Bitcoin: when a decentralised economy becomes centralised

Prof. Dr. Claudio J. Tessone, Universität Zürich

Nowadays, most facets of human behaviour are pervaded by technical systems that facilitate our information and economic exchanges. In recent years, aiming at more resilient and scalable systems, many have been designed in decentralised terms. Block chain has disrupted thinking about distributed systems: this mechanism allows information to be diffused securely across a network without requiring a central (trusted) authority to guarantee its truthfulness. The digital currency Bitcoin provides a prime example: it is implemented on top of a block chain, and its value is solely assigned by a (largely speculative) market. Bitcoin can be seen as a closed economy: having followed a technocratic approach in its immutable design, it is the only case of an economy where all monetary transactions can be traced back with full detail. Interestingly, its fixed incentive scheme has led to high levels of centralisation and economic flow, in stark contrast to its original conception.