Bitcoin-full-report-STVM

1

Will
a
decentralized
digital
cryptocurrency
like
Bitcoin
be

accepted
in
modern
day
society?

Kai
Bennink

Technology
Dynamics
(2015)

Management
of
Technology,
TU
Delft

1.
Introduction

Most
of
the
technology
that
underlay
the
financial
systems
we
use
today
are
structured
and

organized
centrally.
Institutions
like
banks,
pension
funds,
insurance
companies,
hedge
funds,

governments
and
tax
authorities
register
and
regulate
our
financial
transactions
centrally.

However,
Bitcoin,
the
most
successful
decentralized
digital
currency
at
the
moment
challenges

these
established
institutions.
Since
fall
2013
the
exposure
of
Bitcoin
in
society
exploded

because
its
currency
value
skyrocketed
(see
figure
3).
As
a
result
it
got
a
lot
of
attention
from

society
but
only
a
minority
of
society
knew
what
Bitcoin
really
was.
From
now
on
we
see

society
as
a
group
of
entities
that
exchange
monetary
transactions
with
each
other.

In
this
paper
we
will
address
the
technology
and
societal
values
of
Bitcoin
as
an
innovation
in

online
payments.
Furthermore
we
will
elaborate
on
the
underlying
core
technology
of
Bitcoin

called:
block
chain
technology
in
section
2.
This
new
technology
thrives
the
success
of
Bitcoin

and
inspires
many
other
IT
sectors.
The
problem
statement
of
this
paper
addresses
the
factors

that
influence
acceptation
of
Bitcoin
in
modern
day
society.
We
will
focus
on
the
society
wide

stakeholders
that
are
affected
or
may
be
affected
by
this
new
technology
because
these
actors

influence
the
success
of
Bitcoin’s
acceptation.

2.
Technology
map

In
Bitcoin,
electronic
payments
are
performed
by
generating
transactions
that
transfer
Bitcoin

coins
(BTCs)
among
Bitcoin
users.
We
define
an
electronic
coin
as
a
chain
of
digital
signatures

(Nakamoto,
2009).
Users
are
referenced
in
each
transaction
by
means
of
virtual
pseudonyms—
referred
to
as
Bitcoin
addresses
(Gervais,
2014).
Note,
these
addresses
do
not
have
to
be
real

and
thus
users
can
remain
anonymous.
Each
address
corresponds
to
a
unique
public/private

2

key
pair.
These
keys
are
used
to
transfer
the
ownership
of
BTCs
among
addresses
(Gervais,

2014).

Users
can
transfer
coins
by
setting
up
a
transaction.
The
forming
of
this
transaction
starts
with

digitally
signing
a
hash
to
the
previous
transaction
block
where
this
Bitcoin
was
last
spent.
Hash

functions
are
initially
crafted
for
use
in
a
handful
of
cryptographic
schemes
with
specific

security
requirements.
They
have
become
standard
fare
for
many
developers
and
protocol

designers
who
treat
them
as
black
boxes
with
magic
properties
(Mironov,
2005).

Bitcoin
uses
hash
functions
in
order
to
transform
input
data,
which
size
can
be
arbitrary,
into
an

almost
impossible
to
reverse
or
predict
output.
The
smallest
change
to
the
input
of
data

changes
the
output
of
the
hash
unpredictably
and
therefore
a
unique
input
matches
with
the

output
hash
(Nakamoto,
2009).
Because
of
this
technique
the
transaction
blocks
do
not

contain
serial
numbers
but
can
be
identified
by
their
hash.
This
way
Bitcoin
facilitates

identification
as
well
as
integrity
verification
and
therefore
it
is
called
a
cryptocurrency
(see

figure
1).

Figure
1.
(Nakamoto,
2009)

The
protocol
explained
above
verifies
the
transaction
validity
but
it
cannot
verify
the

transaction
users
of
double
spending
Bitcoins.
This
means
it
is
not
possible
to
see
if
the
coins

that
are
received,
previously
have
been
used
to
pay
someone
else.
To
prevent
double

spending,
Bitcoin
users
engage
in
a
peer-‐to-‐peer
protocol
that
implements
a
distributed

timestamp
service
providing
a
fully
serialized
log
of
every
Bitcoin
transaction
ever
made
(Kroll,

3

2013).
A
payee
can
verify
the
signatures
in
these
blocks
to
verify
the
chain
of
ownership

(Nakamoto,
2009).
A
transaction
block
is
a
record
of
multiple
transactions
at
a
given
time.
The

blocks
form
a
subsequent
hash
chain:
each
new
block
contains
the
cryptographic
hash
of
its

predecessor,
allowing
anyone
to
verify
that
no
preceding
block
has
been
modified
(Kroll,
2013).

The
verification
process
is
done
by
Bitcoin
miners,
which
are
active
nodes
in
the
peer-‐to-‐peer

Bitcoin
network
who
try
to
solve
a
big
proof-‐of-‐work
puzzle
(see
figure
2).
The
complete
chain

of
transaction
records
is
called:
the
block
chain.

Figure
2.
(Nakamoto,
2009)

Bitcoin
miners
offer
computational
power
to
the
Bitcoin
network
in
return
for
an
incentive.

