How Can Crypto currency and Block chain Technology ?

Hi Friends, 

You can see about of Play a Role in Building Social and Solidarity Finance. The rise of Bitcoin has been ambivalently received by many in international development circles. The cryptocurrency is based on collaborative open source principles and peer-to-peer networks that suggest a commitment to social solidarity and mutual aid, but Bitcoin’s image has become associated with speculators, profit-driven entrepreneurs, market-fundamentalist libertarians and technology fetishists (Yelowitz and Wilson 2015). 

 

The “scene” or community around Bitcoin seemingly has little connection to the gritty social reality of many in poorer countries. The frequently aggressive rhetoric within the community, as well as the inequality of access and wealth within the system, seems—at first glance—to clash with the ideals of those in social and collaborative economy movements. Despite this, the question of whether Bitcoin can be harnessed to empower marginalized communities and build new means of solidarity-based finance remains unanswered. 

This paper sketches out the contours of some key issues that social and solidarity finance practitioners should consider when thinking about cryptocurrency technology. It is intended to provide a primer on the basics of Bitcoin, and to flag up existent narratives on the technology’s potentials and limits. First, it considers claims made by Bitcoin proponents concerning the positive role Bitcoin can play as a tool of financial inclusion, or as a tool to build new systems of property rights in countries with unstable governance. It also considers technical and political critiques of these claims. 

Second, the paper looks at the attempts to design new cryptocurrencies—such as Faircoin—based on explicitly cooperative and social justice principles. Third, the paper considers the emergent wave of “blockchain 2.0” innovation, in which the underlying “blockchain” technology of Bitcoin is expanded into realms like share issuance and micro-insurance. The original Bitcoin community made much out of the “trustless” nature of the technology (Miscione and Kavanagh 2015)—the fact that it does not rely on trusted central intermediaries—but newer groups are expanding the vision into one of trust-enabling decentralized cooperatives, or “distributed collaborative organizations”.

A Primer on Cryptocurrency To understand the Bitcoin system, it is useful to sketch out the similarities and differences with the normal bank-run electronic payments system. 

In the normal system 

➥ A person has an account number at a bank.

➥ They have a way of proving that they control that account number—for example, a PIN code.

➥ The bank, in turn, has a data record of how much money is attributable to that account number, thereby keeping score of the person’s money on a private internal database or ledger.

➥ The person can then use an electronic communications system to identify themselves to their bank as the authentic account holder, and can request for the money associated with their account number be transferred to someone else’s account at a different bank. UNRISD Working Paper 2016–17

➥ This then spurs the bank to edit their ledger of accounts—changing the person’s score—and to tell the recipient’s bank to do the same. The process is a little more complex than this, but in effect the money moves via a series of private databases being edited.

➥ The normal bank payments system thus works by a limited set of private intermediaries editing private databases that they control, and then informing the account holders that the transactions have occurred (e.g. “Your new balance, recorded in our datacentres, is £1,240”). 

➥ The Bitcoin system—like the normal bank payments system—is intended to move monetary tokens between people through the changing of account entries on databases, but it has two immediate differences. First, the database that is used to record payments between people is public, rather than the privately held account databases of the normal banking system.

➥ Second, the intermediaries that change that database are a decentralized network of people (“miners”) running special Bitcoin software, rather than banks running their own private software systems.

Is Bitcoin money?

➥ When addressing the first question, it is important to note that our normal money is also just tokens—whether in a digital form or in a symbolic paper or metal form—which people move around either by editing databases (electronic money) or by literally handing over the symbolic physical representation (cash). The construction of the perceived value of the euro or the yen is a historical process involving deep cultural and political dynamics.

➥ The value of a US dollar is underpinned by enormous network effects, the fact that hundreds of millions of people implicitly agree that the tokens represent value and the fact that the tokens are deeply anchored in a vast real economy. The fact that so many people are interdependently locked into usage of such tokens makes it incredibly difficult for anyone to deny their perceived value, and if they do so they will tend to find themselves excluded from economic life.

➥ To get such tokens into such a central economic position does not come easily—it involves deep interplays between state power, central banks, commercial banks, institutions that protect property title, and the redeemability of legal tender to pay taxes and other debts—but once a monetary standard is established it is very difficult to dislodge.

➥ 4 Bitcoin, by contrast to a token like the South African rand, has no geographically and politically discreet real economy in which it is dominant. It thus does not tend to be a primary unit of pricing in any economy—very few vendors explicitly price their goods in terms of Bitcoin as a unit of account—and it is also not widely perceived as a means of exchange. 

➥ Thus, while it has the potential to be a currency unit, in practice few people actually use, or perceive, Bitcoin as money in a traditional sense. 5 This has led some national authorities to characterize it as a digital asset rather than a currency. In this sense it bears some resemblance to gold, which similarly has ambiguity as to whether it should be perceived as an asset or as a form of money.

For now, though, it suffices to say that

Bitcoin is a digital token that can be moved between parties, and

the token has market value in terms of major national currencies (the token can be exchanged for dollars, pounds and other currencies) and

it is sporadically used— albeit often in small amounts—in exchange for real world goods and services.