HSAN DORAMACI BLKENT UNIVERSITY

GE - 301 PROJECT REPORT

The Bitcoin Controversy: The Conflict of Technology and
Legality
08.12.2017

Alp Argun
Electrical and Electronics Engineering

Ata Cem HAN

Electrical and Electronics Engineering

B. Orkun Tunay
Electrical and Electronics Engineering

Tun Zerener
Computer Science

1
Table of Contents

Introduction

Approach

Theoretical Analysis

Interview

What we think

Resources

Conclusion

2
Introduction

Being one of the most trending technologies that computer science has come up with,

Bitcoin revolutionizes societys perception of money as it provides free movement of value

without intervention of any profit-seeking commercial banks and it provides a medium of

exchange that is not backed by another commodity such as gold or silver. It is generated and

held electronically, therefore it bypasses commercial banks and any financial intermediaries.

As a decentralized currency, Bitcoin is independent of any monetary policies to govern the

coining process, also known as mining. However, this decentralization brings anonymity in its

wake. Due to anonymity, blackmarket websites for drug trades, human trafficking or etc.

boom everywhere and therefore, there are legal issues surrounding the digital currency since

governments struggle with regulating the circulation of Bitcoin. As a result, Bitcoin will

remain controversial in short term, and hence, requires a thorough research and analysis of

multiple perspectives to develop a strong opinion about Bitcoin.

Approach

Bitcoins revolution on societys perception of money because of the free movement

that it provides and the exchange medium of it that hasnt backed by other commodities such

as gold or silver can be dealt with some STS methods and theories. The controversial

structure of Bitcoin in terms of legality and perception effect becomes much more concrete

and clear when they are examined with these methods.

3
 Firstly, Bitcoin is a humanly controlled technology. Its purpose is to make humans

control the nonhuman parts of both money itself the aspects of it that affects the society. In

addition, it is a neutral technology because there is a clear separation between its means and

ends. Hence, Bitcoin aims to be in the classification of instrumentalism, however, since it is

human controlled, when it is used in other ways from its intentions such as black market or

drug mercantile, the classification slightly tends to critical theory. When Bitcoin technology is

used in the ways that is mentioned, the means start to form a way in society that includes the

ends. In other words, the technology gets out from the boundaries of being neutral.

Secondly, this remarkable technology tends to SCOT as well. SCOT is the social

construction of technology. The society that uses Bitcoin decides how to use it. It can be used

whether to transfer money without any extra effort or to be in black market and drug business.

The intention and the area of its usage is determined and decided by the social group that uses

this technology. Moreover, the tendency to SCOT of this technology can be understood from

the type of it, which is, from time to time, instrumentalism and critical theory. These mean

that Bitcoin is human controlled and the development of the technology does not play an

important role in its usage area. Humans decide and control its usage area. Moreover, Bitcoin

makes perfect sense when it comes to Actor-Network Theory. There wasnt any value of

Bitcoin in terms of real money when it is developed in the beginning. As the time goes, it

started to earn value in terms of money and people begin to use it as money. In addition, no

one can arrange the money flow because the usage of Bitcoin is not illegal and it has its own

4
value of money. Its user are all in near levels of each other and they all buy and sell Bitcoin

because its value of money makes the users to earn money. If the users of this technology

think it has got no benefits for them, they would not buy Bitcoin in the beginning and it

couldnt have had such a great value as it is now.

The point to be emphasized is that the purpose of this approach is to show all the

aspects of Bitcoin usage in terms of society and legality issues. Bitcoin technologys

contraversies can be examined under these theoritical approach and concrete analysis will be

made according to these examinations.

