Bitcoin: the wrong implementation of the right idea at the right time

This paper is a study into some of the regulatory implications of cryptocurrencies using the CAMPO research framework (Context, Actors, Methods, Methods, Practice, Outcomes). We explain in CAMPO format why virtual currencies are of interest, how self-regulation has failed, and what useful lessons can be learned. We are hopeful that the full paper will produce useful and semi-permanent findings into the usefulness of virtual currencies in general, block chains as a means of mining currency, and the profundity of current ‘media darling’ currency Bitcoin as compared with the development of block chain generator Ethereum. While virtual currencies can play a role in creating better trading conditions in virtual communities, despite the risks of non-sovereign issuance and therefore only regulation by code (Brown/Marsden 2013), the methodology used poses significant challenges to researching this ‘community’, if BitCoin can even be said to have created a single community, as opposed to enabling an alternate method of exchange for potentially all virtual community transactions. First, BitCoin users have transparency of ownership but anonymity in many transactions, necessary for libertarians or outright criminals in such illicit markets as #SilkRoad. Studying community dynamics is therefore made much more difficult than even such pseudonymous or avatar based communities as Habbo Hotel, World of Warcraft or SecondLife. The ethical implications of studying such communities raise similar problems as those of Tor, Anonymous, Lulzsec and other anonymous hacker communities. Second, the journalistic accounts of BitCoin markets are subject to sensationalism, hype and inaccuracy, even more so than in the earlier hype cycle for SecondLife, exacerbated by the first issue of anonymity. Third, the virtual currency area is subject to slowly emerging regulation by financial authorities and police forces, which appears to be driving much of the early adopter community ‘underground’. Thus, the community in 2016 may not bear much resemblance to that in 2012. Fourth, there has been relatively little academic empirical study of the community, or indeed of virtual currencies in general, until relatively recently. Fifth, the dynamism of the virtual currency environment in the face of the deepening mistrust of the financial system after the 2008 crisis is such that any research conclusions must by their nature be provisional and transient. All these challenges, particularly the final three, also raise the motivation for research – an alternative financial system which is separated from the real-world sovereign and which can use code regulation with limited enforcement from offline policing, both returns the study to the libertarian self-regulated environment of early 1990s MUDs, and offers a tantalising prospect of a tool to evade the perils of ‘private profit, socialized risk’ which existing large financial institutions created in the 2008-12 disaster. The need for further research into virtual currencies based on blockchain mining, and for their usage by virtual communities, is thus pressing and should motivate researchers to solve the many problems in methodology for exploring such an environment.