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The Crypto Market Ecosystem has emerged as the most profound application of blockchain technology in finance. This textbook adopts an integrated approach, linking traditional functions of the current financial system (payments, traded assets, fundraising, regulation) with the respective functions in the crypto market, in order to facilitate the reader in their understanding of how this new ecosystem works. The book walks the reader through the main features of the blockchain technology, the definitions, classifications, and distinct characteristics of cryptocurrencies and tokens, how these are evaluated, how funds are raised in the cryptocurrency ecosystem (ICOs), and what the main regulatory approaches are. The authors have compiled more than 100 sources from different sub-fields of economics, finance, and regulation to create a coherent textbook that provides the reader with a clear and easily understandable picture of the new world of encrypted finance and its applications. The book is primarily aimed at business and finance students, who already have an understanding of the basic principles of how the financial system works, but also targets a more general readership, by virtue of its broader scope and engaging and accessible tone.

Bitcoin is an online communication protocol that facilitates the use of a virtual currency, including electronic payments. Bitcoin's rules were designed by engineers with no apparent influence from lawyers or regulators. Bitcoin is built on a transaction log that is distributed across a network of participating computers. It includes mechanisms to reward honest participation, to bootstrap acceptance by early adopters, and to guard against concentrations of power. Bitcoin's design allows for irreversible transactions, a prescribed path of money creation over time, and a public transaction history. Anyone can create a Bitcoin account, without charge and without any centralized vetting procedure—or even a requirement to provide a real name. Collectively, these rules yield a system that is understood to be more flexible, more private, and less amenable to regulatory oversight than other forms of payment—though as we discuss, all these benefits face important limits. Bitcoin is of interest to economists as a virtual currency with potential to disrupt existing payment systems and perhaps even monetary systems. This article presents the platform's design principles and properties for a nontechnical audience; reviews its past, present, and future uses; and points out risks and regulatory issues as Bitcoin interacts with the conventional financial system and the real economy.

BackgroundCryptocurrency fraud has become a growing global concern, with various governments reporting an increase in the frequency of and losses from cryptocurrency scams. Despite increasing fraudulent activity involving cryptocurrencies, research on the potential of cryptocurrencies for fraud has not been examined in a systematic study. This review examines the current state of knowledge about what kinds of cryptocurrency fraud currently exist, or are expected to exist in the future, and provides comprehensive definitions of the frauds identified.MethodsThe study involved a scoping review of academic research and grey literature on cryptocurrency fraud and a 1.5-day expert consensus exercise. The review followed the PRISMA-ScR protocol, with eligibility criteria based on language, publication type, relevance to cryptocurrency fraud, and evidence provided. Researchers screened 391 academic records, 106 of which went on to the eligibility phase, and 63 of which were ultimately analysed. We screened 394 grey literature sources, 128 of which passed on to the eligibility phase, and 53 of which were included in our review. The expert consensus exercise was attended by high-profile participants from the private sector, government, and academia. It involved problem planning and analysis activities and discussion about the future of cryptocurrency crime.ResultsThe academic literature identified 29 different types of cryptocurrency fraud; the grey literature discussed 32 types, 14 of which were not identified in the academic literature (i.e., 47 unique types in total). Ponzi schemes and (synonymous) high yield investment programmes were most discussed across all literature. Participants in the expert consensus exercise ranked pump-and-dump schemes and ransomware as the most profitable and feasible threats, though pump-and-dumps were, notably, perceived as the least harmful type of fraud.ConclusionsThe findings of this scoping review suggest cryptocurrency fraud research is rapidly developing in volume and breadth, though we remain at an early stage of thinking about future problems and scenarios involving cryptocurrencies. The findings of this work emphasise the need for better collaboration across sectors and consensus on definitions surrounding cryptocurrency fraud to address the problems identified.

Bitcoin (BTC) is a major virtual currency. Using weekly data over the 2010–2013 period, we analyze a BTC investment from the standpoint of a US investor with a diversified portfolio including both traditional assets (worldwide stocks, bonds, hard currencies) and alternative investments (commodities, hedge funds, real estate). Over the period under consideration, BTC investment had highly distinctive features, including exceptionally high average return and volatility. Its correlation with other assets was remarkably low. Spanning tests confirm that BTC investment offers significant diversification benefits. We show that the inclusion of even a small proportion of BTCs may dramatically improve the risk-return trade-off of well-diversified portfolios. Results should however be taken with caution as the data may reflect early-stage behavior that may not last in the medium or long run.

The proliferation of technology emphasized new forms of payment. During the last years, current literature highlighted the role of virtual currency, the channels of payment through digital coins and the importance of assimilation of such platforms. Bitcoin or BTC is known as a digital coin, issued for the first time in 2009 and based on a peer to peer system. The difference from other forms of payment is that BTC is not controlled by any institution or central authority. BTC transactions have grown rapidly, ”asking\" for regulation measures or legal approval of governments. Although BTC has become very popular, the market is poor and unfortunately of no confidence. There is a lack of regulation which can determine a number of risks associated with criminal financing activities. However, the legal status of Bitcoin is present in many European countries like Belgium, Bulgaria, Denmark, Finland, Germany, Lithuania, Norway, Poland, Slovenia, Switzerland or Turkey. Also, this type of currency has experienced a rapid evolution among coffee shops and restaurants.