Theoretical Analysis

Bitcoin's Background from ANT Point of View

In the beginning of 2009 the first version of Bitcoin was released by Satoshi

Nakamoto. Bitcoin was actualized by forming many networks which worked together as

actants. In 2007 Nakamoto began to work on bitcoin concept using computer systems such as

hardwares, microprocessors, RAMs, drive controllers and etc. Also Nakamoto forged a team

including Charles Bry, Vladimir Oksman and Neal Kin and Gavin Andresen. Even tough he is

called Nakamoto no one really knows who he is. The name might also be a pseudonym. In

The Face Behind Bitcoin Leah McGrath Goodman tries to profile Nakamoto. His requests

to speak face to face with him is declined by the entrepreneur.After his unanswered questions

Goodman contacts Gavin Andresen. He shares his past relations and knowledge about

Nakamoto. According to Andresen He never heard Nakamotos voice, because the founder

of Bitcoin would not communicate by phone. Their interactions, he says, always took place

5
by email or private message on the Bitcointalk forum, where enthusiasts meet online. So its

elicited that Nakamoto used an online forum and Bitcoin enthusiasts to form the network.

Therefore, he enrolled humans and non-humans to form the network of Bitcoin by linking

them with each other. In October of 2009 the exchange rate of Bitcoin was established. With

only 1 dollar you could buy 1,309.03 Bitcoin. The calculation was made reffered to the cost of

electricity to run a computer which generates Bitcoins. It was more of an hypothetical price,

but as people started mining and transacting bitcoins the exchange rate for bitcoin increased

making it a universally tradeable digital currency. Economically, just like every other

currency, the auction market converged the supply-demand intersect. Thus this supply-

demand created the market price of Bitcoin system. As it can be observed, the buyers and

sellers also became a part of the network and worked as actants. By supplying and demanding

monetary values they discovered alliances between themselves. These alliances were

performed continuously so that the network maintained its validity. Just like Latours theory,

all the actants had evident power and interest. Their interests are used to manage actions

towards the network. For an example; when buying and selling Bitcoins the users can see how

many Bitcoin does the seller has. So this can make them act to buy or do not buy from this

seller. Therefore all the actants of network influence each other. In 2011 a Bitcoin

marketplace called Silk Road was opened for business. It was an illicit market for drug

dealing. Later in 2014 Microsoft started to accept BTC for the purchase of Windows

softwares and Xbox games. Also Steam started accepting Bitcoin as a payment method in

April 2016. So, as time passed the network of Bitcoin started to branch out and have new

members. As these members continued to work together the price of Bitcoin which was

$0.003 around March 2010 is about $11500 as of 5 December 2017. There is an unbelievable

gap between these prices. Gavin Andresen states about this gap that I made a small

investment in Bitcoin and it is actually enough that I could now retire if I wanted to. Overall,

6
Ive made about $800 per penny Ive invested. Its insane. To summarize Nakamoto enrolled

humans which were engineers, mathematicians, IT technicians and also related professionals

and non-humans such as computers, computer processors and components to form an actor

network. The mining operations made it possible to translate mathematical algorithms and

open source codes to digital currency. According to Bitcoin as a Complement to Emerging

Market Currencies by Jon Carrick these algorithms allow community to create coins at a

fixed rate until 21 million coins have been created. So algorithms and transmission of

information are ending up as higher representatives such as 21 million coins, through actants

working together. Finally the network creates effects at a great deal. As a result we feel the

need to make this research, governments start to take Bitcoin into consideration which

influences them to try to control this network, politicians and stockbrokers start investing

Bitcoins. The effects of Bitcoin create paradigm shifts by changing the approach of states and

people. Thus it is seen that Bitcoin holds the method of Actor-Network Theory. In the process

of Bitcoin, actors were enrolled to make alliances. Later they translated lower level

information to higher representatives and this made important channels to delegate actions to

these artifacts. These stages are the three phases of ANTs method; enrolment, translation and

delegation. Consequently Actor-Network Theory fits the Bitcoins background story and

current situation perfectly.

Bitcoins Place Between Social and Technological Determinism

It is very hard to evaluate the controversy of bitcoin as a case in which either only technology

influences society or only society influences technology. This means the bitcoin technology is

neither suitable to technological determinism nor social determinism. Bitcoin brings multiple

parties together for a common purpose, making financial transaction over the Internet by

avoiding paying high transaction fees. These high transaction fees are actually the source of

income for the banking industry. For example, the credit cards include 2% or 3% as charges

7
to vendors ultimately paid by consumers. However, Bitcoin offers an environment where

there is no intermediary of transactions, like banks, that the consumers are charged for the

transactions. This appeal of Bitcoin was actually the main cause of the boom in the currency.

