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Barriers to the functioning of the bitcoin system ? user assessment

Author

Listed:
  • Anna Iwona Piotrowska

    (WSB University in Toru?)

  • Dariusz Piotrowski

    (Nicolaus Copernicus University in Toru?)

Abstract

Bitcoin is a system created to service micro-payments in e-commerce, as well as the digital unit of value functioning in the system's environment. When analysed, the behaviour of market participants indicates that the introduction of investment applications of the cryptocurrency, in parallel with its original payment application, had a tremendous impact on the larger-scale functioning of the system. This was aided by the functioning of many trading platforms allowing for exchange into traditional currencies and a high volatility of quotations. Without doubt, bitcoin may be branded a ground-breaking financial innovation or a work of genius. However, the growing, and even global use of bitcoin has brought some of the system's imperfections to light. As the system developed, bitcoin users started to have a better view of the threats to the correct functioning of the system arising from its construction. The paper aims to indicate the main barriers limiting the functioning of the bitcoin system, and its use in payments in particular. The work has adopted the following research hypothesis: In the early stages of bitcoin functioning, users had little awareness of the technological flaws of the system. The study analyses the literature on the subject and the results of a survey carried out among Polish bitcoin users. The analysis confirms of the research hypothesis, as it shows that in the system?s first several years, users identified the following threats to the system?s functioning: the speculative nature of bitcoin, the lack of adequate awareness in society which would allow for a widespread use of the innovation, potential too strict regulation of the cryptocurrencies market or its banning. The authors also present threats to the functioning of the system which in their opinion are of greatest importance at the moment. These relate to the existence of intermediaries, the lack of systemic incentives addressed to bitcoin merchants, growing costs and payment processing time. The authors intend to indicate those aspects of bitcoin's functioning in order to make the use of cryptocurrencies more conscious and contribute to limiting financial risk of system users.

Suggested Citation

  • Anna Iwona Piotrowska & Dariusz Piotrowski, 2017. "Barriers to the functioning of the bitcoin system ? user assessment," Proceedings of Economics and Finance Conferences 4807736, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:4807736
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    References listed on IDEAS

    as
    1. Anton Badev & Matthew Chen, 2014. "Bitcoin: Technical Background and Data Analysis," Finance and Economics Discussion Series 2014-104, Board of Governors of the Federal Reserve System (U.S.).
    2. Ladislav Kristoufek, 2015. "What Are the Main Drivers of the Bitcoin Price? Evidence from Wavelet Coherence Analysis," PLOS ONE, Public Library of Science, vol. 10(4), pages 1-15, April.
    3. Adrian (Wai-Kong) Cheung & Eduardo Roca & Jen-Je Su, 2015. "Crypto-currency bubbles: an application of the Phillips-Shi-Yu (2013) methodology on Mt. Gox bitcoin prices," Applied Economics, Taylor & Francis Journals, vol. 47(23), pages 2348-2358, May.
    4. Brandvold, Morten & Molnár, Peter & Vagstad, Kristian & Andreas Valstad, Ole Christian, 2015. "Price discovery on Bitcoin exchanges," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 36(C), pages 18-35.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cryptocurrency; bitcoin; financial innovation; operational risk;
    All these keywords.

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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