Anybody
can
choose
to
become
a
miner
and
is
able
to
mine
new
transaction
blocks
that
add
to

the
complete
block
chain.
The
only
thing
you
need
is
a
high
performing
computer,
internet

access
and
infinite
power
supply.
For
offering
the
Bitcoin
network
computational
power
a

miner
will
get
a
reward
in
the
form
of
new
‘mined’
Bitcoins
and
a
transaction
fee.
The
protocol

of
mining
a
transaction
block
is
through
solving
a
proof-‐of-‐work
puzzle.
This
proof-‐of-‐work

puzzle
is
very
hard
to
compute
but
the
result
is
easy
to
verify
(Kroll,
2013).

Sakamoto,
the
inventor
of
the
Bitcoin
protocol,
came
up
with
multiple
rules
for
this
proof-‐of-‐
work
puzzle.
One
of
Bitcoin’s
rules
states
that:
the
block
chain
that
used
the
most

computational
effort
will
be
seen
as
the
only
valid
block
chain
and
will
automatically
be

accepted
by
all
nodes
in
the
network
as
the
one
true
block
chain.
Because
the
cumulative

computational
power
of
all
the
nodes
in
de
network
is
so
large
it
is
almost
impossible
for
a

single
user
to
implement
a
malicious
block
chain
that
will
be
accepted
by
all
the
nodes.
For

malicious
users
to
double-‐spend
a
Bitcoin,
they
would
not
only
have
to
redo
all
the
work

required
to
compute
the
block
where
that
Bitcoin
was
spent,
but
also
recompute
all
the

4

subsequent
blocks
in
the
chain
(Gervais,
2014).
This
protocol
prevents
users
from
double

spending
Bitcoins
if
the
majority
of
the
nodes
in
the
network
are
‘honest’.

The
Bitcoin
network
is
robust
in
its
unstructured
simplicity.
Nodes
work
all
at
once
with
little

coordination.
They
do
not
need
to
be
identified,
since
messages
are
not
routed
to
any

particular
place
and
only
need
to
be
delivered
on
a
best
effort
basis
(Sakamoto,
2009).
Nodes

can
leave
and
join
the
network
whenever
they
want.

When
they
rejoin
the
network,
after
a

period
of
absence,
they
just
accept
the
block
chain
that
is
valid
according
to
the
protocol
and

start
mining
again.

2.1
System
of
technologies,
alternatives
&
landscape

The
infrastructure
on
which
the
Bitcoin
network
operates
is
currently
the
TCP/IP
Internet

network,
also
known
as:
the
world
wide
web.
Just
like
Bitcoin
the
Internet
relies
his
success
on

lack
of
regulation
and
the
generally
inclusive
and
permission
less
nature
of
innovation
(Ito,

2015).
In
essence
these
two
technologies
operate
in
a
decentralized
way
and
complement
each

other
in
worldwide
coverage,
security
and
autonomy.

Since
the
launch
of
Bitcoin
in
2009
there
are
a
handful
of
cryptocurrency
competitors
active.

Ripple,
which
is
the
first
real
competitor
of
Bitcoin,
is
actually
a
centrally
distributed

cryptocurrency.
It
has
been
launched
in
2011
and
is
valued
with
a
market
cap
of
$139
million.

Somewhat
more
direct
competitors
are:
Namecoin
($11.4
million
market
cap),
Litecoin
($154

million
market
cap)
and
Peercoin
($15.5
million
market
cap)
all
use
a
decentralized
proof-‐of-‐
work
protocol
similar
to
Bitcoin.
Although
these
competitors
are
more
or
less
addressing
the

same
market
as
Bitcoin,
at
the
moment
they
do
not
come
close
to
being
a
real
threat
to
Bitcoin

with
an
estimated
market
cap
of
over
$6
billion
dollar
(Balch,
2014).

On
top
of
the
Bitcoin
layer
there
are
various
services
active
such
as
electronic
wallets,
currency

exchanges
and
merchant
service
providers
with
varying
levels
of
vertical
integration.
Some
are

tightly
linked
to
just
one
cryptocurrency
like
Bitcoin,
others
are
agnostic
to
whichever
ends
up

‘winning’
(Ito,
2015).
These
Bitcoin
services
can
be
compared
to
the
importance
of
the
email

application
for
the
Internet.
Email
is
still
one
of
the
most
used
applications
run
on
the
Internet.

It
stimulated
online
communication
and
thrived
the
use
of
the
Internet
as
a
decentralized

network
(Ito,
2015).
The
underlying
technology
for
the
success
of
the
Internet
is
the
TCP/IP

5

protocol,
where
for
Bitcoin
it
is
thrived
by
its
block
chain
technology.
Both
technologies
are
in

fact
decentralized.
According
to
Ito
(2015)
we
might
be
able
to
learn
a
lot
about
the
future
of

Bitcoin
from
the
history
of
the
Internet.
For
example:
societal
values
like
decentralization,

autonomy
and
anonymity
are
for
a
great
part
responsible
for
the
success
of
the
internet
as
we

all
know
it.

Kaushal
and
Tyle
(2013)
say
that
if
we
had
over-‐regulated
the
Internet
early
on,
we
would
have

missed
out
on
many
innovations
that
we
can’t
imagine
living
without
today.
According
to
them

the
same
is
true
for
the
block
chain
technology.
Disruptive
technologies
rarely
fit
neatly
into

existing
regulatory
considerations,
but
rigid
regulatory
frameworks
have
repeatedly
stifled

innovation.
(Kaushal
and
Tyle,
2013).
Later
in
this
paper
we
will
elaborate
more
on
the
influence

of
regulation
and
the
impact
of
societal
values
on
Bitcoin’s
block
chain
technology.

