Table Of ContentContributions to Management Science
Stéphane Goutte
Khaled Guesmi
Samir Saadi Editors
Cryptofi nance
and
Mechanisms of
Exchange
The Making of Virtual Currency
Contributions to Management Science
Moreinformationaboutthisseriesathttp://www.springer.com/series/1505
(cid:129) (cid:129)
Stéphane Goutte Khaled Guesmi Samir Saadi
Editors
fi
Crypto nance and
Mechanisms of Exchange
The Making of Virtual Currency
Editors
StéphaneGoutte KhaledGuesmi
CEMOTEV,UniversityParis-Saclay IPAGBusinessSchool
Versailles,France Paris,France
SamirSaadi
TelferSchoolofManagement
UniversityofOttawa
Ottawa,Ontario,Canada
ISSN1431-1941 ISSN2197-716X (electronic)
ContributionstoManagementScience
ISBN978-3-030-30737-0 ISBN978-3-030-30738-7 (eBook)
https://doi.org/10.1007/978-3-030-30738-7
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Preface
The rapid advancement in encryption and network computing gave birth to new
tools and products that have influenced the local and global economy alike. One
recent and notable example is the emergence of virtual currencies, also known as
cryptocurrenciesordigitalcurrencies.Virtualcurrencies,suchasBitcoin,introduced
a fundamental transformation that affected the way goods, services, and assets are
exchanged. Virtual currencies are experiencing an increasing popularity in the
financialmarketsandinportfoliomanagementastheycanbeclassifiedasfinancial
assetorcommoditiesonascalefrompuremediumofexchangeadvantagestopure
storeofvalueadvantages.Asaresultofitsdistributedledgersbasedonblockchain,
cryptocurrencies offer some unique advantages to the economy, investors, and
consumers, but also pose considerable risks to users and challenges for regulators
whenfittingthenewtechnologyintotheoldlegalframework.Bitcoin forexample
maybeusefulinriskmanagementandidealforrisk-averseinvestorsinanticipation
ofnegativeshockstothemarket.
Virtual currencies have several properties common to fiat currencies and com-
modities. Although virtual currencies and their associated technology offer much
potentialtoinvestors,consumers,businesses,andgovernmententities,theyarealso
the source of risks and challenges to both users and regulators. An important
questionremains:Whatdoesthefutureholdforvirtualcurrencies?Cryptocurrencies
have a dark history of mishaps, especially with the Mt. Gox scandal and the more
recent QuadrigaCX scheme. However, the future of cryptocurrencies got brighter
with many governments around the world leading the way in the early stages of
regulation and taxation. For instance, the Bank of Montreal announced that it will
accept dealing with cryptocurrencies as soon as these are regulated and reliable.
AccordingtoBenBernanke,theformerChairmanoftheFederalReserve,“[Virtual
currencies] may hold long-term promise, particularly if the innovations promote a
faster, more secure and more efficient paymentsystem” (Forbes 2014). In fact, the
recent implementation of tokenization in Apple Pay and the endorsement of
tokenization by Visa show a clear trend for this new practice, which has been at
theheartofeverycryptocurrencytransactionsinceinception.Thisfactreinforcesthe
v
vi Preface
future of cryptocurrencies and shows the advantages of this cryptographic encryp-
tionprocess.
Another potential future of cryptocurrencies is the advent of smart property.
Although still at the conceptual level, smart property is likely to change current
ownership concepts. Through smart property, an entity can pay electronically to
accessacryptographickeygivingaccesstoapropertytemporarilyorpermanently.
Examples encompass any kind of property, whether non-physical (e.g., rights,
patents, and trademarks) or physical (e.g., automobile rental and resort time-
sharing). As an example, in the future world of smart cars, a cryptographic key
canensurethatthesmartpropertyissecureandnotheftcanoccur.Hence,although
cryptocurrenciesareveryvolatileandriskextinction,thetechnologybehindthemis
heretostayandmaybecomeamajorplayerinthefuturesmartworld.Somecontend
thatthechancesofanevolvedformofcryptocurrencywillreplacepapermoneyby
2050 if that form is backed by a solid commodity or a set of commodities. The
adoptionofthetechnologybehindthecryptocurrencieshasthepotentialtovalidate
anysingletransactioneverypersonmakesontheplanet.
Moneymaybelikelytobetreatedasbitsofinformationinthefuture.Ifandwhen
that happens, money exchange will be similar to information exchange. The next
generationofdeveloperswillcreatecryptographicbreakthroughsthatrevolutionize
financial transactions. Although the current concept of cryptocurrency will evolve
over time, the technology and innovation that come with it will open the way to
somethingmuch bigger—a revolutionnotonly infinancialtransactions butalso in
everytransaction.
Thisbookprovidesacomprehensivediscussionontheimportantissuesrelatedto
cryptocurrenciesrangingfrompricing,financial,andlegaltotechnologicalaspects.
