Is Bitcoin a Real Currency? An economic appraisal

Yermack, David

doi:10.3386/w19747

Cited by 486 publications

(451 citation statements)

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“…With more competition among virtual currency exchanges, the transaction costs may drop further making virtual currencies a lower cost alternative to real currency transactions. Economists agree that a properly functioning currency should include a method of transaction, a unit of account, and store value (Yermack [3]). Bitcoin may meet the criteria if it can combine its low transaction costs with more stable prices.…”

Section: Discussionmentioning

confidence: 99%

“…Another uncertainty concerning Bitcoin arises in that Bitcoin prices have almost no correlation with other assets (Yermack [3]). We examine whether this is true for other virtual currencies as well.…”

Section: Empirical Analysis On Game Currencymentioning

confidence: 99%

“…To be a used as money, a currency should not have too much volatility as money has to be a unit of account or store value (Yermack [3]). Yermack [3] argues that Bitcoin prices are driven by speculative factors, based on the observation that Bitcoin prices have high volatility and almost no correlation with other assets. A possible basis for this high volatility is the absence of a central authority.…”

Section: Introductionmentioning

confidence: 99%

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The Predecessors of Bitcoin and Their Implications for the Prospect of Virtual Currencies

Kim

2015

PLoS ONE

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To examine whether the recent price patterns and transaction costs of Bitcoin represent a general characteristic of decentralized virtual currencies, we analyze virtual currencies in online games that have been voluntarily managed by individuals since 1990s. We find that matured game currencies have price stability similar to that of small size equities or gold, and their transaction costs are sometimes lower than real currencies. Assuming that virtual currencies with a longer history can provide an estimate for Bitcoin’s prospects, we project that Bitcoin will be less influenced by speculative trades and become a low cost alternative to real currencies.

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Section: Discussionmentioning

confidence: 99%

Section: Empirical Analysis On Game Currencymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Predecessors of Bitcoin and Their Implications for the Prospect of Virtual Currencies

Kim

2015

PLoS ONE

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“…Mt Gox was initially created as an online platform for trading card game enthusiasts to exchange cards, but started trading bitcoins in 2010 after there was enough attention and interest on Bitcoin; it then became one of the most well-known and established name in Bitcoin exchanges [18].…”

Section: The Fall Of Mt Gox and Consumer Protection -Gaps In Governanmentioning

confidence: 99%

“…In April 2013, Mt Gox experienced 3 denial-of-service attacks by hackers, where the exchange could not operate at normal trading volumes [18]. Then, by the autumn on 2013, Mt Gox was being served with a US$75 million lawsuit over absurdly long delays in customer withdrawals, and US$5 million was seized due to its failure to register as a licenced money transmitter.…”

Section: The Fall Of Mt Gox and Consumer Protection -Gaps In Governanmentioning

confidence: 99%

A Note on the Workings of Bitcoin

Hc¹,

Talib²

2017

J Bus Fin Aff

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Crypto‐Currencies – An Introduction to Not‐So‐Funny Moneys

Kumar¹,

Smith²

2019

Contemporary Topics in Finance

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This paper introduces the distributed ledger technology of crypto-currencies. We aim to increase public understanding of these technologies, highlight some of the risks involved in using cryptocurrencies, and discuss some of the potential implications of these technologies for consumers, financial systems, monetary policy and financial regulation.Crypto-currencies have no physical existence, but are best thought of as electronic accounting systems that keep track of people's transactions and hence remaining purchasing power. Cryptocurrencies are typically decentralised, with no central authority responsible for maintaining the ledger and no central authority responsible for maintaining the code used to implement the ledger system, unlike the ledgers maintained by commercial banks for example. As crypto-currencies are denominated in their own unit of account, they are like foreign currencies relative to traditional fiat currencies, such as dollars and pounds.We examine the 'monetary' attributes of crypto-currencies, and describe some of the reasons they have been adopted. While crypto-currencies are clearly used for exchange, we argue that theyare not yet generally accepted, and for the most part they are not used as a unit of account.Bitcoin, the most-traded crypto-currency, has been a volatile and hence imperfect store of value.In the particular case of Bitcoin, the ultimate supply of bitcoins approaches a fixed limit, which means that any fluctuation in the demand for bitcoins is reflected in substantial movements in its price. Like fiat currencies, crypto-currencies have no secondary use. Their utility as a payment mechanism stems from a belief that others will continue to use the corresponding ledger systems to exchange goods and services in future.The paper discusses the mechanics of Bitcoin -the original crypto-currency -to illustrate the fundamental elements of decentralized crypto-currencies. In short, transactions are implemented as messages that debit or credit account balances in duplicate ledgers. Programming protocols ensure that ledgers are synchronized, and agents are rewarded for updating and quality-assuring the ledgers with transaction data, which accumulate in 'blocks'. Cryptography is used to secure the transaction messages and the integrity of the ledgers containing account balances.The latter part of the article provides a high-level summary of the implications of crypto-currencies for consumers, financial systems, monetary policy, and regulatory policy. Crypto-currencies ex-1 We would like to thank Jonathan Chiu and Thorsten Koeppl for providing access to their own research on blockchain technology, which helped to improve our understanding of its implementation and the issues that arise. Helpful comments were also received from

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Is Bitcoin a Real Currency? An economic appraisal

Cited by 486 publications

References 1 publication

The Predecessors of Bitcoin and Their Implications for the Prospect of Virtual Currencies

The Predecessors of Bitcoin and Their Implications for the Prospect of Virtual Currencies

A Note on the Workings of Bitcoin

Crypto‐Currencies – An Introduction to Not‐So‐Funny Moneys

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