2.2
Uncertainties

Bitcoin
is
a
young
currency
in
comparison
to
the
established
national
currencies
used

nowadays.
Since
October
2013
the
value
of
Bitcoin
currency
fluctuated
significantly
(see
figure

3).
Because
there
are
extreme
value
fluctuations,
the
thrust
of
society
in
(and
therefore
the
use

of)
Bitcoin
is
still
low.
Although
these
large
fluctuations
grabbed
the
attention
of
society
and

put
Bitcoin
on
the
map,
they
also
caused
severe
impact
on
the
thrust
and
stability
of
the

currency,
which
discourages
users
to
use
Bitcoin
for
their
every
day
payments
and
businesses

(Polasik,
2014).

Figure
3.
(bitcoincharts.com)

6

A
second
uncertainty
is
the
level
of
safety
and
security
of
the
decentralized
network
because

there
is
no
central
authority
that
supervises
on
the
transactions
that
are
being
made.
Being

unregulated
and
exclusively
online,
the
currency
is
vulnerable
to
unregulated
theft.
This
greatly

withholds
society
to
step
in
and
use
BTC’s
for
their
everyday
transactions
(Balch,
2014).

3.
Stakeholders
map

In
this
section
we
will
describe
the
stakeholders
in
society
that
develop,
use,
or
are
affected
by,

the
Bitcoin
network.
These
stakeholders
have
direct
or
indirect
influence
on
the
acceptation

and
success
of
this
new
technology
and
therefore
we
will
elaborate
on
their
characteristics,

interests,
capacities
and
societal
values
as
influencers
of
this
innovation
process.
First
we
will

address
the
developers
of
the
Bitcoin
technology.
Secondly,
the
stakeholders
that
are
part
of

Bitcoin’s
innovation
system
will
be
addressed.
The
innovation
system
figures
as
the
general

climate
in
which
the
new
technology
is
produced
(Pesch,
2015).
Stakeholders
within
the

boundaries
of
this
innovation
system
are:
exchangers,
administrators,
miners,
investors
and

governmental
regulators.
Thirdly,
the
group
of
stakeholders
that
do
not
affect
Bitcoin
or
its

technology
directly
but
can
influence
the
future
acceptation
or
shape
of
this
technology
is

called:
‘outsiders’.
According
to
the
definition
stated
by
Pesch
(2015)
outsiders
are
the
public-‐
at-‐large,
competing
firms,
NGO’s,
outsider
engineers
and
scientists
that
forward
alternative

problem
definitions
and
solutions
with
regards
to
the
technology
at
stake.
The
stakeholder

group
‘public-‐at-‐large’
will
be
seen
as
society
that
uses
or
will
use
the
Bitcoin
technology
in
the

near
future.
Society
is
not
a
well
organized
group
of
actors
so
identifying
their
interests,
needs

and
values
is
mostly
based
on
global
responses
and
assumptions
that
arise
in
online
discussions

and
press
releases
subject
to
Bitcoin
and
its
under
laying
technology.

3.1.1.
Insider:
Developers

Bitcoin
is
brought
to
life
by
multiple
IT
developers
that
are
responsible
for
the
initial
creation

(programming
code)
and
development
of
the
Bitcoin
framework
and
protocol.
The
founder
of

Bitcoin,
Satoshi
Nakamoto,
is
a
mysterious
person
who,
according
to
multiple
sources,
is
still
an

unknown
person
to
society.
In
2009
Nakamoto
started
the
Bitcoin
network
and
in
2010
he

transferred
the
source
code
of
the
Bitcoin
protocol
to
Gavin
Andresen
and
a
group
of
leading
IT

developers
(Coindesk,
2015).
This
means
the
future
of
Bitcoin
protocol
is
for
a
large
extent
in

the
hands
of
an
exclusive
group
of
IT
developers
who
are
guarding
the
rules
and
protocols
set

7

up
by
Nakamoto.
The
salient
values
that
emerge
from
this
protocol
are
the
result
of
wanting
to

fundamentally
change
the
current
global
monetary
system.
From
this
anarchistic
point
of
view

the
Bitcoin
protocol
is
founded
and
it
values
anonymity,
autonomy,
deregulation
and

decentralization
of
the
monetary
system.
According
to
(Gervais,
2014)
developers
of
Bitcoin
are

interested
in
worldwide
implementation
and
acceptation
of
the
Bitcoin
currency
in
order
to

bring
the
power
back
to
the
people.
“Price
is
the
least
interesting
thing
about
Bitcoin,”

said
Roger
Ver,
an
early
investor
who
is
often
called,
in
a
typical
movement
phrase,
the
Bitcoin

Jesus.
“At
first,
almost
everyone
who
got
involved
did
so
for
philosophical
reasons.
We
saw

Bitcoin
as
a
great
idea,
as
a
way
to
separate
money
from
the
state
(New
York
Times,
2013).

