Cryptocurrency, Deregulation, and Network Society

Arnav Pandey, Rewanth Talasila, Shreya Malkurthi

The concept of a "network society" was first introduced by sociologist Jan Van Dijk in his book
"The Network Society" published in 1991. Van Dijk argued that the emergence of new
communication technologies, particularly the internet, was transforming society in fundamental
ways.According to him, a network society is characterized by a new social structure that is
organized around networks rather than conventional hierarchical structures. These networks are
possible thanks to digital communication technologies like the internet and allow for greater
decentralization and horizontal connections between individuals and groups.

In this networked society, individuals and groups have the potential to access vast amounts of
information and connect with others across geographic and cultural boundaries, anywhere across
the world, instantly. However, the rise of networked communication also poses challenges to
privacy, security, and social cohesion. Overall, the concept of the network society helps us
understand the ways in which digital technologies are transforming social and economic
structures, and underscores the need for individuals and institutions to eventually adapt to these
changes.

A perfect example of informational exchange within the cyberspace network over the internet, is
the peer-to-peer protocol of online communication; information transfer between two users or
‘peers’ on the internet directly, as opposed to the traditional transfer of data which involves a
intermediate ‘server’, which relays information from one computer to another and thus, has
access to both of them. Due to the lack of intermediaries, peer-to-peer connections are far less
centralized and as such, it is much harder to control or regulate the spread of knowledge when
this protocol of communication is used.

Cryptocurrency is a perfect example of how the network society is transforming economic

structures from previous, hierarchical structures. Cryptocurrencies, as the name suggests, are
digital assets that use blockchain technology to enable secure, decentralized transactions without
the need for intermediaries like banks or governments. This means that users are able to transfer
money internationally without relying on conventional financial institutions, which often charge
high fees and take considerable time to process transactions. In addition to providing a more
efficient and cost-effective way to transfer money, cryptocurrency also has social relevance in
terms of financial inclusion. With traditional financial systems, many people are excluded from
accessing financial services due to various factors, such as their geographic location, lack of
identification documents, or low income. Cryptocurrency, on the other hand, can be accessed by
anyone with an internet connection and a digital wallet, which can help to promote financial
inclusion and empower people who are marginalized by traditional financial systems.
Cryptocurrencies, like Bitcoin and Ethereum, are created and exchanged through a process
known as mining, where computers use a portion (or all) of its computational power to solve
complex problems, in order to verify and record transactions on a public ledger of all
transactions made called the “blockchain”, and are rewarded with cryptocurrency for their
contribution. The blockchain is a distributed database that stores all transaction data made in a
currency across a network of computers(for example, all Bitcoin transactions are recorded on the
bitcoin ledger and is simultaneously updated, making it difficult for any single entity to control
or manipulate any related data.

Cryptocurrency has had a massive impact on society since its inception in 2009 but not all of
them were its intended use. As the price of cryptocurrencies is not regulated by any one person,
organization or body, nor does it as it is decentralized, the conversion rate of cryptocurrency to
traditional cash is dependent purely on its supply and demand - in effect, what people deem its
worth to be. This makes the ‘price’ of cryptocurrency fluctuate wildly, meaning any real world
money converted to cryptocurrency could be worth a fraction of what you paid an hour ago.
However, this presents a lucrative opportunity for making a lot of money by manipulating the
cryptocurrency market. Buying and selling cryptocurrency in this manner is a very recent
phenomenon,more often done using cryptocurrency “exchanges”, which record the prices or
multiple cryptocurrencies in real time and is used to facilitate peer-to-peer transactions, and is
somewhat of a gray area of economics, somewhere in between gambling and market trading.

Biases and Controversies:

Cryptocurrency is a digital asset that operates independently of a central authority, making it

decentralized and difficult to manipulate. However, there are ways in which cryptocurrency can
be manipulated by its creators or others who hold a large amount of the currency, and there have
been instances of market manipulation and unethical use.

Cryptocurrency scams are unfortunately a common occurrence in the world of digital currencies.
One of the most prevalent scams is the “pump and dump” scheme, in which a group of
individuals or a single entity artificially inflates the price of a cryptocurrency by promoting it
heavily and then quickly sells off their holdings, causing the price to plummet and leaving other
investors with significant losses. “Pump and dump” schemes take advantage of the decentralized
and often unregulated nature of cryptocurrency markets, which can be easily manipulated by
those with enough resources and influence. This can be done by creators or early adopters of the
currency who hold a large amount of it, and can result in significant profits for them at the
expense of other investors. In many cases, these schemes rely on false or misleading information
to attract investors, such as exaggerated claims about the technology or promises of guaranteed
profits. Another common scam in the world of cryptocurrency is the "initial coin offering"
(ICO), in which a new cryptocurrency is created and offered for sale to investors with the
promise of significant returns. However, many of these ICOs are fraudulent or simply do not
deliver on their promises, leaving investors with worthless tokens and significant losses.

Cryptocurrency can be used unethically or illegally through the purchase of illegal goods or
services on the dark web. Cryptocurrency is often used as a means of payment for illegal
activities such as drug trafficking, money laundering, and cybercrime due to its anonymous and
decentralized nature. This can give cryptocurrency a negative reputation and raise concerns
about its use in the wider economy.

The price of cryptocurrency can also be subject to wild fluctuations, with rapid increases and
decreases in value. This volatility can be caused by a range of factors, including market
speculation, government regulations, and technological developments. While this can result in
significant profits for investors who time the market correctly, it can also lead to significant
losses for those who invest at the wrong time or fail to properly manage their investments.

