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Is Bitcoin a decentralized payment mechanism?

Published online by Cambridge University Press:  20 March 2020

William J. Luther  and
Sean Stein Smith
William J. Luther*
Affiliation:
Department of Economics, Florida Atlantic University, Boca Raton, FL33431, USA
Sean Stein Smith
Affiliation:
Department of Economics and Business, Lehman College, City University of New York, Bronx, NY10468, USA
*
*Corresponding author. Email: [email protected]
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Abstract

We make a distinction between centralized, decentralized, and distributed payment mechanisms. A centralized payment mechanism processes a transaction using a trusted third party. A decentralized payment mechanism processes a transaction between the parties to the transaction. A distributed payment mechanism relies on the network of users to process a transaction on a shared ledger. We maintain that bitcoin is neither a centralized nor a decentralized payment mechanism. It is, instead, a distributed payment mechanism. We then consider decentralized and centralized aspects of the broader bitcoin payment space.

Keywords

Bitcoincentralizedconsensusdecentralizeddistributede-walletexchangegovernancepayments

JEL classification

E40: General E42: Monetary Systems • Standards • Regimes • Government and the Monetary System • Payment Systems E41: Demand for Money
Type
Research Article
Information
Journal of Institutional Economics , Volume 16 , Issue 4 , August 2020 , pp. 433 - 444
Copyright
Copyright © Millennium Economics Ltd 2020

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