3.1.2
Insider:
Exchangers

Entities
that
act
as
a
virtual
exchanger
in
the
Bitcoin
network
are
for
example:
Coinbase,
Circle,

Bittylicious
and
CoinCorner.
These
Bitcoin
banks
offer
complementary
exchange
and
merchant

services
to
Bitcoin
users.
Exchangers
function
as
an
important
node
in
the
Bitcoin
network
that

connects
the
current
monetary
system,
society
and
Bitcoin.
An
exchanger
is
a
person
engaged

as
a
business
in
the
exchange
of
virtual
currency
for
real
currency,
funds,
or
other
virtual

currency
(FinCEN,
2013).
Bitcoin
users
that
are
not
able
to
mine
their
own
Bitcoins,
have
to

exchange
their
local
currency
for
Bitcoins
at
an
exchange
(Woo,
2013).

Recently
a
large

number
of
Bitcoin
exchangers
have
been
hacked
with
large
amounts
of
customer
Bitcoins

stolen.
Bitcoin
exchangers
have
to
cope
with
these
security
breaches;
otherwise
it
will
damage

the
thrust
worthy
image
of
the
exchanger,
it’s
competitors
and
the
entire
Bitcoin
network.

Therefore,
Bitcoin
exchangers
share
a
common
interest
in
system
security
and
reliable

reputation
amongst
users
and
society
in
order
to
increase
business
opportunities
(Woo,
2013).

3.1.3.
Insider:
Administrators

An
administrator
is
a
person
engaged
as
a
business
in
issuing
a
virtual
currency,
and
who
has

the
authority
to
redeem
such
virtual
currency.
Dell
(online
sale
of
PC),
Amazon
(online
retailer)

and
Tesla
(electric
car
manufacturer),
are
companies
whom
all
recently
started
to
accept

Bitcoin
payments
from
their
customers
(bitcoinvalues.net).
By
accepting
Bitcoin
as
an
extra

payment
option
they
potentially
reach
a
new
market
of
customers.
Administrators
try
to
create

8

an
environment
for
their
customers
in
order
to
make
the
process
of
buying
and
selling
of

products
is
as
easy
and
safe
as
possible.

3.1.4
Insider:
Investors

We
call
the
group
of
stakeholders
that
are
interested
in
the
growth
of
Bitcoin
and
its

complementary
service
firms:
Investors.
This
stakeholder
is
in
direct
contact
with
exchangers

and
administrators
and
they
consist
mainly
out
of
high-‐net-‐worth
individuals,
hedge
funds,

institutional
funds
and
venture
capitalists
(Reuters,
2015).
The
capacity
of
this
year’s
total

investments
in
Bitcoin-‐related
firms
is
468
million
US
dollar
according
to
Coindesk.com.
This
is

more
then
50%
of
the
total
amount
of
invested
capital
in
Bitcoin-‐related
firms.
According
to

Polasik
(2014)
Bitcoin
achieved
much
higher
returns
than
other
investment
alternatives,
such
as

stocks
or
bonds,
however
it
also
suffered
from
much
higher
investment
risk.
In
general

investors
are
interested
in
investment
opportunities
that
provide
them
with
low
risk
and
high

return
on
investment
(Modigliani
&
Miller,
1958)
.The
common
goal
investors
share
is
the
total

acceptation
of
Bitcoin
as
a
virtual
currency
in
society
because
the
increased
market
share

lowers
the
total
risk
of
their
investment
(due
to
possible
lock-‐in)
and
increases
the
return
on

investment.

3.1.5.
Insider:
Miners

An
interesting
stakeholder
of
the
Bitcoin
network
is:
Bitcoin
miner.
This
stakeholder
is
an

important
part
of
the
innovation.
As
described
earlier
in
this
article,
Bitcoin
miners
are

responsible
for
the
computational
work
that
has
to
be
done
in
order
to
keep
the
network
up

and
running.
Whereas
most
financial
entities
have
always
been
centralized,
and
still
are
today,

Bitcoin
substitutes
these
powerful
entities
with
other
entities
such
as
IT
developers
and

owners
of
mining
pools
(Gervais,
2014).
The
common
interest
miners’
share
is:
supporting
the

Bitcoin
network
by
offering
their
computational
power
in
return
for
a
reward
(BTCs).
Today

mining
is
increasingly
popular
due
to
the
increased
attention
Bitcoin
gained
since
fall
2013.

However,
the
profitability
of
individual
miners
is
decreasing
due
to
large
dominating
‘mining

pools’
that
profit
from
combining
resources.
Currently
the
top-‐three
(centrally
managed)

mining
pools
control
more
than
50%
of
the
computing
power
in
Bitcoin.
Originally
the
mining
of

a
block
generation
in
Bitcoin
was
designed
to
be
decentralized.
However,
in
order
to
be
as

9

profitable
as
possible,
miners
clustered
in
these
‘mining
pools’
and
are
currently
more
or
less

centralized
to
gain
advantage
from
economies
of
scale
(Gervais,
2014).

3.1.6.
Insider:
Governmental
regulators

Bitcoin
effectively
bypasses
the
intermediary
role
of
banks
and
regulators;
this
too
means
that

it
may
facilitate
illegal
activities.
Due
to
the
anonymous
and
decentralized
nature
of
Bitcoin
it
is

hard
to
control
these
activities
(Balch,
2014).
Governmental
regulators
are
the
actors
that
try
to

get
a
grip
on
the
activities
that
take
place
in
the
Bitcoin
network.
They
affect
the
acceptation
of

Bitcoin
in
today’s
society
and
are
briefly
described
in
the
following
paragraph.

