Introduction
The global development of the world economy, characterized by the rapid transition to digital technology, is modernizing the methods and resources used, creating new financial instruments. One such new tool is cryptocurrency. Cryptocurrency should be understood as a digital currency that is decentralized, which means it does not belong to a particular state or organization but rather is a cosmopolitan resource. Cryptocurrency got its name because of a technical feature according to which all data on transactions, wallets, and reserves are encrypted. For this reason, automated cryptocurrency creates complete anonymity, in which interested people will not be able to access the user’s wallet. Cryptocurrency has become an essential phenomenon for today’s geo-economic agenda, creating a new milestone in the development of the global economy. This project carefully examines the various implications of the Bitcoin cryptocurrency from political, social, cultural, and economic perspectives.
Bitcoin: Background
Bitcoin is the first and most obvious example of cryptocurrency, mainly because of its primacy. The Bitcoin currency was developed by an anonymous author or group of authors under the pseudonym Satoshi Nakamoto. The first mention of Bitcoin was published on October 31, 2008, in a scientific publication by Nakamoto on the deployment of a blockchain system for cryptocurrency wallets (Nakamoto, 2008). A few years later, Nakamoto generated the first block in the chain and created the first fifty tokens. Since then, the number of Bitcoins available has increased to 19.1 million, with a total of 21 million Bitcoins available (Wallabit Media, 2022). In other words, by 2022, Bitcoin’s mining capacity was 90.7%, which means that the moment when all possible tokens will be mined is getting closer.
Bitcoin technology is built using a blockchain, which literally means a virtual chain of blocks. In a blockchain, encrypted transaction information is transmitted between users, or more specifically their electronic wallets, without intermediaries, which means that the amount sent cannot be intercepted or automatically sent back. In fact, blockchain is a distributed computing network, automated and protected from outside interference (Saberi et al., 2019). When new blocks are created, old blockchain elements cannot be edited or deleted, while anonymous transaction information is logged and represents open data. Nakamoto anticipated the expansion of Bitcoin’s technical capabilities, so he created a system of rewards for those who helped the blockchain evolve. In particular, the cryptocurrency resulted in the phenomenon of mining, in which users spend vast amounts of computing power on computers in order to mine new blocks of the blockchain. As a reward, the system gives them tokens that they can dispose of at will.
A significant effect on Bitcoin that should be mentioned beforehand is the high volatility of the value of the token. Over the past seven years, the value of a single Bitcoin converted to USD has increased by more than 13.4 thousand percent (Yahoo, 2022). Notably, the value of Bitcoin is not at its highest by this point but has instead been experiencing a decline in capitalization since March 27, 2022. Government decentralization and media culture create profound resonances in the value of cryptocurrencies, so the price per token proves to be volatile and overly sensitive.
SWOT
Bitcoin technology is not unambiguous, creating opportunities for both user freedom and well-being as well as increasing weaknesses in this cryptocurrency. In addition, it should be taken into account that Bitcoin appeared less than fourteen years ago, which means that this currency is relatively new. There are many prejudices and concerns around this cryptocurrency; its phenomenon is associated with fraud and Ponzi schemes (Spencer, 2018). Considering this, Bitcoin has many opportunities for further development and threats that hinder its existence of this cryptocurrency. This section performs SWOT analysis for Bitcoin.
Strengths
Bitcoin’s most obvious strength is the data security that is created by computing technology. As mentioned earlier, Bitcoin is a fully decentralized and encrypted resource, which creates an excellent environment for protecting financial and personal data. Every time an individual pays with an electronic Bitcoin wallet, the transaction information is encrypted through hashing, so no one can ever know the source and nature of the purchase. This protects users from the redundancy of law enforcement systems, creating economic freedom to manage their own finances. In addition, many cryptocurrency payment platforms are adapted to the active use of Bitcoin, which significantly reduces the number of fees and increases the availability of Bitcoin usage. Cryptocurrency transactions also do not require the establishment of a checking account or the location of the recipient, as the only item needed to exchange Bitcoins is Internet access. The lack of decentralization also reduces the tax burden of owning and disposing of Bitcoins, but recently increasingly national governments have concluded that cryptocurrencies need to be legally regulated (Gesley, 2021). Thus, Bitcoin’s ethical strengths are its perfect security and lack of intermediation effects.
