The papers in this special issue are all on cryptocurrencies, which are a new phenomenon. Cryptocurrencies are digital financial assets for which cryptography decentralised technology ensures ownership and transfer of ownership. The increasing market value of cryptocurrencies, as well as their expanding global appeal, provide a variety of issues and concerns for business and industrial economics. This introductory essay examines the main trends in academic study on cryptocurrencies through the lenses of both neoclassical and behavioural theories, highlighting the contributions of the selected publications to the literature. A special emphasis is placed on socioeconomic issues. Investors, entrepreneurs, regulators, and the general public continue to be fascinated by cryptocurrency. Significant price movements, assertions that the cryptocurrency market is a bubble with no underlying worth, and concerns about evasion of regulatory and legal monitoring have sparked a lot of recent public discussion regarding cryptocurrencies. These issues have prompted calls for tighter regulation, if not outright prohibition. Further issues include whether cryptocurrencies should be classified as commodities, money, or something else; the potential creation of cryptocurrency derivatives and credit contracts in cryptocurrency; and the usage of initial coin offerings (ICOs).
These debates frequently produce more heat than light. There is still a lack of well-established scientific understanding concerning cryptocurrency markets and their impact on economies, businesses, and individuals. The goal of this special issue of the Journal of Industrial and Business Economics is to help close that gap. The special issue's collection of papers presents six different perspectives on cryptocurrencies, written from both traditional and behavioural perspectives and addressing both financial and larger problems of cryptocurrencies' relationship to socio-economic development and sustainability.
We begin by identifying and exploring the fundamental concepts and themes addressed in the papers included in this special issue, as well as previewing their particular contributions, in this introduction. Cryptocurrencies are digital financial assets for which ownership records and transactions are guaranteed by cryptographic technology instead of a bank or other trusted third party. They can be considered financial assets since they have some value for bitcoin holders (explained below), despite the fact that they do not represent any other party's liabilities and are not backed by any real object of value (such as gold, for example, or the equipment stock of an enterprise).
The original developers consciously attempted to develop a digital transfer mechanism that corresponded to direct transfer of physical cash used for payments or other financial assets—such as precious metals and cryptocurrencies—as the term cryptocurrency and other terminology employing ‘coin', ‘wallets' in the original whitepaper proposing the supporting technology for Bitcoin (Nakamoto 2008) all suggest.
What about the arrangements for digitally recorded financial assets (such as bank accounts, stocks, and bonds, but not bearer bonds or bank notes)? The information system maintained by a financial institution (commercial bank, custodial bank, fund manager) determines who is entitled to any income or other rights it offers, as well as who has the authority to sell or transfer these assets. These systems were originally paper-based, but since the 1960s, they have relied on mainframe and, more recently, computer systems. Footnote2 If their information system has a flaw, such as a security breach that results in theft, loss, or failure to drive, It is the supporting software that both confirms ownership and conducts transfers in the case of cryptocurrencies. There is no need for a "trusted third party." This approach, however, necessitates a detailed history record of previous cryptocurrency transfers, tracing each coin holding back to its inception. This digital record is built on a "blockchain," which is a system for linking records ("blocks") so that each new block contains information about previous blocks in a growing list ("chain") of digital records. A new block is accepted by a cryptocurrency network participant so that everyone sees the same transaction history.
The technology's applications are not limited to finance; it can be used for any type of record-keeping; however, if the block refers to a financial transaction, each transaction in the blockchain includes information from previous transactions by definition, and thus verifies the ownership of the financial asset being transferred. Falsifying ownership, i.e. counterfeiting (which, as one might expect, is simple because digital items can be simply copied by copying), is difficult because it would necessitate changing previous records in the chain. This is inconceivable since records are held in a network of many users' computers, a "distributed ledger."
There is a substantial amount of computer science literature on the technologies that support cryptocurrency, including the security of public key cryptography, efficient search tools for finding transactions on the blockchain, and the ‘consensus' mechanisms used to establish network-wide agreement on ledger contents. Commentators predict that the processes currently utilised in Bitcoin and other cryptocurrencies will be replaced by new, more efficient approaches. Footnote6 This, however, has no bearing on our definition of cryptocurrencies (as an asset and a technology that confirms ownership of the asset), which is unaffected by technological implementation.
Cryptocurrencies are part of a broader class of financial assets known as "cryptoassets," which are peer-to-peer digital transfers of value that do not require the use of third-party organisations for transaction verification. What makes cryptocurrencies different from other cryptoassets? This is dependent on their intended use, i.e. whether they are given just for transfer or also serve other purposes. We can follow the distinctions highlighted in recent regulatory reports within the general category of cryptoassets, differentiating two additional sub-categories of cryptoassets, on top of cryptocurrencies.
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