Cryptocurrency: An economic review of its current and potential benefits

Student thesis: Master thesis (including HD thesis)

  • Simon Kristensen
  • Jesper Haar Jakobsen
4. term, Science in Economics, Master (Master Programme)
This project evolves around the nature of cryptocurrencies and some of the benefits that investors and consumers can exploit or potentially gain from. In order to examine the nature of cryptocurrencies and decide which kind of commodity it is some knowledge on money and monetary theory is established. This is done in order to decide what kind of commodity we are dealing with. It is found out that cryptocurrencies have a lot of attributes worthy of being a money commodity but one of the most important one — price stability — is not one of those. This means that in order to converge towards the mandatory attributes of a money commodity, some changes needs to happen.
The reason for the lack of price stability is its current nature which is highly speculative, due to the fact that it is a relatively unknown ’commodity’. An asset analysis is put forth in order to determine what asset class it belongs to but it is learned that it does not remind of any of the classical assets. This fact and its current nature of high returns and high risk and the predominantly independence from other classical assets makes it an asset that can be included in portfolio for riskier but higher returns. It is a very current theme, and the nature of cryptocurrencies can vary relatively much in the matter of not much time.
The next topic involves a possible way to obtain price stability in cryptocur- rencies. This possibility is put forth by Ametrano who sought inspiration in Hayek’s denationalisation of money and consists of a rebasing solution which involves a method where your wallet is automatically rebased to keep the purchasing power constant.
The final section considers how an implementation would look in the crit- ical juncture framework and the benefits that consumers receive after this theoretical implementation. There are some elements from cryptocurrencies that draw parallels with that of the critical juncture framework, and it can be argued that a critical juncture is needed in order to see an adaption of cryptocurrencies. Regarding how the consumers can benefits from this, with the help from various litterature, some attributes outside of the classic three (medium of exchange, store of value, unit of account) like transaction costs, protection against credit card fraud as well as monetary fairness are considered. It is learned that a eventual adoption of cryptocurrency has the possibility to benefit the consumers of different levels.
LanguageEnglish
Publication date30 May 2018
Number of pages57
ID: 280181923