Michael Redmon Economic Geography Professor Coles Alternative and Diverse Economies: Bitcoin

The creation of Bitcoin is rooted from the 2008 paper Bitcoin: A Peer-to-Peer Electronic Cash System written by, pseudonym Satoshi Nakamoto. The purpose of this currency identifies as a functional method of eliminating financial institutions as trusted third parties. Bitcoin is a cryptocurrency, a form of digital currency. Cryptocurrencies rely on cryptography and is based on decentralization through peer-to-peer networks. Unlike fiat currency which can be controlled externally, Bitcoin releases coins at a predictable rate and is capped at twenty-one million coins; as prices of bitcoins rise each unit has the propensity to be divided into one hundred million pieces. The Bitcoin software is open-sourced; this allows programmers to view the source-code of the software which inherits its transparency. The Bitcoin system acts as a ledger for all Bitcoin transactions, and the information of transactions are ran through a distributed database via peer-topeer. The Bitcoin distribution database is ran through a process known as Bitcoin mining.Bitcoin mining relies on a modified proof-of-work function known as hackcash; this allows the dissimilation of information needed to verify transactions to individual nodes. To avoid inflation from the Bitcoin mining function the reward of bitcoin changes continuously in conjunction with changes in technology, and the amount of users mining. In essence, one might say bitcoins originate systematically by the energy used for this server.
Comment [ARC3]: jargon Comment [ARC2]: word choice Comment [ARC1]: word choice

Bitcoin differs from a number of digital currencies because its not a company or organization, its a distributed technology that is impossible to ban or regulate1 2. Transactions that are made through cryptocurrencies are public; however, the sender and receiver of the bitcoins are not. Cryptocurrencies provide an alternative currency to organizations such as the Federal Reserve. This system is beneficial to developing nations around the world that are subject to manipulated high rates of inflation, orlimits emplaced by banks.Fiat currency is a huge influence on actions of global actors around the world. After WW2, the
Comment [ARC4]: a bit informal

Bretton-Woods agreement was issued to help promote stability in a war-torn global economy. The USD was tied to gold at a fixed exchange rate until 1971. In 1971, President Nixon ended the convertibility of USD to gold, also known as the Nixon shock, which inherently paved the way for establishing floating exchange rates. Floating exchange rates allow government to print money through selling debt. Thus, governments are able to split their spending habits with foreign entities through inflation and coercion. The petrodollar, often overlooked, has influenced our involvement in the Middle East as early as the 1970s. During 1973, the United States and Saudi Arabia agreed on a deal that ensured every barrel of oil exported from Saudi Arabia would be sold in USD in return for protection; in extension to the deal, OPEC followed. This deal allowed for global demand on the USD to increase significantly.As the worlds reserve currency, the Federal Reserve is granted enormous power.The U.S. government wants the USD to look as stable as possible, thus they hold tight grips on propped premiums such as the petrodollar. It should be noted that the Federal Reserve does not print money out of thin air; they must issue treasury bonds, debt with interest3.

A cryptocurrency provides propensity as a fix to this sort of system;, it alleviates a governments ability to imperialistically invade other economies with their own1 4. The bitcoin market may easily be compared to a gamble in the stock market; it has a lot to do with speculation. If the bitcoin fundamentally loses its value, the price of a bitcoin will plummet in its exchange rates. The same idea of appropriating value is applied to everycurrency; the beauty of bitcoin is its ability to alleviate third-party intervention5. The youth of bitcoins, and misunderstanding of the system may provide correlation to its volatility6. The ideal stabilized market would offer the cost of a bitcoin to be little over production. Greed and fear are often very large influences of market volatility. Multiple organizations shroud Bitcoin as nefarious due to black-market trading, even though cash provides the same means7. You dont often hear about people paying for items in a convenience store with bitcoins, but the same could be said about gold. The benefit Bitcoin provides over other digital currencies that are backed by gold is that Bitcoin cant be raided8. Bitcoin leaves little room for second chances; all transactions that are made on Bitcoin are final. You are completely liable in your shortcomings if youve accidently downloaded malware. The taxation of bitcoins mirrors a lot like cash does.

Comment [ARC5]: ??

Comment [ARC6]: There is still a third party, it just isnt a bank or government. Comment [ARC7]: Not clear.

Comment [ARC8]: bitcoin was hacked, which destabilized its price.

If you do not report taxes on your bitcoins, inherently you would go through the same process as someone who doesnt report their taxes on cash. Choosing to evade taxes through Bitcoin will still leave you subject to the IRS.

The description of Bitcoin and the comparison with US and petrodollars is good, although there is a lot of missing information about some of the drawbacks of digital currencies such as Bitcoin. There is no reference at all to Gibson-Grahams framework or any other key concepts discussed in class. There are some grammatical errors and a number of words used inappropriately. While most of the writing is clear, some transitional phrases and topic sentences would be helpful. Please remember to include a list of references for all sources. 33/50

Sources 1) In its mythical representation within the hegemonic discourse of capitalocentrism, the market is represented as "free". But we know that this is rarely the case. Markets are naturally and artificially protected, monopolized, regulated, and niched, and , in all these cases, transactions are governed by context-specific power relations, rather than abstract and universal logics. (Gibson-Graham. Chapter 3. Pg. 62) 2) Capitalocentrism is a dominant economic discourse that distributes positive values to those activities associated with capitalist economic activity however defined, and assigns lesser value to all other processes of producing and distributing goods and services by identifying them in relation to capitalism as the same as, the opposite of, a compliment to, or contained within. (Gibson Graham. Chapter 3. Page 56.). 3)Our economic language becomes impoverished (yet paradoxically more powerful) through the processes of condensation and displacement. (Gibson Graham. Chapter 3. Page 57. ). 4)Gibson Graham. Chapter 3. Page 61. Figure 13 5) http://bitcoin.org/bitcoin.pdf, credibility is created as an open-source software 6) Instability due to speculation. 7)They have become in Santos's terms, "non-credible alternatives to what exists", subsisting in the shadows of mainstream economic thinking. (Gibson-Graham. Chapter 3. Page 57.)

8) In the history of Bitcoin, there has never been an attack on the block chain that resulted in stolen money from a confirmed output. Neither has there ever been a reported theft resulting directly from a vulnerability in the original Bitcoin client, or a vulnerability in the protocol. Bitcoin is secured by standard cryptographic functions. These functions have been peer reviewed by cryptography experts and are considered unlikely to be breakable in the foreseeable future. It is safe to say that the currency itself has never been 'hacked'. However, several major websites using the currency have been hacked, often resulting in high profile Bitcoin heists. These heists are misreported in some media as hacks on Bitcoin itself. An analogy: Just because someone stole US dollars from a supermarket till, doesnt mean that the US dollar as a currency has been 'hacked'. Most bitcoin thefts are the result of inadequate wallet security. In response to the wave of thefts in 2011 and 2012, the community has developed risk-mitigating measures such as wallet encryption, support for multiple signatures, offline wallets, paper wallets, and hardware wallets. As these measures gain adoption by merchants and users, it is expected that the number of thefts will drop. (https://en.bitcoin.it/wiki/Myths)
Formatted: Indent: First line: 0.5"