Following the invention of the blockchain-based distributed ledger and the release of the first cryptocurrency, Bitcoin in 2009, what was a theoretical peer-to-peer electronic currency that bypassed governments and banks has evolved into a working alternative for transactions, payments, investment and storage of value. Out of the many possible points of view, selected, often underestimated, but very important in connection with the present thesis aspects are analyzed in order to facilitate a better understanding of the field, provide insight and deepen the questions of viability, further adoption and future prospects.
Introduction
Aggregated data, critical review of relevant sources, evaluation of current developments and meaningful comparisons can provide a solid basis for evaluating the current status of the cryptocurrency sector and attempting to make an educated prediction about viability and future adoption. We conclude that there is definitely a future in the underlying blockchain technology that has the potential to become the cornerstone in the evolution of the traditional transaction and ledger systems.
Money definition, short history, functions and properties
- Commodity money
- Representative money and early banking
- Gold standard and the Bretton Woods Agreement
- Fiat money
- Money functions and characteristics
- Modern money creation by credit
- Paper economies, financial bubbles, crisis of 2008, rise of cryptocurrencies
Confidence that governments, banks, institutions and in the financial system in general will prevent the money supply from getting out of control is essential to one of the most important properties of money, scarcity. Governments and financial institutions aware of the mistakes of the past control the money supply and prevent paper economies, bubbles and subsequent collapses.
Bitcoin, distributed ledger, blockchain and cryptocurrencies
- Bitcoin invention
- Distributed Ledger
- Blockchain
- Ensuring functionality and security
- Bitcoin cryptocurrency
- Alternate cryptocurrencies (altcoins)
The digital equivalent of the same transaction would be Alice sending Bob a digital token, for example via email. The inconsistency becomes immediately obvious due to the nature of the distributed public ledger, and transactions are not verified.
Methodology, literature and similar works
Assessments by international bodies such as the International Monetary Fund, the World Economic Forum and the Bank of International Settlements. Central banks and supervisory authorities reviews such as the European Central Bank, the Federal Reserve, the European Commission and the Securities and Exchanges Commission. Original online sources often cited and widely used in similar works such as bitcoin.org, coinmarketcap.com, twitter, Reddit and forums.
That said, some very notable, well-thought-out, balanced and well-documented attempts to approach the topic of cryptocurrencies have been launched very recently, some by major financial institutions. Although different aspects are explored and views vary, all documents provide the reader with thoughtful insights and relevant, current and accurate information. The case for central bank electronic money and the non-argument for central bank cryptocurrencies.
Lewis, the Bank for International Settlements, the European Central Bank, the New York Times, the IMF, the Cambridge Journal of Economics, and the National Bureau of Economic Research all provide thoughtful insights on the subject and are thoroughly researched. A wide range of views, themes and aspects are explored that cannot all be included in the present dissertation.
Critical review of cryptocurrencies in comparison to traditional forms of money
Cryptocurrencies in terms of Money Functions
- Medium of Exchange
- Unit of Account
- Store of Value
The adoption of cryptocurrencies by businesses and individuals in exchange for goods and services is an essential part of the medium of exchange's function and indicative of its current success and future prospects in relevance to existing counterparts. Bitpay, one of the largest bitcoin payment processors based in Atlanta, still features the Microsoft and NewEgg logos marking partnership announcements from 2014, but again there is no recent definitive reference to the nature of the partnership and the use of cryptocurrencies for payments to the mentioned merchants. The lack of a bitcoin (or other cryptocurrency) payment option on any major online merchant is indicative of the current situation.
A merchant can use one of the countless APIs offered by payment processors to get paid in fiat money. A number of plugins exist for many of the most popular open source e-stores and shopping carts that can be easily implemented. A new shady website emerging from nowhere using a relatively unknown technology but managing billions in sales in two years is an indication of the potential of cryptocurrency payments.
The influx of uneducated new 'investors', unregulated markets, withdrawal delays, exchanges that only trade cryptocurrency pairs (not allowing withdrawals in fiat) and shallow markets in general are certainly some of the reasons attributed to the extreme volatility attributed. One of the main reasons that most Proof of Work (using mining) cryptocurrencies decided on specific rules, including a blockchain-enforced limited supply (in the case of Bitcoin 21M), was to prevent crashes caused by money creation through credit and inflation policy.
Cryptocurrencies in terms of money properties
- Scarcity
- Durability
- Divisibility
- Portability
- Acceptability
- Uniformity
There are a number of cryptocurrencies today that are some or all of the following. Price movements in recent years indicate a growing demand for the remaining 20% of bitcoins that remain to be mined. Some might argue that bitcoin and some cryptocurrencies are even better than gold in terms of scarcity (not intrinsic value or practical use).
Many copies of the distributed ledger shared between thousands of computers (for mainstream cryptocurrencies) guarantee that the accounting entries, thus the amount of cryptocurrency belonging to each address, will never disappear. In that sense, cryptocurrencies are only as durable as the medium used to keep the relevant information safe. The purely digital nature of the cryptocurrencies, so the ability to replicate the relevant computer records cannot be matched by anything that has been used as money so far.
