In a research discussion paper entitled “Monopoly without a monopolist: an economic analysis of the bitcoin payment system” the central bank of Finland solidified its stance towards bitcoin and its optimism in regard to the emergence of a truly decentralized financial system.
The paper written by researchers, Gur Huberman, Jacob Leshno, Ciamac Moallemi delves deep into the technical intricacies, algorithmic and mathematical structure of bitcoin. The paper also evaluates the ability of bitcoin to create its own economy and peer to peer payment settlement system for users that is secure and efficient.
As the title of the paper suggests, the Bank of Finland perceives bitcoin as a monopoly run by a protocol, not by a central entity. The bitcoin network is operated by a decentralized community who contribute to an open source ecosystem. The researchers praised the distributed nature of bitcoin, which eliminates the possibility of a managing organization that could manipulate the market value, price, offerings and rules.
“Bitcoin is a monopoly run by a protocol, not by a managing organization. Familiar monopolies are run by managing organizations with discretion to determine and then change prices, offerings and rules. Monopolies are often regulated to prevent or at least mitigate their abuse of power,” the paper explained
Within the traditional finance industry, offerings and rules can be altered by a few managing entities and through the involvement of the government. For instance, the alteration of the inflation rate of the US dollar is solely decided by the Federal Reserve System of the US through quantitative easing, a central entity which directly controls the distribution of the US dollar. Within bitcoin, such managing entities do not exist. Alteration of offerings and protocol rules can only be completed through network and community consensus, by proposing and executing forks.
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