Versailles,France StéphaneGoutte
Ottawa,ON KhaledGuesmi
Paris,France SamirSaadi
Contents
CryptocurrenciesasanAssetClass. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SinanKrückebergandPeterScholz
AreVirtualCurrenciesVirtuous?EthicalandEnvironmentalIssues. . . 29
SondesMbarek,DoniaTrabelsi,andMichelBerne
CryptocurrencyMining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
VikrantGandotra,François-ÉricRacicot,andAlirezaRahimzadeh
RegulatingBitcoin:ATaxCaseStudy. . . . . . . . . . . . . . . . . . . . . . . . . . 69
MargaretRyznar
AreCryptocurrenciesTrulyTrustless?. . . . . . . . . . . . . . . . . . . . . . . . . 77
UsmanW.Chohan
BlockchainandAlternativeSourcesofFinancing. . . . . . . . . . . . . . . . . . 91
OthaliaDoe-Bruce
Tokenomics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
RalfWandmacher
CryptoTokensandTokenOfferings:AnIntroduction. . . . . . . . . . . . . . 125
ChenLiuandHaoquanWang
InitialCoinOfferings:WhatDoWeKnowandWhatAretheSuccess
Factors?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
ChenLiuandHaoquanWang
InitialCoinOfferings(ICOs):Risks,Regulation,andAccountability. . . 165
UsmanW.Chohan
CryptocurrenciesandRiskMitigation. . . . . . . . . . . . . . . . . . . . . . . . . . 179
HaifaAmairi,BoushraElHajHassan,andAhlemZantour
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
vii
About the Editors
Stéphane Goutte has two PhDs, one in Mathematics and one in Economics. He
received his Habilitation for Supervising Scientific Research (HDR) in 2017 at
University Paris Dauphine. He is a full Professor at CEMOTEV, Université Ver-
sailles St.-Quentin-en-Yvelines, France. Heteachesmathematics andrelated topics
in MSc and BSc. He is also a Senior Editor of Finance Research Letters; an
AssociateEditorofInternationalReviewofFinancialAnalysis(IRFA)andResearch
inInternationalBusinessandFinance;aSubjectEditorofJournalofInternational
Financial Markets, Institutions and Money (JIFMIM); and an Editorial member
ofEuropeanManagementReview(EMR).Hisinterestslieintheareaofmathemat-
ical finance and econometric applied in energy or commodities. He has published
more than 40 research papers in international review. He has also been a Guest
Editorofvariousspecialissuesofinternationalpeer-reviewedjournalsandEditorof
manyhandbooks.
Khaled Guesmi is a full Professor of Finance at Paris School of Business and
Adjunct Professor at Telfer School of Management, University of Canada. He
undertakes research and lectures on empirical finance, applied time-series econo-
metrics, and commodity markets. Dr. Guesmi obtained his HDR (Habilitation for
SupervisingDoctoralResearch)inJuly2015.HeholdshisPhDinEconomicsfrom
the University Paris Nanterre in 2011, and his MSc in Finance from Paris I
UniversityofSorbonnein2005.Previously,heservedasProfessorofFinanceand
Head of Environment, Climate Change and Energy Transition Chair at IPAG
BusinessSchool,asAssociateResearch positionsat“EconomiX”laboratory atthe
UniversityofParisOuestLaDéfenseand"ERF"EconomicResearchForum,Egypt.
In2003,Dr.GuesmijoinedtheUNESCOasaResearchManager,andin2008,he
joined“CaissedeDépôtsetConsignations”asFinancialAnalyst.
He has published articles in leading refereed journals, including the Energy
Journal; International Review of Financial Analysis; Journal of International
Financial Markets, Institutions & Money, Annals of Operations Research, Energy
Economics and Energy Policy. Furthermore, Dr. Guesmi currently serves as
ix
x AbouttheEditors
AssociateEditoratFinanceResearchLetters,asaninternationaladvisoryboardat
The International Spectator. In addition, Dr. Guesmi is the founder of the Interna-
tional Symposium on Energy and Finance Issues and the Project Manager of the
European Commission’s Horizon 2020 Program for Research and Innovation. Dr.
KhaledGuesmiholdsthe4thbestworldresearcherinEnergyFinance:Frontiersand
FutureDevelopmentinBeijingin2018.
SamirSaadi isanAssociateProfessorandTelferFellowinBehavioralFinanceat
Telfer School of Business. He received a PhD from Smith School of Business of
Queen’s University. Before joining the University of Ottawa, he was a Visiting
Scholar at world leading research-intensive institutions such as Stern School of
Businessof New York University and INSEAD (France). He held several external
grantsfrom,amongothers,theSocialSciencesandHumanitiesResearchCouncilof
Canada (SSHRC). His current research funded by SSHRC focuses on how social
media influences investors’ behavior. Along with several book chapters, Dr. Saadi
has published over 50 academic papers in refereed journals such as Financial
Management, Journal of Corporate Finance, Journal of Banking and Finance,
Journal of Financial Research, Contemporary Accounting Research, Journal of
BusinessEthics,andJournalofBusinessFinance andAccounting.HeisanEditor
ofFinanceResearchLettersandhasbeenaGuestEditorofseveralspecialissuesof
peer-reviewedjournals,andkeynotespeakerinseveralinternationalconferences.He
is the recipient of best paper awards, and various prestigious awards from, among
others, the SSHRC, the Europlace Institute of Finance, and the American Finance
Association.