According
to
Elliot
et
al.,
(2012)
Central
banks
like
the
Bank
of
England,
the
US
Federal
Reserve,

De
Nederlandsche
Bank
or
the
European
Central
Bank
act
as
a
centrally
organized
actor
to

provide
financial
institutions
with
funding
and
monitor
the
monetary
fluctuations
of
its

economical
environment.
Regulators
like
the
US
Treasury
department,
UK’s
independent

governmental
department;
Financial
Conduct
of
Authority
and
the
Dutch;
Autoriteit
Financiële

Markten
(AFM)
are
regulatory
organizations
that
supervise
financial
institutions’
behaviour.

Financial
law
enforcement
agencies
like
the
US
FinCEN
and
the
European
System
of
Financial

Supervision
(ESFS)
act
to
maintain
and
correct
financial
institutions
in
their
behaviour.

According
to
Reuters
(2015)
Authorities’
response
to
the
growing
role
of
cryptocurrencies
has

not
been
the
same,
but
almost
all
main
jurisdictions
have
opted
for
a
conservative
approach

and
published
documents
to
warn
society
on
the
different
kinds
of
associated
risks.

Governmental
regulators
are
generally
interested
in
controlling
economic
welfare.
This
means

creating
a
transparent
and
regulated
environment
of
al
monetary
transactions
in
order
to

obtain
criminals,
tax
evaders,
money
launders
and
frauds
(Brunnermeier
et
al.,
2009).
The

transnational
nature
of
Bitcoin
makes
it
difficult
for
regulators
to
quickly
define
rules
or
a
set
of

sanctions
(Gervais,
2014).
The
FinCEN
(2013)
proposal
set
up
by
the
US
defined
a
regulatory

framework
that
is
the
first
of
its
nature.
Although
the
content
still
has
to
be
discussed
and

formalized,
the
first
step
of
defining
a
multi
level
approach
is
made
(Elliott
et
al.,
2014).

3.2
Outsider:
Users

The
Financial
Crimes
Enforcement
Network
(FinCEN),
which
is
part
of
the
Department
of
the

Treasury
in
the
US,
wrote
a
guidance
report
on
how
to
regulate
virtual
currencies
in
the
US.
In

10

this
part
we
will
define
the
stakeholder
‘users’
according
to
FinCEN’s
report
(2013).
A
user
is
a

person
that
obtains
virtual
currency
to
purchase
goods
or
services.
Users
of
Bitcoin
share
a

common
interest
to
transfer
money
with
high
security,
low
cost
of
transfer,
anonymity
and

deregulation.
According
to
the
website
www.blockchain.info
(2015)
the
average
amount
of

uniquely
used
Bitcoin
addresses
in
the
past
two
months
are
more
or
less
250.000.
In
the
last

two
years
the
amount
of
Bitcoin
users
grew
with
a
staggering
400%.
However,
the
growth
of

Bitcoin
users
may
seem
impressive,
it
is
nothing
in
comparison
to
the
majority
of
society
that

still
uses
the
national
based
(fiat)
currencies
to
make
their
everyday
payments.
A
shared
goal

for
Bitcoin
users
is
to
promote
the
use
of
BTCs
so
that
the
acceptation
and
implementation

creates
a
monetary
environment
where
Bitcoin
users
can
use
BTCs
everywhere
and
anywhere.

3.3.2
Outsider:
Competing
cryptocurrencies

Bitcoin
is
by
far
the
largest
and
most
successful
cryptocurrency
at
the
moment.
However,
since

the
launch
there
have
been
launched
lots
of
competing
cryptocurrencies
with
different

characteristics
and
features.
According
to
Bitcoin.it
some
of
the
most
successful
competitors

are:
Ripple,
Namecoin,
Litecoin,
Dogecoin,
Hunterscoin,
etc.
These
competitors
all
address
the

same
market
(stakeholders
group:
users)
as
Bitcoin
but
share
a
common
interest
in
the
war
of

global
acceptation
of
cryptocurrencies.

3.3.2
Outsider:
Financial
institutions

Financial
institutions
have
a
large
stake
in
the
monetary
ecosystem
of
society
and
are,
as

described
earlier,
part
of
the
Bitcoin
landscape.
A
bank,
for
example,
has
to
cope
with

operational
en
transactional
costs
in
order
to
keep
the
financial
transactions
of
its
users

flowing.
According
to
Hashingit.com,
Bitcoin
can
transfer
BTCs
more
than
40%
cheaper
than
a

regular
bank,
so
Bitcoin
can
be
seen
as
a
serious
competitor.
Examples
of
financial
institutions

that
address
the
same
market
as
Bitcoin
are:
HSBC,
Rabobank,
ING,
Citi
bank,
BNP
Paribas,
ABN

Amro,
Mastercard,
Visa,
etc.
The
institutions
described
above
are,
based
on
its
core
business

(monetary
transfer
of
money),
a
competitor
of
Bitcoin.
However,
this
is
just
a
small
part
of
the

services
that
most
of
the
financial
institutions
offer
to
their
customers.
Financial
institutions

may
be
scared
of
the
cheaper
decentralized
and
deregulated
nature
of
Bitcoin
but
the
currency

still
has
a
lot
to
gain
when
it
comes
to
trust
and
acceptation
of
society.
Financial
institutions
are

11

generally
interested
in
gaining
market
share,
increasing
return
on
investment
and
improving

their
trustworthy
image
in
society
(Brunnermeier
et
al.,
2009).

