Background of the research study

This chapter will focus on the background of the research study that aligns with the topic of emergence and development of cryptocurrency and its affect on the economic activities. The pros and cons of crptocurrency is also elucidated in this chapter. The aim and objectives of this research study is also highlighted in this chapter. The research questions have been framed based on the research objectives of the research topic.

The research study provides an overview about the emergence and development of cryptocurrency and its affect on the economic activities. Cryptocurrency have attained huge popularity since the year 2008 with near about 1000 in existence till today. Cryptocurrency refers to the digital currency that utilizes cryptography for securing its transactions, controlling creation of extra units and also verifying transfer of assets. It also uses decentralized control as opposed to central banking systems and electronic money (Heid 2013). Decentralized control of the cryptocurrency mainly works through the blockchain that is basically public transaction database working as distributed ledger. Bitcoin was the first cryptocurrency created in the year 2009.

The nature of transactions of cryptocurrency makes them suited for the host of activities including tax evasion and money laundering. In the recent years, crptocurrency specifically Bitcoin has demonstrated their value boasting to near about 14 millions Bitcoins in circulation. Cryptocurrencies makes easier for transferring the funds between the two parties in specific transaction. However, these transfers made are basically facilitated through utilization of both private as well as public keys for the purpose of security (Iwamura, Kitamura and Matsumoto 2014). These transfers of funds are mainly done with less processing fees and thus permitting users for avoiding high fees that are charged by the financial institutions and banks. On the contrary, crptocurrencies are basically not immune to hacking threat. Some industries are presently facing some challenges that involve- volatility, regulatory and complexity in technology.  The bitcoin value fluctuated at high rate after it had been released owing to infancy of currency. Bitcoin also experienced many glitches in technology, which in turn resulted to halt of transactions and improper transactions (Qian 2014). Another challenge that faces cryptocurrencies such as Bitcoin is transparency. As the transactions made become transparent, individuals associated to these cash transactions were not easily recognized.

One of the major areas of development has been the technologies of cryptocurrencies. The distributed or blockchain ledger approaches, which has been utilized for these currencies provides huge potential for development in several areas (Narayanan et al. 2016). The development as well as application of technologies that underpins bitcoin is mainly the utilization by banks for automating their system of payment. It has been evident from recent studies that several banks involving Barclays, Deutsche Bank, UBS has been experimenting with the technologies that are based on blockchain framework.  From the customer’s perspective, cryptocurrencies basically offers cheaper peer- to peer options of payments as compared to that provided by traditional businesses. Additionally, cryptocurrencies provides low volatility risk as well as less transaction fees as seen from the perspective of merchants.

Overview of Cryptocurrency and its development

The aim of this research study will analyze on the impact of cryptocurrency on the economic activities. This study will focus on the emergence and future development of cryptocurrency. The research study will also highlight on how the cryptocurrency has been disrupting the economy worldwide.

The objectives of this research study will be-

• To evaluate the significance of cryptocurrencies in the market
• To identify the future development of cryptocurencies
• To analyze the positive and negative impact of cryptocurrency in the economic activities

The research questions that has been framed for this research study are given below-

• Do cryptocurrencies impact the activities occurring in the economy?
• Does cryptocurrency have further development in future?
• Whether cryptocurrencies will pose threat to the banks and financial institutions in future?
• Does cryptocurrency disrupts the global economy? 

Although cryptocurrency has been in existence and in increased popularity in the recent period only, however, there exists considerable literary works and empirically supported evidences regarding the emergence, evolution, significance as well as limitations of the usage of the same in the global economic scenario. This section of the report tries to conduct an extensive review of the existing literatures existing in this domain.

The term “Cryptocurrency” has been defined in various ways from different perspectives by many scholars. However, the most comprehensive definition of the term is given by Anderson (2017), who explains the term as the new type of virtual currency or medium of exchange in the contemporary period which is secured in its own virtue and which was primarily brought to existence in the contemporary global economy with the vision of decreasing the fraudulent and unfair activities in the financial markets.

The phenomenon of invention of Cryptocurrency was in fact an unintended by product of another invention, as can be seen to be highlighted and discussed extensively by Chohan (2017). As the author asserts, the unknown inventor of cryptocurrency is known in the Pseudonym of Satoshi Nakamoto. The person or organization (still not known) invented the first ever cryptocurrency in the world known as the Bitcoin (Qian2014). Heid (2013), argues that Bitcoin, according to the inventor was the first ever “Peer-to-peer Electronic Cash System”, with full decentralization and no central authority or server, which was expected to facilitate worldwide easy and fast digital financial transaction, without the usage of any hard cash, thereby saving time as well as preventing different money-laundering which the conventional cash forms face.  