Weaknesses
Bitcoin’s associated economic freedom, however, is also a severe weakness of the system. Due to its decentralized and anonymous nature, Bitcoin can be safely used to pay for goods and services of a criminal nature. Cryptocurrency is known to be a permanent means of payment on the darknet (Bahamazava & Nanda, 2022). The lack of a legal basis for using Bitcoin refrains most of the population from this cryptocurrency because they fear fraud and threats associated with a previously unknown method of payment for goods and services. It is well known that cryptocurrency mining requires serious production capacity, which increases the carbon footprint (Bondarev, 2020; de Vries et al., 2022). The unpredictability of the system is also a significant ethical constraint on the use of Bitcoin. The high level of volatility in the value of the token can bring down all financial savings of users in an instant, creating conditions of economic insecurity. There is also a weakness in the Bitcoin wallet phenomenon related to severe encryption. For example, if a user forgets the password to the decryption key, they will never be able to access their savings in their lifetime, no matter how much they have. Bitcoin’s impact on the global economy is ambiguous: the cryptocurrency does not create new jobs and does not contribute to national GDP, and therefore creates conditions for the development of the shadow economy.
Opportunities
The emergence of cryptocurrency has been a significant breakthrough for global economic policy and practice, and Bitcoin is expected to continue to evolve. It is fair to say that with the emergence of Bitcoin, society has embraced the benefits of such a virtual financial system, which has led to the development of additional cryptocurrencies. Competition between cryptocurrencies is based on the classic principles of market competition, which also creates opportunities for Bitcoin’s growth and development. In addition, a growing number of states and businesses are recognizing the viability of Bitcoin and building opportunities to pay for goods and services using this cryptocurrency. Notably, even with the collapse of the global financial system, Bitcoin will almost certainly continue to exist because it is not directly linked to banking systems and real transactions. Bitcoin creates ample opportunities for individuals to creatively realize their goods and services because it allows them to sell their goods and services without intermediaries and to make a total profit on the sale. Moreover, blockchain technology has inspired the creation of NFT as a new milestone in the development of digital art.
Threats
Bitcoin’s limitations, as conceived by Nakamoto and realized with existing technical capacities, pose one of the most dangerous threats to its existence. As mentioned, less than 10 percent of tokens remain to be mined to reach the cryptocurrency’s upper limit. According to forecasts, the last Bitcoin will be mined by 2140, which means that by that time, one should expect a severe economic crisis, caused not only by the wide spread of the cryptocurrency but also by the sharp price per token (George, 2022). In addition, one can never know for what purposes Bitcoin is being used, including by significant criminals. The shadowy use of tokens by the government can create the conditions for government crime and the illegal theft of federal funds to flourish. Increased interest in Bitcoin will also lead to increased crime, as criminals will have a reliable way to conduct transactions to purchase drugs and weapons and sell organs illegally. On the other hand, legal regulation of the system would reorganize cryptocurrency wallets and almost certainly impose tax systems on virtual transactions — thus putting bona fide users at a distinct disadvantage.
Historical Context
As mentioned, Bitcoin was first introduced in 2008 as a term in an academic paper by Satoshi Nakamoto, but the idea of electronic cash had been developed before that. In particular, back in his paper, Nakamoto referred to the concept of b-money by Dai, who created the open-source library Crypto ++ (Nakamoto, 2008). Dai was inspired by ideas of crypto-anarchism in which governments would not have access to the financial freedoms of citizens; therefore, the researcher developed a primitive blockchain architecture on which virtual b-money could be used. Blockchain technology was finalized by Nakamoto in 2009, and that year saw the first-ever virtual Bitcoin transaction (Foirillo, 2020). In 2010, a programmer from Florida, not giving due credit to the cryptocurrency’s evolutionary possibilities, bought two pizzas for 10,000 Bitcoins, although he could have become a dollar millionaire by now. In 2010, the first cryptocurrency exchanges were created to exchange tokens between users systematically. In 2011, the public paid close attention to the developing technology, but Bitcoin was described in terms of illegal transactions made by cryptocurrency on the darknet (Bahamazava & Nanda, 2022). In the years that followed, the value of a single token was subject to high fluctuations so that a single Bitcoin could reach the $20,000 mark and then plummet to a few thousand (Yahoo, 2022). In recent years, there has been a new milestone in Bitcoin’s historical development in terms of legal recognition of its power. In particular, increased states are recognizing Bitcoin and creating legal regulations for citizens to own and dispose of the cryptocurrency (Gesley, 2021). Thus, the historical evolution of Bitcoin demonstrates the high dynamism of both economic and social metrics.
Ethical considerations regarding Bitcoin create horizons for public and academic debate. This technology has significantly modernized the fabric of the world economy, which has undoubtedly influenced globalization processes. On the other hand, the emergence of Bitcoin has given rise to a number of ethical dilemmas related to crime, reflections on economic freedoms, and government regulation of blockchain. It is through the prism of these themes that Bitcoin should be explored as a financial instrument.
