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The Bitcoin Project As A Challenge to Sovereignty?

Written by Maximilian Mayrshofer

Paper category

Bachelor Thesis


Business Administration>Finance




Bachelor Thesis: Cryptocurrency The following section will outline the basic characteristics of cryptocurrency as the central theme of this article. The idea of ​​electronic network currency is not new. As we will show, it is closely related to the development of the Internet and its gradual integration into the financial market. Although the Bitcoin project-when the first "real" cryptocurrency was created-provided an innovative way to solve some of the key issues that made independent virtual currencies work, I think it is ingeniously related to an inherently free The long-term political projects of the ideological ideals are linked together. In order to make this argument-essential for the subsequent analysis and discussion of the interaction between cryptocurrency and the concept of sovereignty-I will briefly describe the origin of cryptocurrency, discuss its main characteristics and the issues following its currency, and touch on its political advantages And briefly examine the ecosystem that has developed around its technology. 4.1 The origin of cryptocurrency From the early days of the Internet, entrepreneurs and programmers are studying methods of using networked computers to process general currency transactions-and establishing independent and anonymous currencies, especially currencies that are not controlled by the government. There are many suggestions for replacing physical cash with some form of digital cash. In addition to well-known technological innovations such as Paypal and today's widespread integration of credit card transactions into e-commerce processes, early examples of similar currency technologies include ecash and b-moneyor bitgold. The origin of the latter technology may be mainly located in the cryptographer and hacker community, composed of a group of programmers dedicated to designing new methods of protecting and encrypting Internet data transmission-many of them have special political ambitions, which I will detail below . It is worth noting that in the public debates in the 1990s, people worried that digital cash might undermine the nation-state's control over the money supply (Maurer 1998, Panurach 1996, Karlstrøm 2014, Roio 2013). The term cryptocurrency refers to a specific form of virtual currency, which is directly related to the birth of the Bitcoin project in 2008, when an unidentified programmer with the pseudonym "Satoshi Nakamoto" released a white paper outlining him The most important feature of "pure point-to-point". The peer-to-peer version of electronic cash” (Nakamoto 2008) passed a relatively small cryptographer’s mailing list and released the first version of the Bitcoin protocol the following year. 4.2 The operation of Bitcoin Given Bitcoin's pioneering role in cryptocurrency, how does the technology behind it work? In short, Bitcoin can be understood as a peer-to-peer transaction network that directly mediates payments between the payer and the payee through an open source cryptographic algorithm. Bitcoin itself is just a special form of code that is sent over the Internet (that is, through a globally networked computer) and stored in so-called wallets. These wallets are located on the user's local computer or remote server ("in the cloud"). The transaction is directly in the These wallets. Since the identities of the sender and receiver in a given transaction are not revealed, a private encryption key (created by the wallet program) is used to verify each transaction and match them with the corresponding public key. However, the described system raises a special problem: Given the anonymity of users and the lack of a central authority to oversee transactions, how to avoid the potential double spending of a particular Bitcoin (or part of it) through dishonest senders? This is The remarkable innovation brought about by Bitcoin technology comes into play. The Bitcoin algorithm provides a decentralized verification system that allows the use of some form of public ledger to perform every transaction through all computers connected to the Bitcoin network Federated identity verification and recording. This ledger can be understood as a database containing all approved transactions, which are bundled into so-called blocks. The algorithm assigns an increasingly difficult cryptographic puzzle that requires pure computing power (as a trial). The wrong process) to solve the puzzle. The problem-solving process of this puzzle is designed to compete between different nodes in the network. The winner is the first node to solve the block, and the blockchain is expanded to follow a set of predefined rules Confirming the validity of all transactions is to reward a fixed amount of new Bitcoin. The process described here is called mining. (Nakamoto 2008, Maurer, Nelms & Swartz 2013) Therefore, the underlying code of Bitcoin technology imitates the anonymity of cash transactions And irreversibility, and user privacy should be protected, because the identity is clearly shielded from the public ledger. As I will discuss below, this is one of the characteristics of Bitcoin with a clear political dimension. Read Less