distributed ledger technology (DLT) can be used in many areas
other than Bitcoin. A good number of services under government control could be decentralized via
the use of blockchain; for instance, title to physical assets such as land, real estate, or car after the
agreed consensus of ownership can be recorded in a distributed ledger that makes it visible to anyone
who has a share of ownership. This way without the need of a trusted third party (i.e. government),
inalterable title data could not be modified, tampered or deleted in the event of wars, natural disasters
or human errors. Blockchain can also be used to verify the identity of a person without the need of a
government as the trusted third party issuing identification cards, driver’s licenses, and passports;
this way, a global blockchain as the trusted machine can verify true identities of all.

17 According to BitPay, 200,000 Bitcoin transactions in December 2017 when Bitcoin was at its peak (180,000 on average).

12
Source: Statista, https://www.statista.com/statistics/
Figure 3: Bitcoin Statistics
13
3.0 Conclusion

Many tools and applications we are so accustomed to using or seeing around can run on blockchain
to create a paperless digitalized world which could potentially help reduce global warming. Internet,
marketing, asset management, traffic control, utilities (electric, gas, and water) and social security
(i.e. retirement benefits) can all be decentralized through blockchain to provide more efficient and
unrestricted access to data. Consolidation of resources as well as elimination of paper (saving forests)
will definitely help reduce the speed of global warming. Blockchain offers immense opportunities and
unimaginable forms to take in the future, but only if regulators, law makers, central banks and other
branches of governments pay close attention to the valuable comments made by Christine Lagarde,
Managing Director of the International Monetary Fund (IMF), she urged central banks not to ignore
“winds of change” referring to blockchain and its prodigy Bitcoin (Lagarde, 2018).

Source: PricewaterhouseCoopers – PwC blockchain survey (2018)

Figure 4: The Biggest Barriers to Blockchain Adoption

Little over a decade has passed since Bitcoin’s debut in January 2009, blockchain and Bitcoin still faces
many barriers and challenges, but blockchain’s potential business value is a lot greater than Bitcoin
or cryptocurrencies in aggregate. According to the 2018 PricewaterhouseCoopers survey (Figure 4),
a majority of 600 executives took the survey points to “regulatory uncertainty” (regulatory backlash)
as the biggest barrier facing blockchain. Interoperability and scalability issues also scored high.

14
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