One example of market manipulation by a cryptocurrency founder is the case of Justin Sun, the
founder of Tron (TRX) cryptocurrency. In 2019, Sun announced that he had won a lunch with
Warren Buffet, a billionaire investor who had previously criticized cryptocurrency. Sun's
announcement caused the price of TRX to skyrocket, but it later emerged that the lunch had not
yet taken place and there were concerns about the legitimacy of the announcement. This led to
accusations of market manipulation and questions about Sun's credibility as a cryptocurrency
founder.

In addition to scams, there are inherent biases present in the world of cryptocurrency that can
create challenges for investors and regulators. One such bias is the unequal distribution of wealth
and power within cryptocurrency markets, with early adopters and those with significant
resources often having an advantage over others. This can lead to increased economic inequality
and limit the potential for cryptocurrency to be a truly democratic and equitable form of
currency. Additionally, the lack of regulation in many cryptocurrency markets can create risks for
consumers and the wider economy, as there are few safeguards in place to prevent fraud or
ensure stability.

Overall, while cryptocurrency has the potential to revolutionize the way we think about currency
and economic organization, there are concerns about its potential for manipulation, unethical use,
and wild fluctuations in price. It is important for investors and regulators to be aware of these
risks and take steps to mitigate the risks and challenges presented in order to ensure the
responsible and sustainable use of cryptocurrency.

Future Implications:

Cryptocurrency is a relatively new concept that has been around for less than 15 years. As a
result, its future is uncertain. However, it is clear that the decentralized model of cryptocurrency
has shown that a currency independent of any financial institution can exist. This independence
from financial institutions gives potential for a more decentralized and democratic economic
system.

Cryptocurrency and existing financial institutions are not fully compatible with each other yet,
but there have been efforts to bridge the gap. While cryptocurrency operates independently of
traditional financial systems, there is a growing recognition among some banks and financial
institutions that digital currencies are here to stay and that they need to adapt to this new
technology. One of the biggest challenges is the regulatory environment, as there are still many
questions around how to regulate and oversee digital currencies. However, the situation has
changed a lot since its inception in 2009. Though this technology was initially met with
suspicion, it has gained a lot of acceptance as it fulfills basic properties of money such as
durability, portability, divisibility, uniformity, limited supply and acceptability. All these
properties make it an attractive alternative to the traditional currency.

One of the most significant advantages of cryptocurrency is its ability to operate independently
of traditional financial institutions. This model removes the need for intermediaries like banks
and other financial institutions, which can limit accessibility to financial services for some
people. Cryptocurrency's decentralized model also allows for greater transparency and
accountability in financial transactions, as every transaction is recorded on a public ledger.

One major controversy/criticism cryptocurrency has been facing is about its energy consumption.
The process of mining cryptocurrency requires vast amounts of energy, which can cause more
pollution, leading many countries to completely ban the use of cryptocurrency. Thus, there is a
need for cryptocurrency to become more energy-efficient to ensure its sustainability. The issue
has been recognised by researchers and efforts are being made to address the issue. One
approach is to shift the mining operations to locations where renewable energy sources like wind,
solar power are abundant. The cryptocurrency mining operation established in Iceland to use
geothermal energy is a great example for this. As a result of the commercialization of
cryptocurrency mining, the energy costs of mining may continue to increase, which could have
significant implications for the future of cryptocurrency.
Cryptocurrency is a relatively new concept that has been around for less than 15 years and as
such, its future is uncertain. However, it is clear that the decentralized model of cryptocurrency
has shown that a currency independent of any financial institution can exist, at least in theory.
This independence from financial institutions gives cryptocurrency a significant amount of
potential for a more decentralized and democratic economic system.

One of the most significant advantages of cryptocurrency is its ability to operate independently
of traditional financial institutions. This model removes the need for intermediaries like banks
and other financial institutions, which can limit accessibility to financial services for some
people. Cryptocurrency's decentralized model also allows for greater transparency and
accountability in financial transactions, as every transaction is recorded on a public ledger.

Furthermore, cryptocurrency has become an attractive option for criminals as it facilitates large,
illegal transactions internationally with little to no risk to the sender or the receiver. As such,
cryptocurrency is likely to see more government restriction and regulation in the future.
Governments worldwide are already considering ways to regulate cryptocurrency and ensure that
it cannot be used for illegal purposes.On the other hand, there is potential area for the future of
cryptocurrency is in digital user identification systems; as more people move towards digital
transactions, there is a need for secure, private and efficient digital identification methods which
could be solved by cryptocurrency, meaning cryptocurrency could be made safer.

Despite all the challenges, the future of cryptocurrency looks bright. As more people become
aware of the benefits, it is highly likely to gain more acceptance. Banks, too, are exploring the
possibility of creating their own cryptocurrencies, which would be backed by physical currency.
This would give people the benefits of cryptocurrency, while also providing them with the
security of traditional banking methods.

In conclusion, while the future of cryptocurrency is uncertain, its decentralized model offers
potential for a more democratic economic system. However, the energy costs of mining and the
potential for criminal activity using cryptocurrency have led to calls for greater regulation. It
remains to be seen how cryptocurrency will evolve in the coming years and whether it will
become a widely accepted form of currency or not.

Conclusion:

In conclusion, cryptocurrency has come a long way since its inception. While it has faced some
challenges, it has proven to be a viable alternative to the traditional banking methods. The future
of cryptocurrency looks bright, with potential for it to become more energy-efficient and to
provide solutions to digital identification challenges.

References:

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https://doi.org/10.2139/ssrn.3555599
2. Winner, L. (1980). Do Artifacts Have Politics? Daedalus, 109(1), 121–136.
http://www.jstor.org/stable/20024652
3. Redshaw, T.(2017).OF BITCOINS AND BLOCKCHAINS: THE SOCIAL
CONSTRUCTION OF CRYPTO-CURRENCIES
https://pure.manchester.ac.uk/ws/portalfiles/portal/184628471/FULL_TEXT.PDF