Erica Pimentel
Academic Director (Master of Financial Innovation & Technology) & Assistant Professor
- Adapted from: “Bitcoin: An Accounting Regime”
- Based on Research by: Mélissa Fortin, Erica Pimentel
- Journal: ScienceDirect
Key Takeaways
- Bitcoin, a cryptocurrency and payment system, is a technology shaped by social relations and infused with accounting language.
- The early Bitcoin community demonstrated a mindset that promotes decentralization and a rejection of oversight that informed the practices that underpin its accounting regime.
- Bitcoin’s source code effectively produces an accounting ledger with its own rules and embedded values existing outside the purview of accountants.
- Though it purports to be algorithmically governed, decentralized, and free, Bitcoin’s governance is shaped by human actors and values, changes to its code are tightly controlled, and its lack of regulation carries risk
Within the last decade, popular cryptocurrencies such as Bitcoin have emerged as the backbone of a new decentralized finance movement aimed at disintermediating financial transactions and creating a new financial order. Bitcoin, the original cryptocurrency and the first large-scale application of blockchain technology, was first proposed in 2008 and developed within an online community through the ensuing years. Authors Mélissa Fortin and Erica Pimentel utilize a netnographic approach to this early Bitcoin community to study the creation of the new payment system and the role of accounting in recording and measuring transactions. Their study explains how Bitcoin and blockchain technology work, offers a history of the cryptocurrency’s development, and demonstrates the contours of Bitcoin’s accounting regime.
Through an analysis of emails, forum posts, and the white paper that introduced the Bitcoin project, Fortin and Pimentel outline how Bitcoin constitutes a new technology built on social practices infused with accounting language in a particular regime of verification and validation. They propose that the social interactions of the early Bitcoin community combined accounting and programming logic to create a Bitcoin mindset infused with values and ideologies that promote decentralization, transparency, and rejection of government oversight, which dictated how the system was designed and would eventually operate.
Fortin and Pimentel underscore the importance of social relations to the technologically mediated system and examine the implications of the Bitcoin mindset and system architecture, which effectively produce an accounting ledger with its own set of rules and embedded values existing outside the purview of accountants. The authors contrast the traditional view of an accounting regime, which models an organized financial order coordinated by accounting experts and realized with centralization and accounting standards, with Bitcoin’s alternative regime. The authors find that Bitcoin, which purports to be decentralized and free, is instead articulated around a centralized governance system that tightly controls who can change to the programming code that underpins the system. Moreover, the study examines the limits of Bitcoin’s freedom and the consequences of a payment system operating outside of regulation and oversight.