The Dual Nature of Bitcoin as Payment Network and Money

Abstract

Back to 2008, Nakamoto combined the distributed ledger technology with cryptography and gave origin to what is now known as blockchain technology. The blockchain technology allows for a trustworthy record of transactions among anonymous without the need of a neutral central authority. The blockchain contains all the transaction history and each transaction is tamper-proof, publicly auditable (traceable) and no-reversible. The first application of the blockchain technology is Bitcoin: a digital currency that combines together the characteristics of money with those of a payment system. This dual nature is explained by the fact that Bitcoin is money expressed as a string of bits sent as a message in a fully decentralized network composed of millions of users with computers and devices connected among each other. In this chapter we analyze the dual nature of Bitcoin both as payment system and money.

Keywords: Bitcoin, Blockchain, Money, Payment