Literature Review
The issue of the ethical use of Bitcoin is a prevalent and welcome one in academic discourse. Since Nakamoto published his work, more than tens of thousands of case studies have appeared. Multiple authors have explored Bitcoin issues ranging from the global economic system to the use of cryptocurrency in medicine and agriculture. This literature review will examine in detail the academic treatment of Bitcoin and will provide a comparative analysis between selected sources. The total number of academic papers used was five. To support the relevance and academic impartiality of the literature review, the section uses studies from different countries, including authors from Italy, Finland, the USA, Brazil, and Portugal.
For example, Bitcoin is often perceived as a risky and unrestricted financial instrument that creates a wide range of uses (Guegan, 2018). Guegan deliberately refers to Bitcoin not as money but rather as a medium of exchange, which highlights one facet of skeptical academic attitudes toward cryptocurrency. The main point the researcher makes in this paper is the need for state regulation of cryptocurrency systems in order to limit Bitcoin’s criminogenic capabilities. In addition, Guegan emphasizes that there may be hidden conspiracy interests behind the ownership of cryptocurrencies, which also influence the evolution of the token. The weakness of this study remains the understatement and ambiguity of Guegan’s conclusions.
However, the skeptical attitude toward cryptocurrencies is not the only correct one in academic discourse, as there are also studies defending the ethical sense of Bitcoin. More specifically, Brazilian authors have shown that the perception of threats and dangers in using the new payment system is a natural part of human practice, just as people were once afraid to use credit cards (Castilho et al., 2021). The authors found a significant lack of quality knowledge and dissemination of information about Bitcoin, which they believe is the reason for the avoidance of cryptocurrency use. This does not seem surprising since the literature search has already demonstrated a plurality of academic papers on various topics, but exceptional authors have been able to deepen existing knowledge about blockchain. The final conclusion created by the researchers is that Bitcoin can never become a substitute for real money but instead will create a parallel mode of exchange.
A similar opinion is held by authors from Portugal, who have used more than a hundred academic references to review the Bitcoin problem systematically. In particular, Cunha et al. (2021) conclude that Bitcoin does not threaten the central economic system because it represents an alternative way the exchange goods. In addition, the authors emphasize that Bitcoin is becoming an increasingly popular cryptocurrency, leading to a reduction in the use of cash in some countries and the technological development of local companies. Central banks around the world, according to Cunha et al., see advantages in the use of cryptocurrencies, so they try to develop their own tokens and virtual payment systems as competitors for Bitcoin. Having a broad evidence base gathered through a systematic review allows this study to be viewed as academically robust and dependable.
A fundamental view of the endpoint of Bitcoin was offered by authors from Finland. The researchers examine the ideological and ontological foundations of cryptocurrency and show that there is a more profound philosophy behind the eloquent slogans about security and the lack of intermediation (Korhonen & Rantala, 2021). In particular, Korhonen and Rantala suggest that blockchain should be seen as political libertarianism with its own interest in promoting cryptocurrency and rejecting centralized approaches to governance. The researchers show that cryptocurrency has a propensity for self-governance and anarchism, along with a rejection of corporate governance and hierarchy.
An alternative perspective on this issue is offered by an American study, in which the authors acknowledge that over time the availability and public interest in cryptocurrencies have increased significantly. More specifically, Deebadi (2020) calls cryptocurrency an entirely speculative phenomenon, the value of which is determined purely by public agenda and sentiment. This information is perfectly supported by a retrospective study of the real value of tokens over time (Yahoo, 2022). The key goal of this study is to develop a mechanism for predicting the value of tokens based on semantic analysis of Twitter user texts. Obviously, such a solution has self-serving enrichment goals, as the developed predictive tool allows investors to adjust their behavior based on machine predictions. The limitations of this study are the imperfections of the semantic analysis tool. Moreover, the development of such a tool would not really lead to the expected effect since the widespread use of predictive methods would affect the herd behavior of investors, which in turn would make the focus on public sentiment impractical.
It is not hard to see that there is an obvious connection between the studies. Thus, both Guegan and Castilho et al. with Cunha et al. address the phenomenology of Bitcoin in terms of the ethical capacity of this cryptocurrency to replace real cash. Meanwhile, it may seem that Guegan, Castilho et al., and Cunha et al. hold diametrically different perspectives on the charge or defense of Bitcoin. Qualitatively different from the previous authors is the Deebadi study, which does not evaluate cryptocurrency in terms of its potential as a substitute for real money but rather in terms of the manipulation that can lead to the enrichment of investors. Korhonen and Rantala also consider cryptocurrency from the point of view of manipulation but offer a view from the point of view of public administration. The authors acknowledge that cryptocurrency is based on anarchic roots and creates ideological challenges to state regulation. Thus, it is correct to postulate that academic evaluation from an ethical perspective in the use of Bitcoin has a high diversity and plurality of focuses. The community of authors does not seek to unify ideas about what exactly cryptocurrency is and what consequences the instrument leads to, but they do offer varied perspectives on the issue.
