Banking Beyond Banks and Money by Paolo Tasca Tomaso Aste Loriana Pelizzon & Nicolas Perony

Author:Paolo Tasca, Tomaso Aste, Loriana Pelizzon & Nicolas Perony
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

For example, consider security. By the very nature of the open source process, potential security holes can be directly accessed and modified if need be to incorporate technical advances in cryptology or computing.

At first glance, any open source structure seems deliberately uneconomic: Why freely share code as open source projects repeatedly do? The answer, we think, is the lines of code are not static but part of the changing structure of an ongoing project that is in a continual state of improvement. Open source efforts are, in their own way, like a currency: As more programmers use them, the code has greater value. Here is Metcalf’s law at work once again. Indeed, in some computer environments, these arrangements work quite well and allow various competitors to cooperate and share knowledge with mutual benefits for all. For example, human capital regressions find greater log wages for open source coders in the Apache webserver project than others, amounting to a growing secular wage premium of 13–27 %.18

Open source code can be customized to suit particular requirements—to change on the fly–without waiting for the next release of commercial code. Currently, the MIT media lab supports ongoing Bitcoin programming efforts, which consist of a small staff of three programmers, plus occasional volunteers from all over the world.

The resulting speed of advance in the digital sphere of coin creation and extension compared with legacy production methods for banknotes is impressive. First, we just noted that in Bitcoin’s short experience, several hundred copycat cryptocurrencies have been created. While some of these new coins are relatively trivial extensions, all have had an opportunity to thrive in the competitive cryptocurrency marketplace. Some like Dogecoin started as a prank, but has remained in the top five in market cap of all virtual currencies.

In terms of P2P money transfers Bitcoin works reasonably well as do some competitors like Ripple. The main problem confronting Bitcoin has been outside the P2P domain in trying to extract immediate value by converting Bitcoins to other currencies, such as the dollar, the euro, or the yuan. These transactions occur generally on centralized exchanges that have witnessed a considerable share of fraud and start-up problems, Mt. Gox, being the prime example.

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