Working Title: Digital Currencies and Bitcoin as the new “cash” for the internet.
Author: Peicu Rares (0252991)

Many forces can bring about big changes in economies and societies, but since the
Industrial Revolution, technology has had a unique role in powering growth and
transforming economies.
Technology represents new ways of doing things, and, can have profound impact in the
structure and functioning of a society. At the same time, technology often disrupts,
destroying older ways of doing things and rendering old skills and organizational
approaches irrelevant.

The rise of the internet as a global communication platform, fundamentally changed in
many ways how people interact, and opened new possibilities of communication.
This new way of communicating had deeper reach in society’s structure and affected
other parts of our lives.
One of the important ways where the internet had a big influence is the economic
landscape and the way people conduct businesse.
A business fundamentally is based on communication between the partners involved in
an economic exchange, and the new communication capabilities brought by the internet
have had the effect of rethinking many ways we do business.
There are many ways in which the internet changed the way businesses are conducted,
but I would mention only a few that I personally find interesting:
One change was that firms could start to communicate easily and direct with their
customers. By using email, chat, voip telephony, video telephony, firms could get fast
and cheap in contact with their customers.
Other firms used the internet to find potential collaborators and create a network of
partners that was not bound by time and geographical location.
In a later development, selling goods and services directly online has exploded, and
with that, a wave of new and old firms adopted this strategy and were able to reach
customers worldwide. This brought also new business models on the market, creating
new firms, distribution networks and even industries.

One of the most interesting developments, from my point of view, are the innovative
internet-based technologies that could have a profound effect on the business world, by
fundamentally change it. Here I could point out innovations like online streaming, 3d
printing, eBanking.

In this paper, I want to explore a relatively new technology that has surfaced
mainstream in the last 5 years, and if successful, could have major implication in the
way internet evolves. This technology could have also a big impact in the way
businesses are conducted online and the structure of the current financial system
I would like to analyze the topic of Digital Currencies and specifically the phenomenon
of Bitcoin.

Bitcoin is a consensus network that enables a new payment system and a completely
digital money. It is the first decentralized peer-to-peer payment network that is powered
by its users with no central authority.
From a user perspective, Bitcoin is pretty much like cash for the Internet (bitcoin.org).
Bitcoin appeared as a theoretical concept in a scientific paper published in 2009 by
Satoshi Nakamoto, and is the first implementation of a concept called "crypto-currency",
which was first described first in 1998 by Wei Dai.
The basic idea is suggesting a new form of money that uses cryptography to control its
creation and transactions, rather than a central authority.

This new form of “money” has gained momentum in the last years, and can be seen
very often in the press and public opinion.
Many consider this technology as a potential candidate for the financial systems and
even of social structures of the future. As it is the case with every new major innovation,
there are also major issues and critics, and a huge debate has emerged around Bitcoin
and digital currencies.
Because I think it is a very actual and interesting topic, with the potential to be a major
change in the business world of tomorrow, I decided to approach this topic for my
master thesis.

Research Purpose & Questions
The purpose of this research is to make a exploratory research in the nature of digital
currencies and especially in the Bitcoin phenomenon. I will concentrate on creating an
overview of the phenomenon and answer the following research questions:

What are digital currencies and how do they work ?

How does Bitcoin works and how does the surrounding economic ecosystem looks?

What are the threads and opportunities of Bitcoin to become a global transactional
currency in a sustainable manner ?

Can Bitcoin be an alternative to current currencies in online transactions ?

The thesis will be divided into four parts:

1.In the first part I will explore the notion of money in general, its history, its functions
and characteristics and the way it evolved to our modern understanding.

2.The second part will be about digital currencies, its history and developments. I will
explain how a digital currency works, how many exists, and compare them from a
theoretical point of view with the classical money.

3.The third part will be concerned with Bitcoin, as an example of the most major digital
currency on the market at this moment. In this part I will try to get to a comprehensive
overview of the whole economical ecosystem created around Bitcoin. Here I will discuss
the influence a digital currency has on a market, its pros and cons, and the potential for
changing established structures. The Bitcoin economical ecosystem will be analyzed by
looking at internal and external factors, both historically, currently and by making a fair
assumption about the future.

4.In the end, I will analyze the Bitcoin as a possible currency for online transaction, with
regard to eBusinesses. I will explore the characteristics and different types of online
payments, and draw conclusions with regard of Bitcoin.

Table of Contents
Money (aprox. 15 pag)
-History of money
-Definition of Money
-Characteristics and Functions
-Economical perspective on exchange mediums
-Regulation of Money
Virtual Currency (aprox. 15 pag)
-How virtual currency works
-Different types of virtual currencies
-Informational Money
-Legal Status
-Relevance for central banks

Bitcoin: Case Study (aprox. 30 pag)
-Bitcoin as exchange medium
-Bitcoin Ecosystem: Acteurs
-Securities Issues of Bitcoin
-Use of Bitcoin in illegal activities
-Difference between classic financial ecosystem and bitcoin ecosystem
-Advantages of Bitcoin
-Critics and Weaknesses: Is Bitcoin sustainable ?

Payments (aprox. 10 pag)
-Different kind of payments
-Innovation in Retail Payment
-The ethics of payments
-Characteristics of the retail payment market
-Bitcoin as alternative to current currencies in online transactions

As Digital currency is a new phenomenon, and Bitcoin, the biggest digital currency, has
appeared only in the last 5-6 years, the literature is not very abundant. On the positive
side, all the literature is fairly recent, with the oldest sources starting from 2010, and
therefore the informations are up to date.
After an extensive research, I managed to create a database with approximative 40
papers and studies regarding money, digital currencies and Bitcoins.
I consider a good amount of literature to start with, and as I am writing the thesis, I will
continuously search for new and recent studies.

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