The value of one bitcoin was 0.07 cents in July 2010 and it is around 11.500 dollars today.

However, the Bitcoin ecosystem still has to solve a very simple dilemma and this dilemma is

actually the real obstacle for the technology to be perceived as either technological

determinism or social determinism. This dilemma can be interpreted as the chicken-egg

dilemma. If more vendors accept bitcoins, more people will use them; and if there are more

bitcoin users, vendors are more likely to accept them. Conversely, vendors will not accept

bitcoins unless more people have them, and people will not use bitcoins unless vendors accept

them. Regulations of the governments will be a very important factor to solve this dilemma

since the demand sides, consumers and supply side, vendors will be affected by these

regulations. Here, without presenting any forecast about the future trend of bitcoin, we can

easily observe that the technological factors of Bitcoin are not enough to determine the

success of the technology. However, as technological factors are not enough to explain the

bitcoin controversy, the social factors are also not enough to evaluate the technology since

despite all the doubts about the Bitcoin, the currency keeps appreciating. Therefore, it is better

to examine the Bitcoin controversy from the SCOT point of view.

SCOT Point of View

As it is discussed from the SCOT point of view, it can be easily said that the society

effects the usage areas of this technology. Unlike determinism types, technology does not find

a way to effect its usage. However, in this case, other factors that create different

contraversies come up. As we told, the success of this technology cannot be determined by

both the technological and social factors. Since its usage areas differ from one relevant social

8
group to another, SCOT shows us more concretely that the success of it does not clear from

society angle of this situation. The relevant groups of this technology can be business men

that deals with trades which include transferring or receiving considerable amount of Money

or it can be some citizens with bad intentions and ideas that lead to drug dealing and black

market trade. This variation on the usage area that is determined by the society creates another

contraversy as we mentioned. Moreover, this issue can be detailed under two main theories

that are used for classifying a technology good, usefull in other words or bad. These two

theories are consequentialism and deontology. These can be called ethical conserns also.

Consequentialism focuses on the results of an action. According to this manner, Bitcoin

technology can be considered as not quite good since it is used for bad purposes such as

trading illegally. This result can be evaluated as a bad result and because of this conclusion

Bitcoin technology is not what it should be. Yet, according to the deontological point of view,

the purpose and intention are much more important than the results while deciding the

usefullness of a technology. Bitcoin is designed and improved to create a system that will not

get affected from the other exchange issues of moneyy. Although some of the results are

different than expected, the overall result can be thought as useful. Moreover, this technology

will not get to closure since it creates new problems as the others are solved because of the

new created usage areas that will also continue. The point to be emphasized is that from

SCOT point of view, Bitcoin technology goes quite parallel with the idea that society shapes

the areas that a technology is used, however, these usage areas that are decided and found by

the society leads to one big contraversy about the usefulness of this technology.

Interview (Leyla Batav)

What do you think about the Bitcoins effect on perception of money in general?

9
- Bitcoin is revolutionary for the societys perception of money because now, people

started to realize that they do not actually need banks for taking part in transactions. We have

actually never needed banks for transactions but we have just started to become aware of this

fact.

What are the advantages of Bitcoin to Society?

- Obviously, people actually do not have to pay any extra fees to banks anymore if they

make transactions via Bitcoin.

Does this technology harm financial banks and financial intermediaries?

- It will eventually affect the financial programs of banks and other similar

intermediaries and I think they will make new policies to involve with the Bitcoin

transactions. For example, Swiss Bank has started to sell Bitcoin to its customers which is a

sign of my forecast will come true. Other banks all around the world will apply similar

actions in order to reduce the bad effects of Bitcoin on their financial programs.

Will there be any increase in the value of Bitcoin?

- I think the value keep increasing since it has still a great potential to appreciate but

since it is still a very new type of currency we see that the increase in value that we are talking

about is happening very unsteadily. We might observe a 20% increase or decrease in a day

just because Bitcoin is still very vulnerable to changes in the market and the agenda.

Which perspectives should Bitcoin be examined by Government?