The sale of virtual currency has become an important revenue source in the digital gaming industry. This paper analyzes the impact of this business model on players’ gaming behavior, the game provider’s strategies for virtual currency price and ad level, and social welfare. Our findings have important managerial implications for the gaming industry and policy makers. We find that when the enabling-power rate of virtual currency (i.e., how much players benefit from enhanced gameplay due to virtual currency generated per unit of playing time) is stronger, players have lower incentive to purchase virtual currency. Therefore, the provider should set a lower price to avoid losing too much demand. In the meantime, the marginal benefit of playing the game increases, and thus the provider should set a higher ad level to take advantage of this boosted marginal benefit for players when the base valuation of gameplay is sufficiently low. Finally, we demonstrate that offering in-game purchases of virtual currency as a new business model benefits society as a whole. Our findings suggest that regulators of the gaming industry should be less concerned about the risk of excessive gameplay for games that sell virtual currency compared with those that do not. Despite the growing popularity of in-game purchases of virtual currency in digital games, there is very limited formal research that studies this new business model. This paper builds on the neoclassical labor–leisure model to examine the impact of selling virtual currency on players’ gameplay behavior, game provider’s strategies, and social welfare. When the game provider offers virtual currency for sale, players have two options to obtain virtual currency— playing the game and purchasing virtual currency directly. We introduce a parameter—the enabling-power rate of virtual currency—to characterize the extent to which virtual currency generated in a unit of playing time can augment players’ production of gaming leisure. We find that selling virtual currency reduces the playing time for certain heavy players, whereas it boosts certain light players’ playing time. It may also lead to a larger player base allowing more people to enjoy the benefits of playing digital games when the enabling-power rate of virtual currency is sufficiently high. The game provider should charge a higher (lower) virtual currency price for a game with a relatively lower (higher) enabling-power rate of virtual currency. She should also set a higher (lower) ad level for a game with a relatively higher (lower) enabling-power rate if the game’s base valuation of gameplay, that is, the valuation of gameplay independent of virtual currency, is sufficiently low. Finally, we demonstrate that selling virtual currency could lead to a win–win–win situation for the game provider, players, and society as a whole. It will alleviate the conflict of interest between the provider’s goal of longer playing time to maximize her ad revenue from in-game ads and the social goal of reducing excessive gaming, especially for heavy players. The online appendix is available at https://doi.org/10.1287/isre.2018.0812 .

In socially aware networking, nodes typically behave selfishly due to resource constraints and social correlations, resulting in low network performance. To incentivize selfish nodes to actively participate in message forwarding, this paper proposes a resource-based dynamic pricing and forced forwarding incentive algorithm (DFIA). Firstly, the algorithm introduces virtual currency as a transaction medium and then designs a pricing function based on factors such as the node’s resource status, participation contribution, location relevance, and social connectivity. It ensures that the forwarding service is transacted at a reasonable price through bargaining rules. Secondly, a forced forwarding strategy is implemented to compel selfish nodes, which are unwilling to participate in other nodes’ message forwarding, to forward a certain number of non-local messages. Meanwhile, in order to prevent nodes from discarding messages and to ensure successful forwarding to the destination, specific rules are used to allocate contribution values to nodes that successfully participate in message forwarding. Lastly, to avoid false quotation behavior, blockchain technology is employed. Transaction information is packaged into blocks and added to the blockchain after consensus validation by other nodes in the network, ensuring the transparency and immutability of transaction data. Simulation results indicate that compared with the existing incentive algorithms, this algorithm not only enhances message delivery probability but also effectively reduces average latency.

In Socially Aware Networks (SANs), nodes exhibit some degree of individual selfishness and social selfishness because of their limited resources and the strength of social relationships, which affects network performance. Therefore, this paper proposes a Resource-Constrained and Socially Selfish-Based Incentive Algorithm (RSIA), which employs the payment of virtual currencies to intermediate nodes as rewards to incentivize them to forward messages. At the same time, nodes can have a preference for selfishness due to the high affluence of their wealth. For the selfish preference of highly affluent nodes that do not participate in message cooperative forwarding, the service level of the node will be reduced as a punishment. So, the nodes’ resource status and social relationship, and service level are considered to price the message, and the message forwarding is done by consensus through a bargaining game. Secondly, this paper introduces a security module and an encryption mechanism to prevent false offers from the nodes. Finally, the results of simulation experiments indicate that the RSIA algorithm improves the delivery rate of messages with effect and improves in terms of average latency.

The Metaverse – built from virtual reality, augmented reality and mixed reality – is arriving via wearable headsets that have cameras, microphones, speakers, sensors and communications built in. These spatial computing technologies create new social and economic connections, and while some of these connections are virtual, the business implications are very real. The authors set out the potential for financial services in metaverses and the 'always-on' immersive future internet, beginning with a look at the key technologies needed to make these metaverses useful for businesses. They then go on to explore the emerging realities in which new markets will function and the digital assets that will be exchanged in transactions between online identities. The book develops a comprehensive and practical model of the Metaverse and the nature of those new transactions in a business environment. It has a clear view of virtual worlds and it provides both a simple taxonomy for digital assets and a tried-and-tested model of digital identity that will provide a better understanding of the opportunities that exist in the many metaverses where we will work, rest and play in the near future.

The design of the in-game economic system is key to ensuring the balance and sustainability of the game. In this paper, each virtual currency element in the designed economic system is introduced in detail, and based on the PIPE network, the economic system model within the game is designed. A multi-faceted recognition assessment research of this paper’s system is conducted through a questionnaire. It was applied to five games to analyze the players’ game behaviors, and using regression models, the players’ behaviors were predicted using this paper’s system. Players’ overall recognition of this paper’s system is high, with ratings ranging from 4.09 to 4.66. Under the system of this paper, the amount of player’s income from selling game props is higher than the amount spent by buyers, such as in Game 5, where the difference between the two is $120.06. When players have a sufficient amount of virtual currency, the percentage of players’ time in the economic system is significantly higher. All the key factors in the system have different degrees of positive influence on players’ spending behavior.