TITLE:
Cryptocurrencies: Are Disruptive Financial Innovations Here?
AUTHORS:
Gautam Vora
KEYWORDS:
Bitcoin, Cryptocurrency, Digital Currency, Virtual Currency, Cryptography, Finance, Economics, Regulation, Disruptive Innovation
JOURNAL NAME:
Modern Economy,
Vol.6 No.7,
July
20,
2015
ABSTRACT: Digital currencies, virtual
currencies, in-game currencies, etc., have gathered a lot of attention, despite
the difficulties of definition, from all corners of society for many years. Cryptocurrency
has gained unprecedented attention since the birth of Bitcoin in 2009. Bitcoin is
an online system of making and receiving payments in bitcoins. The system distinguishes
itself by providing an open-source, cryptographically secure, confidentiality-preserving
platform for transactions and/or making payments. The number of transactions as
well as the number of accounts (held by individuals and businesses) is steadily
increasing. A whole industry of service-providers has sprung up alongside. We consider
the development of Bitcoin and its sister currencies as an important disruptive
financial innovation which is here to stay unless throttled by ill-considered legislative
or regulatory actions. Potential problems are analyzed and solutions offered. The
overall assessment is that cryptocurrencies and variants of virtual currencies are
a welcome development, they will offer competition to the existing modalities of
money and governmental regulation, they will provide alternative means to economic
agents for their transactions, and their innovative existence should be encouraged
so that their beneficial features outperform any deleterious ones.