BRM6003 Dissertation: Crypto Currencies Impact on the World Economy

This dissertation investigates the growing popularity of crypto currencies and their influence on the world economy. It examines the characteristics, usage, potential, and future of digital currencies, specifically Bitcoin. The research identifies key issues facing crypto currencies and evaluates their overall impact on the global economy. A secondary research approach was employed, comparing gathered data with existing literature on Bitcoin's history, legal, technical, political, and social aspects, advantages, disadvantages, and the rationale for countries to adopt crypto currencies. The study highlights the shift from traditional financial processes to the use of digital currencies and explores the role of blockchain technology. It also addresses the legal aspects of crypto currencies and the challenges associated with their regulation.

Running head: IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
The rise of crypto currencies and their impact on the world economy
Name of the Student
Name of the University
Author’s Note

2
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
Table of Contents
Chapter 2: Literature Review...........................................................................................................3
1.1 Concept of Crypto currencies................................................................................................3
Factors affecting market of crypto currencies.............................................................................6
Legal aspects of Crypto currencies..............................................................................................9
Economic aspect of crypto currencies.......................................................................................12
Risks in Smart Contract.............................................................................................................14
A network of micropayment channels can solve scalability.........................................................16
Hashedlocked Bidirectional Micropayment Channels..............................................................17
Hashed Timelock Contract (HTLC)..........................................................................................17
Protection and Security..............................................................................................................19
Chapter 3: Research methodology.................................................................................................21
3.0 Introduction..........................................................................................................................21
3.1 Research Philosophy............................................................................................................21
3.2 Research Approach..............................................................................................................22
3.3 Research Design..................................................................................................................23
3.4 Data Collection....................................................................................................................25
3.5 Sampling technique.............................................................................................................25
3.6 Data Collection instruments................................................................................................26
3.7 Data Analysis.......................................................................................................................27

3
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
3.8 Ethical consideration...........................................................................................................27
3.9 Limitations...........................................................................................................................28
3.10 Summary............................................................................................................................29
Chapter 4: Data Analysis...............................................................................................................30
4.1 Introduction..........................................................................................................................30
4.2 Qualitative Analysis.............................................................................................................30
Chapter 5: Conclusion and Recommendations..............................................................................40
5.1 Conclusion...........................................................................................................................40
5.2 Recommendations................................................................................................................41

4
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
Chapter 2: Literature Review
2.1 Concept of Crypto currencies
As remarked by Al-Bassam et al. (2017), crypto currencies have been gaining popularity
in all over the world in a rapid speed. Crypto currencies are depicted as digital currencies that
have no real existence in the market. It is an asset that can be only digitally transferred between
parties. Bit coins have been the cost used crypto currencies in the market. The bit coins have
been maintaining the digital currencies transfer in the market. The use of the digital currencies
have been maximizing the business of various companies in all over the world. Crypto currencies
have been maintaining the global transfer market in all over the world. The use of different
protocols have been implemented for the security of the crypto currencies in the market. As
demonstrated by Zheng, Xie and Wang (2016), the use of saturated market strategy in this
technology have been helping in maintaining the flexibility if the technology. The digital
amount can be transferred from one party to another with the help of the crypto currency
technology. Various financial institution have been researching in the technology of crypto
currencies in the world. Luu et al. (2016) argued that the gateway of crypto currencies have
simplified the tendency of the digital transfer of assets and financial documents all over the
world. A massive amount of money has been floating in the market increase in the businesses all
over the world. Therefore, the transfer of these money from one contender to anywhere have
been difficult through the normal transactions.

5
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
Figure 1: Blockchain Market in 2017
(Source: Lindman, Tuunainen and Rossi 2017)
As commented by Lindman, Tuunainen and Rossi (2017), banks from all over the world
have been facing difficulties on their server. Many times their server used to crash down due to
heavy traffic of transaction all over the worked. Therefore, huge amount of financial loss have
been faced by the companies in the market Therefore, there was a need of a platform for
transferring a huge amount of money and financial documents within a few seconds. This has
evolved the concept of crypto currency in the market. Atzei, Bartoletti and Cimoli (2017) said
that the use of digital currencies have been maintaining huge transaction of money between
parties or companies. The transaction of digital currencies have helped in companies in
maintaining a proper database of their or financial assets in the account. The real money is
converted into digital money and then transferred to other parties. This have helped in
maintaining a proper sequence of the transaction in the market. The use of the digital currencies
have been helping in providing transaction process of the currencies in the market. Bitcoin