Assessing the Impacts on Equity
Bitcoin cryptocurrency is a cosmopolitan instrument that provides virtually unlimited financial opportunities to a wide range of people. With Bitcoin, users can make the usual commodity exchanges through virtual currencies, trade on exchanges, and exercise economic freedoms without fear of government regulation. However, the idea of this cryptocurrency has a severe ethical limitation that prevents social and economic equality. Specifically, Nakamoto created an organic product that is spontaneous and self-organizing, with the rules for managing the cryptocurrency established by the community of token holders. This prevents a new user from freely accessing the purchase of cryptocurrency since the initial price cap is defined as excessively high. In this sense, it is fair to clarify that despite the high cost of tokens, Bitcoin can be purchased in fractions called satoshi (Johnson, 2019). Any user can purchase a few satoshis depending on their financial capabilities, but on a large scale, such resources prove to be inadequate. At the same time, the seeming increase in blockchain availability leads to increased volatility. This poses a threat to economic equity because once the price per token falls enough for a user to purchase it, Bitcoin can behave unpredictably (Deebadi, 2020). In particular, a sharp drop in the value of the asset after opinion leaders speak could plummet the Bitcoin exchange rate, leading to a rapid impoverishment of cryptocurrency holders. Capital is also threatened by speculation on the cost of the equipment needed to mine the tokens. It is well known that as a result of widespread Bitcoin mining on home computers, the cost of video cards has skyrocketed, preventing the free purchase of equipment for non-mining purposes (Bondarev, 2020). In other words, cohorts of new users previously unfamiliar with Bitcoin but choosing to invest in cryptocurrency find themselves vulnerable based on the current market agenda. Extrapolating from this group allows for the inclusion of low-income individuals, as well as refugees and migrants, who lack economic sustainability and are thus discriminated against when it comes to Bitcoin acquisition.
Consequently, developing regions with weak economies, including rural communities, are the most vulnerable, as residents of poor regions may be affected by higher prices for cryptocurrency-related equipment. In addition, traditionally, Muslim regions are also affected because Bitcoin is not halal, and its use is illegal under Shariah principles (De Vynck, 2022). In other words, the unsuitability of this cryptocurrency discriminates against the rights of poor people and Muslims to economic freedom. Finally, restrictions on Bitcoin use are related to the need for Internet access. Thus, token holders can only be people from an affluent socioeconomic class who have the technological and financial capacity to purchase cryptocurrency. In turn, this could widen the gap between the poor and the rich. Thus, marginalized populations may suffer from Bitcoin’s development until rules for the ownership and use of cryptocurrency are implemented.
Bitcoin thus demonstrates ambiguous effects on different populations. For example, with regard to affluent young people who are into technology or stock trading, Bitcoin is an excellent digital currency, allowing them to get rich very quickly on margin trading. On the other hand, the high volatility of tokens can have the opposite effect and significantly reduce an investor’s capital. It is possible to mitigate the negative impact by learning how to invest wisely, in which risks on one of the assets are covered by stocks on more reliable securities.
On the other hand, vulnerable people from the disadvantaged and economically underprivileged backgrounds are also exposed to the ambiguous effects of cryptocurrency. As has already been shown, the development of Bitcoin under the current rules increases their vulnerability because they find themselves unable to purchase the cryptocurrency for financial or technological reasons. If villagers do get the opportunity to invest in Bitcoin, they are exempt from income tax and can spend the money they receive wherever they want — in other words, it can work as an economical elevator. To enhance this elevator effect, the availability of buying cryptocurrency should be increased; conversely, to reduce the adverse effects, the opportunities of the cryptocurrency elites should be restricted.
Code of Ethics
Preamble
Bitcoin tools allow the expansion of the financial freedoms of citizens, but the lack of governance systems entails the uncontrolled development of cryptocurrency, one of which is the growth of socioeconomic inequality. This need necessitates the development of a generalized, comprehensive code of ethics with guiding principles. Adherence to this code cannot be dictated by already existing users, as the areas of economic responsibility of individual states do not extend to Bitcoin. For this reason, it is recommended that global users be widely informed about developing the code of ethics, the opportunities it offers, and the problems it addresses. It is essential to clarify that even after such programs, it is unlikely that all individuals will follow the guidelines, just as in the real world, not all citizens are inclined to follow the laws. Therefore, a secondary issue that requires careful consideration is working out the degree of responsibility and penalties for non-compliance with the code.
