he value of Bitcoin reached new and enormously high, highs in June 2017, when a unit of the virtual currency was worth $ 2,851, whereas just one year ago it was worth 600. It is believed that currently, more than 10 million people around the world The world has bitcoins and more than 100,000 traders accept them in exchange for products (not counting all those who use them to sell drugs and other illegal goods on the black market).
Part of the attractiveness of Bitcoin for many of its users is the lack of centralized control or regulation by a government or a bank. Instead, it relies on a technology known as “block chain” to perform and secure transactions. But the research that my colleagues and I have carried out indicates that the lack of any social confidence in the way the block chain works is an obstacle for Bitcoin to become more general.
The block chain is a public database that records digital transactions. The latter are validated by computers working within a global network that solves complex coding problems. While traditional banking transactions are authorized by financial institutions and are controlled by governments through taxation and contracts between parties with known identities, the block chain is decentralized, unregulated and anonymous.
In our studies of block chain users, we discovered that these features attract Bitcoin users because of growing distrust of financial institutions and governments. Technology allows people to regain control over their money, with no restrictions on where and when to send it.
But our findings also indicate that two fundamental aspects of block chain design – the fact that transactions are anonymous and irreversible – pose significant problems for social trust among its users. Obviously, anonymity is attractive to people who want to avoid government control. And irreversible transactions were included in the original design of the block chain as a positive feature to eliminate the privilege that banks have to void transactions, even when the contract states that they are final.
But in practice, these characteristics pose a problem for many people. Most people are accustomed to relying on a seller’s reputation to decide whether to buy them or not and the ability of the legal and financial system to help them if something goes wrong. But none of this is possible with the chain of blocks.
Paper Trails Have Their Advantages
In most transactions, not just Bitcoins are moved from one electronic purse to another. In practice, they are often part of other major double-entender transactions in which both parties send and receive goods such as bitcoins, real world currencies or physical products.
The problem is that the block chain only records the movement of bitcoins, not the movement of other currencies or products. As there is no authority to complain about, there is an important risk that users may be misled by dishonest merchants who do not comply with their part of the deal.
There is an imbalance between the freedom and power granted by the unregulated nature of the chain of blocks, and the absence of security that people are accustomed to receiving from financial institutions
In our last study, we interviewed 20 Bitcoin users from five Malaysian Internet groups, and most of them had more than two years of experience in using bitcoins. Our research indicates that more than 50% of participants preferred block-chain transactions to be regulated and identified so that transactions can be canceled or those dishonest merchants are legally sanctioned.
This shows that there is an imbalance between freedom and power bestowed by the unregulated nature of the chain of blocks and the absence of security that people are accustomed to receiving from traditional financial institutions. If this is not resolved, this imbalance could limit the expansion of Bitcoin beyond its current base, and even reduce the number of bitcoin users involved in double-sided transactions, because more and more people are aware of the risks they face. Suppose the dishonest merchants. Conversely, the use of the block chain to make one-way transactions such as transfers will continue to increase because they are less affected by dishonest merchants.
What can be done?
Even current users of bitcoins continue to operate to a large extent with the traditional mindset of centralized and regulated currencies. Bitcoin proponents may have to find ways to encourage users to develop a new mental approach to unregulated block chain technology.
But developers could also create tools to solve some of the concerns of bitcoin users. For example, there may be a way to record whether real-world elements of bitcoins transactions are also checked, authorized, and annotated in public accounting. Electronic purses could be tied to a reputation file that users could see before accepting a deal, much in the same way that some sites like eBay allow users to rate sellers. And, in addition to the irreversible chain of blocks protocol, they could create mechanisms that would allow canceling the individual transactions of double meaning.
If nothing is done to address these problems, precisely what most attracted people to the bitcoins at first could end up limiting their growth and, eventually, bury them in oblivion.
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