6
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
technology have enhanced the level of the crypto currencies in the market. The use of bit coins
in the market have been maintaining various types of transaction in the market. The use of bit
coins have been helping banks in minimizing their pressure in the market. Bitcoin have been
helps in providing a centralized database to the customers. Adopters of Bitcoin technology have
been undermining the importance of money transaction in the market. The use of digital
currencies gave been maintaining currency pose of governments in different countries. However,
flat money transaction have been maintaining the importance of trust factor of the customers in
the market. However, maximum number of customers are investing their money in the crypto
currencies in order to increase their profit in the market.
Figure 2: Blockchain growth
(Source: Research-doc.credit-suisse.com, 2018)
There are approximately 7.5 million bitcoin existing in the market and 50 bitcoin are
awarded in every 10 minutes. Therefore, by 2030, the number of bit coins in the market have
been estimated to be 21 million. These have guaranteed the programming protocols for the
managing communities for manipulating the powers of the officials. The valuation of the bitcoin
have been maintaining the technological background of different currencies in the world.

7
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
However, bitcoin have been an amazing innovative payment system technology that helps in
bypassing some of limitations of traditional payment process. However, there is no third party
interference in the bitcoin technology that helps in reducing the transaction cost.
2.2 Factors affecting market of crypto currencies
The market of crypto currencies have been increasing with a rapid pace as most if the
large companies are investing their money in bitcoin. Bitcoin have become the world’s largest
digital currency and has increases by 1500 percent in 2017. However, the market have been
much complex as in other cases. As commented by Lindman, Tuunainen and Rossi (2017), the
complexity in the use of the bitcoin technology have not been understood able by various
customers and companies. Therefore, there has been less information about the bitcoin in the
market. Most of the middle case families are not showing their interest in the bitcoin investment
due to lack of knowledge. Therefore, the use of bitcoin market has been captured by big business
man for increasing their revenue and profit in their business. The use of bitcoin have been
maintaining the current trading at $1000, which has raised warnings for different researchers.
However, the currency has been expanding up to $16,000 at the beginning of the year. The
behavior of the entire market has been depended kin some factor that have been affecting the
market of the crypto currencies. These factors have been categorized in two types including
internal factors and external factors.
Internal Factors External Factors
Supply and Demand Crypto market Macro-financial Political
Transaction Cost Attractiveness Stock market Legalization
Reward System Market trend Exchange rates Restrictions
Less difficulty Speculations Gold price Others

8
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
Coins Circulation Interest rate
Forks rule changes Others
Table 1: Factors affecting market of crypto currencies
There have been rise in the market of the crypto currencies all over the world. These
have affected trading practices of the market. There has been a rise in the shift of the market
from traditional process to modern approach of the transaction. As commented by Guo and
Liang (2016), the use of the bitcoin technology has helped in changing the traditional process of
money transfer through bank and other investing funds. This shift have been helped in
maintaining a fast and secure transaction of digital currencies in the market. The use of digital
currencies have helped in maintaining the speed of the transfer of financial assets through digital
mode. The crypto currency have been creating revolutionary changes in the transaction process
of companies in the market. The block chain technology have been a new creation of this
technology that might help in maintaining transaction market.
However, the decentralization and anonymity of transaction have been offering plenty of
advantages to the crypto currencies, these facture have been affecting the market. Various illegal
activities have been generated in the market for tracking the digital currencies. Kothapalli,
Miller and Borisov (2017) specified that there are various security protocols implemented for
securing data and information about the digital currencies of various companies. However, there
have been various risks and threats involved in the bitcoin technology. The financial
departments of various companies have been researching in the security level of this technology.
These researchers have been maintaining a keen look to the happening and process of the crypto

9
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
currencies policy. The exchange of bitcoin in the market have been increasing in daily times.
The popularity of the technology have been increasing in the market due to the investment of
various customers and companies in the market. Zhang et al. (2016) determined that the digital
amount can be transferred from one party to another with the help of the crypto currency
technology. Various financial institution have been researching in the technology of crypto
currencies in the world. The gateway of crypto currencies have simplified the tendency of the
digital transfer of assets and financial documents all over the world. As commented by Swan
(2015), a massive amount of money has been floating in the market due to the increase in the
businesses all over the world. Bitcoin was begun in 2008 suggested as the main blockchain
innovation. However, blockchain began a test for building up a stage for computerized exchange
of cash and other monetary resources (Kosba et al. 2016). Blockchain has receivedmuch
consideration in market because of rise in bitcoin esteem. Alongside this, Smart Contract has
been in light for various exchange of advanced resources and contracts (Christidis and
Devetsikiotis 2016). Smart contract requires consideration in straightforwardness amid exchange
among parties associated with an agreement.
Figure 3: Execution of smart contract on blockchain