Guiding Principles
This code offers several guiding principles to facilitate effective cryptocurrency exchange. The philosophy behind the formation of these codes was based on a utilitarian paradigm, so benefit as the outcome of every action associated with cryptocurrencies was a measure of their ethics. Specifically, the code of ethics postulates:
- Reject the idea of government regulation of tokens. High government interest in cryptocurrencies leads to increased concerns about taxation and prevents the development of a cosmopolitan Bitcoin philosophy.
- Expand technological acquisition capabilities. Care must ensure that many users can acquire tokens without forming a solvent elite.
- Educate about the benefits and features of cryptocurrency. Since most people are afraid to use Bitcoins, expecting conspiracy tricks, it is suggested to develop a system to educate and inform people about the possibilities of Bitcoin.
- Do not limit competitive currencies. According to the principles of classical economics, Bitcoin will develop its viability under the pressure of competition, so the idea of focusing only on Bitcoin should be abandoned.
- Develop a policy for selling video cards. High speculation on video cards creates a commodity deficit and impedes effective economic growth. However, it is worth emphasizing that this guideline should only be implemented in the short term.
- Allocate the responsibility for the computing resources of the registry check-in proportion to the shares of users’ money on the blockchain. Since cryptocurrency mining now requires substantial computing power and is usually implemented by users with small savings, this creates an imbalance of responsibility on the blockchain (Orcutt, 2018). When the responsibility is divided among random users according to their share of Bitcoin ownership, it will solve the problem of unfair distribution.
Applications
- National governments should not introduce Bitcoin into state circulation and tax it, as this is contrary to the free flow of cryptocurrency and creates an imbalance of tax liability among citizens. Do not invest time and state budget resources to discuss Bitcoin phenomenology and attempts to legitimize cryptocurrency. Allow cryptocurrency to circulate freely in the country and not try to control it.
- Create legal exchanges to sell cryptocurrency and charge a commission on transactions. Invest in developing Bitcoin wallet accounting programs for deceased people, which will return Bitcoins to free circulation. Form a limit on the purchase of Satoshi or Bitcoins so as not to accumulate a surplus of cryptocurrency in the hands of some users.
- Publicly recognize Bitcoin and the opportunities and threats it poses. Deprive Bitcoin of any ambiguity and conspiracy nature. Do not create stigma or bias against Bitcoin users in the national media.
- Actively develop new cryptocurrency units, including Central Bank digital currencies. Do not participate in the legitimization of particular cryptocurrencies or give them preference. States should not interfere in the cryptocurrency economy, allowing it to exist freely according to market laws.
- In the short term, introduce state regulation of video card prices. Invest in finding additional opportunities to maximize computing power. Do not ignore opportunities to recycle video cards to create new ones while reducing cryptocurrency’s carbon footprint.
- Generate an understanding that all users are responsible for verifying the authenticity of mining equipment, which ultimately leads to Bitcoin development. Create an algorithm that assigns responsibility to 1,000 random users whose cryptocurrency wallets verify the source code of the keys and pass this function on in a snowball fashion. Do not ignore this problem, as it has the potential to widen the socioeconomic gap between Bitcoin users.
Recommendations
By now, Bitcoin is an excellent tool for decentralized use of finance, but the self-organizing nature of the cryptocurrency leads to the development of inequality and an increase in crime. The recommendation is not to fight Bitcoin but to invest state budgets in the development of law enforcement prevention systems in order to curb the growth of crime. On the other hand, states need to legalize Bitcoin so as not to create obstacles to the development of an alternative economy in the modern world. In addition, state regulation of computer hardware sales should help curb the speculative rise in video card prices and increase the availability of the product among a wide swath of individuals. It is necessary to promote widespread public awareness of the possibilities of alternative circulation of money, including through media culture. Widespread study of Bitcoin technology will not only enable the development of new ways to combat the environmental damage created by blockchain but will also enhance public investment literacy, thus contributing to national and global economic growth.
Ultimately, it is worth recognizing that the emergence of cryptocurrency was a natural result of globalization and the mass digitalization of all spheres of life. Bitcoin is an advanced tool that provides users with financial freedom. However, Nakamoto’s libertarian philosophy poses a threat to equality by giving Bitcoin the resources to self-organize and herd investors. The recommendations given are expected to allow cryptocurrency to increase accessibility and solve the ethical dilemmas that arise when using blockchain technology.
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