Decentralized digital currency: BITCOIN (Sisi)

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I. Source of Authority and Governing Instrument

Bitcoin is a crypto-asset in the form of a digital token which is exchanged electronically, rather than physically. The most notable characteristic of bitcoin is that is not issued by a central public authority,[1] it is a decentralized cryptocurrency.  “Decentralized” means that there is not a single source of authority, neither a single person, or corporation oversee bitcoin.[2] Bitcoin is a system of computer nodes that form a network guided by a set of “unspoken rules” and decided upon by the consensus of users through each node.[3]

Users are attributed different roles in the networks. The minors produce new blocks on the electronic chain. The node operators develop software to verify individual transactions on each block. Developers propose changes to the open-source software Which only take effect if nod users voluntarily update the software. Finally, the nodes actually enforce the rules.[4]

Therefore, no single authority can unilaterally make decisions, or “change the rules” for the rest of blocks, instead, bitcoin relies on “a community of open-source developers with many regular contributors.[5] As such, while no government instrument controls Bitcoin, it purports to be a democratic form of financial exchange.


II. Interest and Value it Purports to Protect

Bitcoin is enabled through blockchain technology. This means that Bitcoin transactions are recorded on a transparent, permanent ledger that can be verified by any user by eliminating the need for a bank or government institution.[6] This is an attractive feature because users have complete control over their currency. Moreover, Bitcoin is not subject to inflation. Inflation occurs from the increase in price of goods due to a given currency losing value. On the contrary, Bitcoin was specifically designed to never have above 21 million bitcoins “in circulation”, therefore inflation may not occur.[7]

No single individual or entity can manipulate the decentralized system. Blockchain security is ensured by “thousands of minors across the world” That individually verify transactions and ensure security on the network. Bitcoin’s accountability fosters trust and increases its reliability for users. Indeed, to successfully attack the network, a hacker would require 51% of the entire system’s mining power.[8]


III. Weaknesses in its Capacity, Legitimacy, or Accountability

It may be said that bitcoins biggest weakness in capacity is its own nonphysical nature. Bitcoin users can send and receive payments directly through digital wallets which contain both public and private keys necessary to secure the transactions.[9] Bitcoin is not backed by physical assets such as silver and gold. This makes highlights the volatility of bitcoins price which makes it difficult for everyday use.[10]

Bitcoin’s open-source system also creates new opportunity for complex forms of crimes. Perpetrators of crypto-crime operate anonymously with their identities disguised through “mixing services or privacy coins” to make it difficult to track them.

Furthermore, because Bitcoin is a global network and does not recognize national “jurisdictional boundaries”, these crypto criminals operate in a new system of less effective law enforcement. The challenge of capturing a new form of crime in a system without traditional jurisdictional boundaries highlights the “urgent need” to develop “criminal regulatory reform” to adapt to our traditional legal environment.[11]

Finally, other disadvantages include manufacture lack of governmental regulation which leave it open to being “co-opted by the existing financial system”, and a larger environmental concern as Bitcoin networks consumer a lot of energy.[12]


Sources

[1] European Central Bank, What is bitcoing? 13 February 2018, updated 14 July 2021, https://www.ecb.europa.eu/ecb-and-you/explainers/tell-me/html/what-is-bitcoin.en.html

[2] The Smarter Web Company, Who Controls Bitcoin, https://www.smarterwebcompany.co.uk/knowledge-base/who-controls-bitcoin/

[4] The Smarter Web Company, Who Controls Bitcoin, https://www.smarterwebcompany.co.uk/knowledge-base/who-controls-bitcoin/

[6] Dhiraj Nallapaneni, How Does Bitcoin Have Value If It’s Backed by Nothing, CoinLedger, https://coinledger.io/learn/what-is-bitcoin-backed-by

[8] Dhiraj Nallapaneni, How Does Bitcoin Have Value If It’s Backed by Nothing, CoinLedger, https://coinledger.io/learn/what-is-bitcoin-backed-by

[10] Dhiraj Nallapaneni, How Does Bitcoin Have Value If It’s Backed by Nothing, CoinLedger, https://coinledger.io/learn/what-is-bitcoin-backed-by

[11] Pambudi1* , Zudan Arief Fakrulloh, Criminal Liability of Perpetrators in Crypto Ecosystem, the Regulatory Challenges, And Legal Voids in the Criminal Law System in Indonesia, Majelis: Jurnal Hukum Indonesia Volume 2, 2025

[12] Dhiraj Nallapaneni, How Does Bitcoin Have Value If It’s Backed by Nothing, CoinLedger, https://coinledger.io/learn/what-is-bitcoin-backed-by

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