- Government should be concerned about the occasions where Bitcoin is used as the

currency of digital crimes. I read many news from all around the world about how Bitcoin is

10
used for drug-trafficking and human-trafficking, recently I heard that first Bitcoin related

murder took place in Antalya which indicates that our government will also soon act to take

precautions against similar possible incidents.

How does the perception change affect Bitcoins value?

- Economically question is very simple. The demand is one half, of course while the

supply is also the other half, so if the demand changes, which means if the perception of

Bitcoin changes, the value of Bitcoin will certainly be affected by that.

Do you think Bitcoin is a threath that needs to be eliminated with respect to Deep Web's

usage of the cryptocurrency?

- There are many cyryptocurrencies today other than Bitcoin; Ethereum, Litecoin,

Namecoin, Swiftcoin etc. Eliminating the leader cryptocurrency, Bitcoin, from the market just

opens the way for other cryptocurrencies. The real criminal here are the dealers and buyers of

the Deep Web, not the currency they use for the transactions. If you only take the weapon off

a criminal, he/she can find new weapons to commit more crimes.

Do you see any familiar technology that affects as in the same manner with Bitcoin lately?

- I will perceive the Bitcoin as a type of digital currencies and I can say that digital

currencies affect the market in a very unique way. I cant relate the rise of digital currencies to

any other technology of the recent years.

How should the Government approach to Bitcoin?

- This is actually a very hard question to answer and this is why the majority of the

governments do not have any clear actions about Bitcoin. However, in my opinion,

11
governments accepting Bitcoin as legit currency will give the more information and more

control on the transactions which might at least decrease the Deep Web related problems.

How should the Society approach to Bitcoin?

- Majority of the society perceives Bitcoin as a mean of investment and I think thats

good and beneficial way to approach Bitcoin nowadays.

Which perspectives should Bitcoin be examined by Government?( Analizden sonra

cevaplayalm)

What we think

The uncertainty about how to approach Bitcoin arises from the uncertainty about the question

that has always been forwarded to new technologies: Is it beneficial or is it harmful? This

dilemma also causes the controversy between the Bitcoin technology and legal concerns that

we are trying to analyze. In order to state an opinion about how to approach Bitcoin, we first

have to figure the way that Bitcoin and society interact with each other when the technology

is not under control of any legalities or policies. By analyzing this interaction with the

methods that we learned during the course, we understand that Bitcoin actually changes the

perception of supply and demand in the society and it also changes the financial structure of

the society by bypassing the intermediaries. On the contrary, it facilitates the digital crimes

like drug dealing and human trafficking by eliminating the security factors that these financial

intermediaries provide. This certainly serves to the interests of Deep Web users and society

gets adversely affected by this new technology. However, the important point that should

never be disregarded is the fact that Deep Web had been there before Bitcoin emerged.

Therefore, the dilemma evolves to the question: Should we shackle or eliminate Bitcoin or

should we try to make policies or laws to prevent the adverse effects that we mentioned. The

12
governments like China which tried to shackle and ban Bitcoin from the society failed to

reach their goals since we observe that Bitcoin is still appreciating while the number of Deep

Web crimes are still rising in these countries. Therefore, we think that trying to shackle Deep

Web users and trying to make policies to strangle the activities in Deep Web can be more

effective for this dilemma. From the research that we made and from the point of views that

we analyzed, we assert that it is not a wise action to cut the connections between science,

technology and society. We should let Bitcoin revolutionize the societys point of view but we

should keep taking action whenever the rise of this new technology brings about any adverse

effects.

Alp Argun

As an electrical engineer, I am always open minded for radical technological

developments. I loved the fact that Bitcoin eliminates intermediary costs. As I am planning

working abroad for my future career, I can benefit a lot from zero remittance cost in Bitcoin

transactions. I hope legal constraints do not block Bitcoin and at the same time, the threat of

Deep Web to the society and technology can be eliminated.

Ata Cem Han

Bitcoin technology can bring out remarkable new stereotypes to the world. Humanity's

perception on money can completely change. This change should be managed carefully and

this undeniably strong technology should go further legally.

