Can Cryptocurrencies Fulfil the Functions of Money?

Columbia University, Center on Capitalism and Society, Working Paper No. 92, August 2016

31 Pages Posted: 1 Sep 2016

Date Written: August 31, 2016

Abstract

This paper analyses five cryptocurrencies’ monetary supply growth, credibility, and stability, to evaluate whether these currencies can perform the functions of money. While all cryptocurrencies can theoretically serve as a medium of exchange, they are inherently too unstable to be used as a unit of account. Of the five, only Bitcoin could serve as a store of value, due to its strict commitment to low supply growth, credibly backed by the network’s distributed protocol and very large processing power. Other cryptocurrencies’ low processing power, centralized control, and use as tokens for specific applications make them unlikely to fulfil monetary functions.

Keywords: Cryptocurrency, bitcoin, money

JEL Classification: E42, E51

Suggested Citation

Ammous, Saifedean, Can Cryptocurrencies Fulfil the Functions of Money? (August 31, 2016). Columbia University, Center on Capitalism and Society, Working Paper No. 92, August 2016. Available at SSRN: https://ssrn.com/abstract=2832769 or http://dx.doi.org/10.2139/ssrn.2832769

Saifedean Ammous (Contact Author)

Lebanese American University ( email )

P.O.Box 36
Chouran-Beirut 1102 2801
Byblos
Lebanon

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