The Internet, Policy & Politics Conferences

Oxford Internet Institute, University of Oxford

Hitoshi Okada, Vanessa Bracamonte: The Influence of the Emerging Virtual Currency on Nation, Society, and Economy

Hitoshi Okada, National Institute of Informatics, Japan

Vanessa Bracamonte, National Institute of Informatics, Japan

Bitcoin is a decentralized virtual currency that emerged in 2008, created following the design described in a paper written by the pseudonymous Satoshi Nakamoto.

Although Bitcoin was initially an experimental endeavor known only among technical experts, it eventually came to be used as a payment method in actual internet transactions. And then around 2012, Bitcoin developed an exchange rate with legal currencies and came to circulate as a form of currency

Bitcoin attracted widespread attention in 2013, when its exchange rate with legal currencies experienced high volatility. Motivated by the financial collapse of the country and feeling unsure of the safety of their savings accounts, big depositors in Cyprus moved their assets to Bitcoin. As a consequence, the exchange rate between legal currencies and Bitcoin soared.

In addition to this, a large electronic commerce website in the People's Republic of China declared its intention to accept payment with Bitcoin, which triggered an investment boom for the virtual currency as a financial product. This heated investment boom for Bitcoin then came to an end as a result of the bankruptcy of the virtual currency exchange company Mt. Gox, headquartered in Japan.

At the time in Japan, there was the perception that the issuance of Bitcoin itself had been stopped. However, in the framework of a decentralized virtual currency such as Bitcoin, currency is not issued by a corporation or a natural person. Therefore, a situation of issuer bankruptcy is not expected to happen.

The event of the bankruptcy of Mt. Gox that occurred in Japan only meant the closing of an office for the exchange between virtual currency and Japanese Yen. It did not mean the disappearance of the virtual currency itself. The reason for this is that Bitcoin uses P2P technology, and in principle, it does not have a center or core. Although it is true that major network nodes play a significant role in the framework of a decentralized virtual currency, it has a resilient structure and its robustness would not be affected even if some nodes were to disappear.

In Japan, research and development on a payment infrastructure to support decentralized virtual currencies has stagnated to some extent, but around the world there are countries and regions that are actively investigating how to utilize these virtual currencies for business purposes. However, the reality is that there are still various problems that need to be resolved in order to make use of decentralized virtual currencies in real business settings and as part of payment infrastructures. 

This paper will discuss, from a multidisciplinary perspective, how decentralized virtual currencies are trying to change the financial system and how the economy and society could be transformed by this change. In addition, this paper will explore how the role of the state could be transformed if the fundamental principle of modern states that is the state-based issuance of currency is weakened. With regard to the methodology used in this paper, the issues of the kind of influence that emerging technologies have on society and the problems that they can bring will be analyzed using a multidisciplinary approach which includes technology, society and ethical perspectives.

Hitoshi Okada, Vanessa Bracamonte