B. Orkun Tunay

It is very hard to make a radical judgement about Bitcoin. But it is certainly a game changer

for the modern perception of economics. It facilitates many digital crimes but it does not

13
mean that it causes the digital crimes. I am against to the conservative idea of shackling new

technologies. We should let it develop and innovate the modern economics by making new

policies to prevent the side effects that Bitcoin brings in its wake.

Tun Zerener

Bitcoin is a revolutionary invention to take the hands off government and bank institutions off

from individuals. The sudden increase and decreases in Bitcoin's price makes it possible to

have huge profits from the virtual currency. Most people think that Bitcoin is a bubble now

and they're late to invest. The thing they don't know is that we are still at best times to invest

in Bitcoin. I genuinely think that Bitcoin can hit $100k margin in the near future.

Resources

1) Regulating Bitcoin as a Commodity(Prentis, Mitchell):: The author of the article

follows an opposed view about categorizing Bitcoin as a currency or security subject. In

addition he refers to the advantages of categorizing and regulating Bitcoin as commodity.

Argues that this categorization will provide a better regulation for Bitcoin and clarify the

efforts of regulation. The article gave us a better examination between two opposite ideas

about accepting Bitcoin as a currency. Thus, we were able to observe both positive and

negative effects about categorizing Bitcoin as a fungible good.

2) BitCoin No Trust Needed (Griffin, Donovan): The article focuses on California

engineer Dorian Satoshi Nakamoto's paper "Bitcoin: A Peer-to-Peer Electronic Cash System"

which defines bitcoin as an electronic payment system devoid of trust. It notes Nakamoto's

focus on preventing the system from being abused and preventing a user from double-

14
spending his bitcoins. It indicates Nakamoto's concern over the ethical nature of bitcoin. The

article actually gave us an opinion about the nature and the emergence of Bitcoin which made

us able to develop stronger opinion about the ethical concerns of Bitcoin. It also groups the

Bitcoin enthusiasts into different parties which also gave us an idea about how to approach the

societys perception of Bitcoin.

3) Bitcoin as a Complement to Emerging Market Currencies(Carrick,J): The study is one

of the primary studies which examine Bitcoin in terms of its composition with market

currencies on the rise. Author is interested in exploring the very relation between these

emerging currencies and how they can complement each other with Bitcoin. Results of the

study propose that the characteristics of Bitcoin make it highly suitable to work with

emerging market currencies. Outcomes also suggest that Bitcoin's risks are reducible. In our

research, we used the information in this study to grasp the deeper technical situation under

Bitcoin's formation. The study also provided us greater understanding about what makes

bitcoin a currency and the requirements it satisfies.

4) Bitcoins: The Future of Money(Walker, Judy): The article offers information on

bitcoins, a form of digital currency and a kind of money that exists only in computers online.

It mentions that the bitcoins can be used for exchange or receive as payment for goods and

services, and need a very little information of the customers in comparison to the banks and

credit card companies which increases the risk of data security. It also adds that the bitcoins

make the international transactions very easy. The article actually gave us an insight about the

process of transactions of Bitcoins and technical information about the data security issues of

Bitcoin which made us able to consider the data security and anonymity while developing the

analysis.

15
5) The Bitcoin Ecosystem(Cosumano,Michael): The author discusses aspects of the

bitcoin ecosystem. He mentions its role as a computer-generated commodity and crypto-

currency, which are available to people with computers and Internet connection. The article

gave us an opinion about the technical aspects of Bitcoin like how the transaction are made

and how the Bitcoin economics Works

6) The Face Behind Bitcoin(Goodman, Leah McGrath): Leah Goodman tries to discover

the father of the Bitcoin idea, Satoshi Nakamoto, who created the top placed virtual currency.

When the author tries to contact Nakamoto, he prefers to remain silent and refuses to answer

questions all together. Nevertheless the author achieves to gather some information about the

founder about his interests with modifying model steam trains, Bitcoin's performance in 2014

and digital security. He even receives some comments from Nakamoto's former work friends

and relatives including his daughter share their thoughts about him. This article gave us

insight about Nakamoto's personality and how he acquired to create the whole network of

Bitcoin. This made us able to observe the person behind the screen closer and have a better

sense of Bitcoin about how were the first steps of Bitcoin taken and what changes occurred

until its current state.