Compared to a conventional wallet with a bunch of notes, a safe with gold, or an e-banking system with the balance of a deposit account, cryptocurrencies are clearly as portable as they come. In fact, cryptocurrencies today are not as portable as they could be compared to their traditional counterparts.
Crypto creation, decentralization and distribution
- Money creation
- Decentralization and consensus
- A solution to inequality by creating a new currency
- Creating money by mining Bitcoin
- Creating money by mining Ethereum
- Currency “fair” distribution
- Crypto transactions privacy and anonymity
Having the chance to "mine" a cryptocurrency on your own, no one with the power to regulate, and no third parties involved, in the wake of the 2008 crises has a political feel to it. given the entire cryptocurrency movement. In the case of Bitcoin, today's most powerful CPUs found only in servers costing thousands of dollars can reach around 60MH/s. Of course, ASICs are not sold on the high street and are made by companies that are also into mining.
With thousands of computers in the network, the law of large numbers comes into effect when looking for the right solution. The amount of money invested, barriers to entry, operating costs, mining companies, mining pools and technicalities have made mining a very dangerous (for individuals) and very profitable (for the industry) business, and large mining pools control a large percentage of hashrate with whatever that means in the decentralization and consensus concepts. While that may not be a surprise in the real world, inequality seems to be a very hot topic these days, but it certainly doesn't seem to be in line with the original idea of bitcoin and cryptocurrencies which aim to 'democratize' money and bankrupt to clear the way.
Since the balances of transactions and addresses on the blockchain are public and the owner of the address is known to the company exchanging fiat for crypto, there is really no privacy. The promise of anonymity, privacy and no third parties is not true in most cases.
Cryptocurrencies value
- Companies, users, publicity, stability
- Exchanges, Market Capitalization and Altcoins
- Economists, central banks and regulators
The total amount invested may seem small compared to the size of the investors, but it does indicate that there is some interest from the industry. The same goes for the irony that it slowly became something to be avoided and considered one of the reasons for the 2008 financial crisis. Since many of the following comments will concern value and bubbles, it should be noted that there controversy still exists over the issue of understanding the efficiency of markets.
Many of the following remarks come from panels, interviews and discussions held on the sidelines of the 2018 World Economic Forum in Davos. The fact that there was a session (The Crypto-Asset Bubble) on this issue (World Economic Forum, 2018) with a panel that included a Nobel laureate economist and a deputy central bank governor reveals the impact that cryptocurrencies are already having . Blockchain technologies and distributed ledgers are smart ideas that are used in many areas of the economy and offer significant opportunities.
Unwanted changes led to the complete destruction of the value of fiat currencies in the past, in some ways Bitcoin is more robust than some existing fiat currencies. On the latest development front, one of the most influential organizations, the International Monetary Fund also included crypto assets in its Global Financial Stability Report.
Summarizing
72 reinstate it, now many consider it ineffective, leading to stagnation and one of the causes of the Great Depression. When converting to fiat money, some registered and regulated banking institution is involved and the recipient information appears alongside the transaction. 74, the potential of new technologies in the development of money seems to be more appropriate and considered the most likely outcome in the near future.
On the other hand, regulating the cryptocurrency sector could benefit cryptocurrencies in the long run. On that front, distributed ledgers that enforce security and create trust without third parties, changes only possible through network consensus, peer-to-peer direct transactions, the speed and irreversibility of settlements are some of the real strengths of cryptocurrencies. While they can all be considered groundbreaking, some might argue that there are no trust issues to resolve, that the transactions are already instantaneous (from the consumer's perspective), and that a third party must always exist, even for the possibility to cancel or block the transaction. specific transactions, the finality of the blockchain is a problem for some.
One of the examples that favor cryptocurrencies is the http protocol analogy with the distributed ledger. While the invention of the http protocol in 1989 now looks like a solution to a universally accepted problem, not everyone is convinced (today) that the existence of third parties and centralization is a problem that needs to be solved.
Conclusion
Beskikbaar by: https://www.forbes.com/sites/greatspeculations governments-still-heavy-handed-80-years-after-fdrs-gold-confiscation. Beskikbaar by: https://www.stlouisfed.org/education/economic-lowdown-podcast- series/episode-9-functions-of-money. Beskikbaar by: https://www.cnbc.com bitcoin-criticized-at-wef-in-davos-but- cryptocurrency-world-fights-back.html.
Available at: https://www.bloomberg.com/news/articles crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc. Available at: https://www.bankofengland.co.uk/-/media/boe/files/quarterly- bulletin/2014/money-creation-in-the-modern-economy.pdf. Available at: https://www.bankofengland.co.uk/-/media/boe/files/quarterly- bulletin/2014/money-in-the-modern-economy-an-introduction.pdf.
Available at: https://www.nobelprize.org/nobel_prizes/economic- sciences/laureates/2013/advanced-economicsciences2013.pdf [Accessed 2 February 2018]. Available at: https://www.ssb.texas.gov/news-publications/4-billion-crypto-promoter-ordered-halt-fraudulent-sales.