3.3.3
Outsider:
Society
(public-‐at-‐large)

As
described
earlier,
society
is
the
public-‐at-‐large
which
is
a
very
broad
and
diverse
group
of

actors
that
are
generally
disorganized.
However,
this
group
of
possible
stakeholders
could

emerge
rather
fast
when
levels
of
moral
discontent
related
to
Bitcoin
arise.
In
this
paper
we

assume
that
society
values
trust,
privacy
and
convenience
of
the
monetary
system.
Although

these
values
are
still
very
generic
and
based
on
global
assumptions,
it
is
very
important
to

include
this
group
in
the
sociotechnical
value
map
in
order
to
create
a
broad
scope
of
all
the

possible
stakeholders
that
may
affect
Bitcoin’s
acceptation
in
society.

4.
Value
map

In
this
part
we
try
to
identify
the
technological
and
societal
values
that
are
relevant
for
the

acceptation
of
the
Bitcoin
currency.
From
the
empirical
results
shown
earlier
in
this
paper,
we

will
develop
a
coherent
interpretation
to
create
a
so-‐called
value
map.
We
will
deduce
the

values
that
are
affected
by
the
technology,
and
the
values
that
are
forwarded
by
the

stakeholders
in
order
to
create
a
value
sensitive
design
in
part
5
of
this
paper
(Pesch,
2015).

4.1
Technology
values

The
Bitcoin
technology
is
value-‐laden
with
implicit
values
in
the
form
of
sociotechnical
scripts

that
have
shaped
the
Bitcoin
network
and
its
users.
According
to
Akrich
(1992)
technological

artefacts
embody
certain
sociotechnical
‘scripts’.
In
the
design
of
a
new
technology,
designers

use
certain
images
or
representations
of
their
‘target
audience’.
Often
the
designers
only
hold

these
images
or
representations
unconsciously,
but
they
have
the
effect
that
certain
tastes,

competences,
motives,
aspirations,
and
prejudices
become
inscribed
in
the
artefact.
In
their

turn,
these
script
steer,
guide
and
limit
the
behaviour
of
the
user
(Pesch,
2015).

The
Bitcoin
protocol,
written
by
Satoshi,
guards
the
following
values
in
the
Bitcoin
network:

Anonymity,
autonomy
and
safety.
Anonymity
is
deduced
from
the
fact
the
users
don’t
need
to

register
with
their
personal
information,
but
can
sign
up
with
an
anonymous
alias.
Secondly,

12

the
decentralized
Bitcoin
network
is
not
monitored
and
regulated
by
a
governmental
or

external
party,
so
transactions
can
be
made
in
almost
complete
anonymity
and
autonomy.

However,
the
anonymous
and
autonomous
nature
of
the
Bitcoin
protocol
does
create
an

environment
of
increased
responsibility
for
its
users.
The
security
of
the
private
key
is
the

complete
responsibility
of
its
owner.
If
the
key
is
lost
or
hacked
there
is
no
central
organized

entity
that
can
retrieve
or
redeem
it.
If
this
may
occur,
the
BTCs
that
are
attached
to
that
key

and
wallet
are
as
well
lost
in
digital
Bitcoin
space.
We
can
conclude,
in
relation
to
central

organized
financial
institutions,
that
Bitcoin’s
values
‘anonymity’
and
‘autonomy’
come
with
an

increased
responsibility
factor
of
personal
security.

4.2
Public
values

The
value
‘trust’
is
a
core
value
for
any
user
of
financial
institutions
and
is
visualized
as
the

general
value
for
society
in
figure
4.
If
there
is
a
lack
of
trust
in
financial
institutions,
society
will

stop
using
their
services
(Foster
et
al.,
2009).
The
stakeholder
groups:
users,
developers
and

insiders,
share
this
value
based
on
their
commitment
to
develop,
use
or
exploit
the
Bitcoin

network.
According
to
Dimase
(2015),
who
wrote
an
article
on
Bitcoin’s
societal
acceptation
for

Reuters,
within
the
cryptocurrencies
ecosystem,
the
concept
of
trust
shifts
from
a
government

to
encryption
algorithms;
creation
of
money
is
transferred
from
central
banks
to
computing

systems;
the
intermediation
role
played
by
banks
is
replaced
by
the
“block
chain,”
a
ledger

collecting
records
of
all
transactions.

According
to
Dimase
(2015)
people

who
use
Bitcoin
trust
the
protocol

instead
of
a
specific
private
or
public

institution.
In
figure
4
we
present
a

general
visualization
of
Bitcoin’s

sociotechnical
system
that
includes

the
main
stakeholders
and
its
core

values.
The
values
are
placed
in

context
of
the
global
monetary

landscape.