However, eventually the concept outgrew from a peer-to-peer digital money framework to become an alternative form of currency itself, which started to be traded, purchased and valued in the international financial scenario.

In the contemporary period, the term cryptocurrency, as defined by Engle (2017), defines the same to be “limited entries to a particular decentralized and non-authoritatively governed database”, which cannot be changed by anyone without access which can be gained only by gaining fulfilling certain conditions. There exist different types of cryptocurrencies in the global framework in the contemporary period, much of which can be attributed to the increasing popularity of the same. The primary ones, except that of Bitcoin, the most popular form of cryptocurrency, are names as Litecoin, PPcoin and Namecoin. From 2009, since the emergence of Bitcoin in the global economy, till 2015, the total number of Bitcoins circulating in the global market has increased to as high as 14.6 million with the total valuation of nearly $3.4 billion.

Pros and Cons of Cryptocurrency

The following flow chart shows extensively and elaborately the working of Cryptocurrency in the contemporary economy

Zavorinet al. (2017), highlights the different benefits of the usage of cryptocurrency, which primarily includes the ease of transfer of funds between the different parties in concern, to and from any corner of the world, without compromising the security of the financial aspects of the parties involved. This, as the author asserts, has been becoming increasingly important given the fact that the global business environment and economy has been becoming integrated and inclusive and given that increasing numbers of business from all parts of the world are going global. The assertions of the authors are also supported and augmented by the works of Sapuric,Kokkinakiand Georgiou (2017), who highlights the aspects of reduction in the processing fees and mediatory charges taken by the financial institutions like banks and others in currency transfer across the different parts of the globe.

However, in spite of the benefits of the same, cryptocurrency and its usage is still bounded by several constraints and serious limitations. The currency and its usage is primarily not comprehensive and easy to understand for major population across the globe, especially those who are not comfortable with digital transactions. This makes the acceptance of cryptocurrency comparative much less than the conventional forms of currencies in the major parts of the world. Their also remains huge threats of volatility of this form of currency due to the lack of mass adoption and acceptance of the same. There also remains no scope of reversal of such payments, thereby making the potential users sceptic about the viability and authenticity of these alternative forms of virtual currencies (Coinpupil.com 2018).   

This chapter highlights on the various tools that the researcher will be using for completing this research study including- research design, research paradigm, research method and data collection method. For this research study, the researcher will be conducting secondary data collection method for analyzing the impact of cryptocurrency in the economic activities.

The research onion demonstrates the phases that the researcher will adopt in order to develop strategy for completing this study. Research onion mainly reflects on the six phases that is related to time horizon and research process.

The research design method helps the researcher to appraise the variables that will be used in the research problem. There are three broad categories of research design including- exploratory, explanatory and descriptive.

Areas of Development of Cryptocurrency

Exploratory research design helps the researcher to survey the situation for meeting the main objectives of the research study (Mitchell  and Jolley 2012). It basically involves various methods involving – interviews, experiments, group design etc that the researcher adopts for attaining accurate data relating to the research topic.

Explanatory research design indicates the attempt to relate with the thoughts to understand the cause as well as effect of relations. It also interrelates with those factors that come in collective manner.

Descriptive research design highlights on the behavior and attitude of the respondents in proper way. The research also endeavors to analyze the additional data collected for the particular research topic.

In this research study, the research will adopt descriptive research design in order to explore the impact of cryptocurrency in the economic activities across the globe.  Descriptive research is mainly used in this research study as it helps to describe, explain and validate findings of research.  On the contrary, exploratory and explanatory research design will not be adopted in this research as it uses modest samples that are not chosen on probability basis and relates to capability of making forecasting from results

Research approach helps the researcher to classify the research principle by applying different aspect of research study. There are four kinds of research approach involving- positivism, pragmatism, interpretivism and realism.

Positivism approach discusses about collection of data as well as positive facts that has been accredited from empirical facts. It considers the present theories or concepts to conduct the hypothesis testing while conducting the study.

Realism paradigm assumes the approaches to reality of the development activities.  It is mainly dependent on the independent reality idea of the individuals.