7) Bitcoin and Money Laundering: Mining for an Effective Solution(Danton, Bryans):

Examining the technological crime art that can be done in different time by the same person.

Danton and Bryans focuses on the use of technological advancements to distance themselves

from illegal activities that they do. They point out that Money transfer systems allow

criminals to buy, sell and exchange goods without any physical interaction. Bitcoin can be an

example to these transfer systems.

8) Capital Flight and Bitcoin Regulation(Ju, Lan, Lu Timothy, Tu Zhiyong): This article is

mainly about the risk of Bitcoin usage for capital flight. It explains the tracelessness of

16
Bitcoin from the example of a capital flight that is from US to China. After this flight, no

evidence was found about any transfer of Money.

9) The Bamboozling Bite of Bitcoin: Bitcoin Doesnt Make White Collar Crime Possible, But

It Does Make It Easier! (Isaacson, Scott): Isaacson and Scott focuses on the risks of miuses

and confusions of virtual currencies. Moreover, it is explained that White colar crime statutes

require some sort of financial transaction that includes a monetary instrument.

10) A Profile of Bitcoin Currency: An Explanatory Study (Franklin, Mitchell): This study is

an exploration of the Bitcoin as a functional, international virtual currency. This study

provides a literature review of the history of Bitcoin, including its advantages and

disadvantages, and the challenges such as taxation issues faced by countries, financial markets

and banks to understand and adapt to its entry into the market. How countries treat this

currency, the tax implications when income, gains and losses arise from transactions and the

investment opportunity it provides are evaluated.

11) Banning Bitcoin(Luther, William): Luther and William employ a monetary model with

endogenous search and random consumption preferences to consider the extent to which a

government can ban analternative currency, like Bitcoin. They define a ban as a policy

whereby government agents refuse to accept an alternative currency and meet out

punishments to private agents caught using it. After they identified monetary equilibria where

an alternative currency is accepted, then derive the conditions under which a ban might deter

its use. As in earlier studies, they show that a government of sufficient size can prevent an

alternative currency from circulating without relying on punishments. Luther and William

also show that, given its size, a government can ban an alternative currency so long as it is

willing and able to mete out sufficiently severe punishments.

12) Bitcoin: a regulatory nightmare to a libertarian dream (De Flippi, Primavera) This

17
article provides an overview of national policies and current discussions on the regulation of

Bitcoin in Europe and beyond. After presenting the potential threat that cryptocurrencies pose

to governmental and financial institutions worldwide, it discusses the regulatory challenges

and the difficulty for national regulators to come up with a sound regulatory framework,

which the author believes explains the absence of regulatory responses in this field. The

article concludes that regulation is needed, but in order not to excessively stifle innovation in

this nascent ecosystem, some of these challenges might better be addressed through self-

regulation.

Bitcoin Websites
1) https://btctheory.com

2) https://www.theguardian.com/commentisfree/2015/dec/09/the-guardian-view-on-

bitcoin-the-ghost-behind-the-machine

3) http://www.expertsmind.com/library/bitcoin-as-an-ethical-dilemma-closing-case-

5855895.aspx

4) http://historyofbitcoin.org

5) https://www.theguardian.com/commentisfree/2015/dec/09/the-guardian-view-on-bitcoin-

the-ghost-behind-the-machine

Bitcoin Movies
Banking on Bitcoin

Deep Web

The Rise and Rise of Bitcoin

18
Conclusion

Throughout the research, we found the chance to implement the STS point of views to a

controversial topic that we chose in the beginning of the semester. Before using our

theoretical knowledge to develop an opinion about the Bitcoin case, we initially found many

articles, websites and movies to gather some information. Later on we also added the

knowledge that we obtained from the interview. After gathering these raw information which

included many answers to our questions, we started to analyze the information by applying

different point of views that we learned during GE 301 course. Finally, by uniting different

approaches from different STS perspectives, we stated an opinion about how to approach the

Bitcoin case. The project was very informative and important for all four of us since in the

end of the course we actually managed to analyze a popular topic by applying different STS

approaches such as SCOT, ANT, social determinism and technological determinism.

19