Figure
4

13

The
stakeholder
group
‘governmental
regulators’
value
transparency
and
control
of
the

monetary
system.
Govermental
regulators
govern
their
economic
behaviour
and
tax
collection

through
monitoring
and
regulation
in
order
to
maintain
and
improve
economic
welfare
of
the

state.
These
values
are
in
direct
conflict
with
the
autonomous
and
deregulated
values
of
the

Bitcoin
technology.
The
users
and
developers
of
Bitcoin
share
a
common
ideologically
that

supports
deregulation
of
the
current
monetary
system.
These
salient
values
become
very
clear

in
the
Bitcoin
protocol.
Through
Bitcoin,
developers
advocate
for
the
separation
of
money
and

state.
Bitcoin’s
emerging
technology
and
increasingly
growing
users
create
a
complex
tension

where
governments
all
across
the
world
have
to
cope
with
because
the
lost
of
monetary

control
weakens
its
global
competitive
advantage
(Brunnemeier
et
al.,
2009).

The
described

conflict
of
values
between
Bitcoin
and
governmental
regulators
are
on
the
one
hand,

respectively;
autonomy
and
anonymity
of
transferring
money,
and
on
the
other
hand,
lack
of

monetary
control
and
power.

5.
Value
sensitive
design

According
to
Dosi
and
Nelson
(1994)
the
developers
are
part
of
a
variation
environment
who

develop
variations
of
new
technological
designs
in
order
to
become
successful.
On
the
other

side,
we
have
the
selection
environment,
public
actors
who
decide
which
of
the
technological

variations
are
chosen
used,
and
as
such
decide
which
alternatives
eventually
become

successful.

According
to
the
described
societal
features
of
the
Bitcoin
technology
and
its
stakeholders
we

will
conclude
a
value
sensitive
design
that
may
possibly
improve
the
acceptation
of
the
Bitcoin

technology
in
modern
day
society.
First,
we
will
start
by
describing
possible
missing
values
in

the
current
Bitcoin
design.
Secondly,
we
will
assess
the
importance
of
these
missing
values
and

deduce
a
recommendation
of
design
requirements
based
on
this
assessment.

5.1
Technological
design
requirements

Although
Bitcoin
is
a
semi-‐open-‐sourced
technology
that
can
easily
adapt
and
grow,
its
core

protocol
values
and
under
laying
technology
represent
its
true
identity
and
are
irreversibly

connected
to
each
other.
As
we
discussed
in
part
4,
the
value
‘trust’
is
highly
important
for

financial
institutions.
Trust
from
society
in
the
integrity
of
financial
institutions
is
necessary
to

14

grow
customers
and
build
revenue.
Exactly
the
same
goes
for
Bitcoin
but
it
still
has
a
lot
to
gain

on
building
trust
from
society.
Mainly
this
is
due
to
the
young
nature
and
large
fluctuations
of

the
Bitcoin
currency
value
since
fall
2013.
Although
Bitcoin
is
the
most
successful

cryptocurrency
at
the
moment,
the
world
of
cryptocurrencies
is
still
addressing
a
niche
market.

According
to
Kemp
et
al.
(1998)
and
Schot
&
Geels,
(2008)
a
niche
is
considered
as
a
breeding

ground
for
innovation.
Safe
places
where
developers
can
test
innovations
and
still
keep
a

reasonable
amount
of
influence
and
control.
Bitcoin’s
technology
is
a
large
part
of
the

decentralized
cryptocurrencies
niche
where
it
can
learn
to
develop
a
sociotechnical

configuration
that
can
ultimately
challenge
the
more
established
mainstream
financial

institutions.

To
develop
a
trustworthy
image
from
society,
Bitcoin
developers
could
make
changes
to
its

protocol
that
increases
transactional
transparency
for
global
governments.
However,
many

digital
technology
experts
like
Ito
(2015)
discuss
the
fact
that
Bitcoin
never
can
and
will
change

its
protocol,
but
the
successful
block-‐chain
technology
that
thrives
the
success
of
Bitcoin
might

evolve
into
a
new
societal
acceptable
cryptocurrency.
A
suitable
example
of
this
new

acceptable
design
will
make
a
value
trade-‐off
that
enables
governmental
regulation
and

monitoring
as
well
as
providing
a
more
decentralized
and
autonomous
network
of
transferring

money
for
society.
For
example,
Bitcoin’s
competitor
Ripple
is
a
younger,
centrally
organized

cryptocurrency
that
enables
increased
transparency
and
regulation
from
governmental

regulators.
Ripple
is
not
nearly
as
large
and
successful
as
Bitcoin
but
the
improved
process
of

mining
faster
and
the
governmental
friendly
protocol
is
definitely
a
possible
advantage
when
it

comes
to
global
acceptation
in
society
when
compared
to
Bitcoin.
However,
bear
in
mind,

increased
transparency
means
decreased
anonymity.
This
value
trade-‐off
is
exactly
the
power

and
limitation
of
Bitcoin’s
success.
In
the
next
part
we
will
discuss
Bitcoin’s
value
trade-‐off

between
technological
and
institutional
values
in
more
detail.

15

5.2
Institutional
context
design

We
define
institutions
as
a
group
of
professional
entities
with
similar
expertise
that
all
endorse

a
set
of
rules
and
behaviours
that
are
based
on
shared
understanding.
Whoever
makes
part
of

an
institution
knows
the
rules
and
expectations
(Kemp,
1998).
Since
2009
Bitcoin
is
actively

part
of
the
global
monetary
system
that
acts
as
a
wide
spread
institution.
In
this
part
we
will

elaborate
on
Bitcoin’s
most
salient
conflicts
in
institutional
context
and
discuss
possible

solutions
that
could
stimulate
Bitcoin’s
acceptation
in
society.