Interpretivism approach refers to the kind of social approach, which relies on the social science. It is implemented by the researcher by applying qualitative research.

For this study, positivism approach will be adopted for this research study. The reason behind adoption of this approach is that it mainly relies on the quantitative data and follows well- defined structure.  Intrepretivism approach will not be adopted in this research as it relates to the subjective type of approach and involves biasness of the researcher. Likewise realism approach will not be adopted in this study as it will not portray actual facts of the study.

There are basically two kinds of research method that involves- inductive and deductive. Deductive method involves developing as well as testing of hypothesis of the research topic. Based on this hypothesis, the researcher adopts the strategy for the study (Flick 2015). On the other hand, inductive method aims at investigating new theory and moves particular observations to larger generalizations as well as theories.

Aim and Objectives of the Research Study

For this research study, the researcher will adopt deductive data in order to complete the research in less time.  This method will be adopted for this study as it is the focused method of hypothesis testing and thus facilitates to ascertain hypothesis by utilizing existing theories. On the other hand, inductive method will not be adopted as incorrect observations might result in incorrect outcome.

Data collection method involves two methods, which are primary and secondary. Secondary data is collected from newspapers, journals, websites etc. On the contrary, primary data is collected from the interviews, surveys etc. (Palinkas et al. 2012).

Secondary data collection method will be used for conducting this research in order to generate new insights from the previous analysis. Moreover, it will consume less time as the data is readily available. On the contrary, primary data will not be used in this study as it will require large sample and will be consume more time.

Ethical considerations is necessary for doing the research since it will help to attain accurate outcome.The secondary data will be collected from the authentic data source and will follow the norms of data source. 

Conclusion

The main idea that can be drawn from the above research study is that cryptocurrency impacts the global economy both positively and negatively.  Bitcoin being the digital crptocurrency is mainly considered as future of money by some researcher. Although Bitcoin presents different innovations, it implements old concepts into digital architecture. The above study reflects the fact that cryptocurrency has been disrupting the global economy. In fact, the blockchain technology is considered as one of the vital technologies behind this cryptocurrency that disrupts the business process globally. Thus,  it concludes that cryptocurrencies will never be used for huge transactions.

References 

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Anderson, J.C., 2017. Cryptocurrency: Ultimate Beginners guide to learn and understand the world of cryptocurrency.

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Bunjaku, F., Gorgieva-Trajkovska, O. and Miteva-Kacarski, E., 2017. Cryptocurrencies–advantages and disadvantages. Journal of Economics, 2(1).

Chohan, U.W., 2017. A History of Bitcoin.

Coinpupil.com. (2018). ADVANTAGES AND DISADVANTAGES OF CRYPTOCURRENCY. [online] Available at: https://coinpupil.com/altcoins/advantages-disadvantages-of-cryptocurrency/ [Accessed 27 Mar. 2018].

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Flick, U., 2015. Introducing research methodology: A beginner’s guide to doing a research project. Sage.

Heid, A., 2013. Analysis of the Cryptocurrency Marketplace. Retrieved February, 15, p.2014.

Iwamura, M., Kitamura, Y. and Matsumoto, T., 2014. Is bitcoin the only cryptocurrency in the town? Economics of cryptocurrency and Friedrich A. Hayek.

Mitchell, M.L. and Jolley, J.M., 2012. Research design explained. Cengage Learning.

Narayanan, A., Bonneau, J., Felten, E., Miller, A. and Goldfeder, S., 2016. Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction. Princeton University Press.

Palinkas, L.A., Horwitz, S.M., Green, C.A., Wisdom, J.P., Duan, N. and Hoagwood, K., 2015. Purposeful sampling for qualitative data collection and analysis in mixed method implementation research. Administration and Policy in Mental Health and Mental Health Services Research, 42(5), pp.533-544.

Qian, X., 2014. A Bitcoin system with no mining and no history transactions: Build a compact Bitcoin system. arXiv preprint arXiv:1404.4275.

Sapuric, S., Kokkinaki, A. and Georgiou, I., 2017. In Which Distributed Ledger Do We Trust? A Comparative Analysis Of Cryptocurrencies.

Silverman, D. ed., 2016. Qualitative research. Sage.

Zavorin, I., Solonovich, A., Meshkov, V.I. and Ivanchenko, I.A., 2017. Cryptocurrency.