خلاصة:
In this paper we utilize the main findings from the recent literature to set the economic
foundation for the existence of money, its modern interpretation as “memory”
(Kocherlakota, 1998) and how the Blockchain technology has empowered crypto
currencies to perform this role in the information age. To locate the issue in a historical
perspective and in line with this strand of thought, we consider direct and indirect
exchange and the Wicksell triangle and discuss the frictions under which the need for fiat
money arises. More specifically, it will be argued when “reputation” (trust) is imperfect,
high cost of enforcing contracts undermines the case for pure private money (credit). The
corner stones of the present system, a remnant of 20th century central banks’ fiat money
and “private money” issued by the banking system, relies primarily on the technologies
and centralized “trust” protocols developed before the early 1990s. The internet and the
digital technology have greatly reduced the costs of gathering and storing information
and thus is able to compete with the traditional payment system in the future in the niche
markets. In this connection, how the Blockchain technology can complement internet
technology for creation of crypto currency for payments, money transfers and asset
purchases will be discussed. Finally, the paper examines whether crypto currencies can
replace money in its current form. It will be shown that in the case of crypto currencies
in their current form, their store of value function is undermined by their excessive price
volatility. Moreover, issues pertaining to money laundering and taxation prevents them
to become a widespread form of money, though they will be used as a medium of
exchange in the niche markets.
ملخص الجهاز:
The Blockchain based crypto currencies such as Bitcoin perform the essential functions of the intermediaries that include: establishment of trust; verification of the identities of the parties to payment transfers or to a transaction; clearing and settling transactions; keeping the records.
In the Blockchain based systems (such as Bitcoin) these individual participants, known as "miners", act as a substitute for payment processing activities of banks and clearing house processors and provides the system with a trust protocol.
Secondly, crypto currencies satisfy the medium of exchange function of money but they do not satisfy the other two characteristics: store of value and 1 In the context of a gift-giving small community where the extent of verbal communication and volume of information individuals possess regarding each other is limited, the contribution of the community members to the collective good is memorized on a ‘distributed network of brains.
Bitcoin prices are not sufficiently stable to satisfy the store of value function and this, amongst other factors mentioned previously, limits its scope as a widely accepted currency, though it can be a useful medium of exchange in some niche markets and international payments where transaction cost is high.
In this manner operation and regulation of crypto currencies such Bitcoin does not require direct central bank supervision except for the issue of anonymity of the parties to transactions and the associated issues of money laundering and tax avoidance.
Blockchain technology is newer and utilizes cryptography, collective efforts of decentralized volunteers, and the internet network to cost-effectively support payment processing, transfer of valuables, holding of large secure data bases and smart contracts.