The
salient
values
that
arise
from
Bitcoin’s
protocol
and
under
laying
technology
(see
part
4.1)

are
an
implementation
barrier
that
is
in
direct
conflict
with
the
values
of
the
governmental

regulators
(see
part
3.1.6).
We
speak
of
value
conflicts
when
“considered
in
isolation,
they

evaluate
different
options
as
best”
(Van
de
Poel
2009,
977).
In
such
situations,
two
scenarios

are
conceivable:
First,
(1)
changing
the
design
in
such
a
way
that
it
accommodates
these

conflicting
values
or,
secondly,
(2)
making
a
value
trade-‐off
that
decides
which
value
should

take
priority
in
the
design.

As
described
earlier,
core
values
like
autonomy
and
anonymity
of
Bitcoin
are
irreversibly

connected
to
its
identity.
This
means
changing
the
protocol
to
meet
governmental
demands
in

order
to
achieve
acceptation
will
break
Bitcoin’s
core
purpose.
On
the
other
hand,

governmental
regulators
will
actively
resist
the
acceptation
of
Bitcoin
to
prevent
loosing

transparency
and
power
of
the
monetary
system.
Therefore,
scenario
1
mentioned
by
Van
de

Poel
(2009)
will
not
be
a
very
straightforward
solution
to
solve
this
conflict.
Bitcoin
is
an
online

technology
that
thanks
a
great
part
of
its
success
to
the
decentralized
nature
of
the
internet.

Governmental
regulators
can
try
to
block
and
ban
the
use
of
Bitcoin
but
this
must
be
done

highly
coordinated
and
performed
on
a
global
scale
in
order
to
effectively
reduce
Bitcoin’s

activities
to
minimum.

However,
the
conflict
described
above
does
not
mean
Bitcoin’s
acceptation
is
doomed
to
fail.

There
are
two
scenarios
that
could
reinforce
the
acceptation
of
Bitcoin
in
its
current
form.
The

first
scenario
is
based
on
the
democratic
power
of
society
to
influence
the
value
hierarchy
of

governments.
Governmental
stakeholders’
power
is
based
on
the
democratic
electorate
of

society.
The
key
question
we
can
ask
ourselves
(as
being
society):
Do
we
value
transparency

16

and
control
of
our
economic
well
being
more
than
the
degree
of
autonomy
and
privacy
of
our

monetary
activities?

The
second
scenario
is
based
on
the
level
of
trust
society
has
in
the
integrity
of
the
current

financial
institutions.
As
described
in
part
4,
financial
institutions
base
their
success
mainly
on

trust
of
society
in
their
integrity
and
performance.
If
the
level
of
mistrust
in
current
traditional

and
central
organized
financial
institutions
increases
this
may
stimulate
society
to
use
a
more

autonomous
alternative
like
Bitcoin
instead.

6.
Conclusion

The
founder,
Satoshi
Nakamoto,
created
the
Bitcoin
protocol
in
2009
to
offer
society
a
way
to

perform
online
financial
transactions
in
complete
anonymity
and
with
increased
autonomy.

Based
on
current
empirical
research
we
described
and
analysed
Bitcoin’s
protocol,
technology

and
its
stakeholders.
With
this
framework
we
could
identify
salient
technological
and
societal

values
that
were
embedded
in
Bitcoin’s
protocol
and
represented
by
its
stakeholders.
In
part
5

we
discussed
significant
value
differences
that
emerged
between
its
stakeholders
and
used

these
insights
to
analyse
and
guide
Bitcoin’s
development
in
order
to
increase
societal

acceptance.
In
short,
the
analysis
of
this
paper
concludes
that:
Bitcoin’s
protocol
and
block-‐
chain
technology
is
an
innovation
that
challenges
the
current
financial
power
distribution
on
a

global
scale
by
providing
society
an
alternative
to
autonomously
perform
monetary
activities

that
effectively
bypasses
established
governmental
regulators
and
financial
institutions.

However,
the
success
of
a
new
technology
depends
on
the
linkages
it
can
make
between

existing
technologies,
infrastructures,
institutions
and
also
user
experiences
(Rip,
1995).
The

decentralized
and
globally
accessible
nature
of
the
Internet,
as
a
peer-‐to-‐peer
network
that

functions
as
Bitcoin’s
infrastructure,
is
a
key
factor
in
the
success
of
Bitcoin.
Changing
Bitcoin’s

protocol
to
meet
governmental
values
is
not
possible
without
loosing
its
true
identity.
The

under
laying
block-‐chain
of
Bitcoin,
however,
may
be
used
in
a
more
successful
governmental

friendly
cryptocurrency
that
both
enables
transactional
transparency
for
governmental

regulators
and
autonomous
use
of
online
monetary
transactions.
Acceptation
of
Bitcoin
in

society
is
possible
when
the
answer
to
the
question
stated
in
part
5.2
“Do
we
value

transparency
and
control
of
our
economic
well
being
more
than
the
degree
of
autonomy
and

privacy
of
our
monetary
activities?”
is
‘no’.

17

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