10
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
(Source: Christidis and Devetsikiotis 2016, pp. 2297)
As commented by Lindman, Tuunainen and Rossi (2017), advanced resources have been
utilized by different organizations everywhere throughout the world. In this way, Smart contracts
have possessed the capacity to pick up its significance on the planet showcase. In any case,
blockchain contains cryptographic decentralized database set up (Luu et al. 2016). Along these
lines, all clients of blockchain can get to every one of information and data put away in database.
This may make a few impediments for this innovation. Private and essential data identified with
the people can be barged in by outsider. This have made issues in security of budgetary records
and cash for the organization (Peters and Panayi 2016). The security of these information and
data is a noteworthy hazard in this unique circumstance.
2.3 Legal aspects of Crypto currencies
Cryptographic forms of money has been characterized with private cash inside the group
cash. In the vast majority of the nations, legitimate exchanges have been kept up the
administration. Along these lines, government have been working for legitimizing installments
through cryptographic forms of money. As commented by Swan (2015), digital forms of money
raise various lawful issues with the impact that their clients are presented to a critical legitimate
hazard. The first and fundamental issue is to set up the lawful idea of cryptographic money (for
the most part three strategies for legitimate direction can be recognized common law, managerial
law, and criminal law). In any case one ought to talk about and decide if digital currency ought to
be seen consistently inside system of every one of techniques for the lawful control. The path of
the digital money framework is an exceptional record of exchanges. This is known as a
blockchain. In the Bitcoin framework, there is nothing which would compare to legitimate
delicate money, which is particular to money. The "wallets" of the clients of digital money

11
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
framework store just the data (joins) demonstrating where, in the individual obstructs, the
exchange affirmation can be found. There is no "development" between the wallet of one Bitcoin
"holder" (or a holder of some other cryptographic money) to the purported wallet of the
following Bitcoin "holder" – the main thing that progressions are the connections (pointers of the
place in the blocks). Accordingly the digital forms of money (e.g. Bitcoins or Litecoins),
characterized independently, and not as a framework, are just records in the record, i.e. the
blockchain. These records speak to a Secondary esteem. For accommodation, the idea of fiscal
unit comprehended as a dynamic measure of significant worth can be connected to these records
(Cachin 2016). From the perspective of common law, the cryptographic forms of money can be
viewed as a "measure of significant worth other than cash", unless the gatherings to the
understanding have stipulated that the measure of the advantage will be resolved by the
concurred measure of significant worth, i.e. a particular cryptocurrency.
Figure 4: Working of Blockchain Cryptography
(Source: (Bloq.com, 2018)

12
IMPACT OF CRYPTO CURRENCY IN WORLD ECONOMY
This approach compares to the view of digital money as a theoretical measure of
significant worth, that is the financial unit. Moreover, the digital currency (when thought about
exclusively) ought to be perceived as a property right and a sort of property. This property right
is spoken to by a record in the record, i.e. the blockchain. Arrangement of advances in
cryptographic money may raise some debate. A different, yet vital in social terms, is the issue of
buyer insurance, which ends up clear even with a cursory research of the operational practices of
the business people working in the digital currency framework. We ought to consider whether to
subject cryptographic forms of money to legitimate control representing installment
administrations. Christidis and Devetsikiotis (2016) commented that while on account of
installments utilizing an installment account there is a moderately clear division of duties
between the installment benefit client and supplier, as set out in the arrangements of the PSD
Directive and the arrangements of national law of the EU Member States, for exchanges utilizing
cryptographic money, since there is no substance running the digital money framework, such
division does not exist at all and the clients bear the whole duty regarding effectively leading
exchanges based on general tenets of common law.
As commented by Mougayar (2016), under the present condition of law, while making
digital currency exchanges, it is not conceivable to apply the PSD Directive (and, thus, no
Member States' arrangements executing the Directive) since this kind of exchanges falls outside
both material and individual extent of the Directive. Also, it gives the idea that the application,
regardless of whether just incomplete or "relating to", of the PSD Directive (or really another
PSD2 Directive6 ) may introduce enormous issues hard to overcome, if simply because there is
no element in the digital currency framework comparable to the installment administrations
supplier. The similitude of the blockchain to an installment record (and furthermore to a ledger