In this thesis, the crypto-currency Bitcoin should be examined for its suitability as world currency or part of it. In order to determine the potential of Bitcoin, the terms currency and cryptocurrency must be explained and defined first. Included in the definition of cryptocurrencies is the meaning of the Bitcoin system and the functionality will be roughly explained. In this thesis the detailed technical aspects of the design of the Bitcoin system are greatly simplified and partially neglected. After that follows a summary of advantages and disadvantages of cryptocurrencies in general that can be found in the literature. This is primarily to gain insight into how the current perception of Bitcoin is in the public and to identify arguments that are likely to have a high impact on others' opinions.
After the consideration of the cryptocurrency Bitcoin follows a historical discussion with the concept of the world currency. It will be investigated which approaches of a world currency already existed in the recent past and which are currently available. This will lead to the identification of the driving forces and challenges that have an impact on the fiscal world order.
Thereon, the findings about the Bitcoin system will be laed against the discussion about a world currency and potentials will be derived. After a conclusive summary and a critical conclusion, further research opportunities in the investigated fields are finally opened.
Table of Contents
1. Relevance and course of the investigation
1.1. Relevance
1.2. Course of the investigation
2. Definitions
2.1. Currency
2.2. Cryptocurrency & Bitcoin
3. Is Bitcoin a currency?
4. Advantages and disadvantages of cryptocurrencies
5. The idea of the world currency - a historical thought
6. Potential of Bitcoin being a world currency
7. Conclusion
7.1. Summary
7.2. Conclusion and results
7.3. Outlook
Objectives and Research Focus
This thesis examines the potential of the cryptocurrency Bitcoin to function as a global world currency. It explores whether Bitcoin meets the fundamental economic requirements of a currency and analyzes its viability within the context of historical and modern concepts of a unified world monetary order.
- Theoretical definition of currency and digital cryptocurrencies.
- Technical functionality and decentralization of the Bitcoin system.
- Comparative analysis of Bitcoin against traditional monetary criteria.
- Historical evaluation of world currency concepts and political challenges.
- Assessment of Bitcoin's future role in the global financial system.
Excerpt from the Book
3. Is Bitcoin a currency?
According to Daube & Dobernig (Digitale Währungssyssteme: Kryptowährungen in der Unternehmensfinanzierung, 2019), Bitcoin can be understood as a currency, since both the exchange function and the computing function and (depending on the exchange rate, the interest rate and the inflation rates) the value retention function are basically given. The fact that currencies must be issued by a central bank is not an essential requirement.
Quitzau (2018) disagrees. He believes that the three monetary functions are insufficiently fulfilled. Surely you can calculate and compare prices and monetary values in Bitcoin. However, since many people do not have any bitcoins yet, the use of Bitcoin as a processing unit turns out to be a foreign currency. Thus, there is the problem of widely fluctuating exchange rates and Bitcoin is useless as a processing unit. A stable exchange rate would at least minimize the problem and getting the paycheck in Bitcoin would even eliminate the problem. Due to the small number of businesses that accept Bitcoin as a means of payment, Bitcoin's means of exchange is also less fulfilled for Quitzau. Again, he sees the origin in the strong fluctuations of the exchange rate, since there is always one side of the market that has no interest in a transaction in Bitcoin. The third function of currencies, the value preservation, is also subject to exchange rate reasoning. The function cannot be answered with yes or no, which, according to Quitzau, is reason enough to regard this function as inferior.
Summary of Chapters
1. Relevance and course of the investigation: Outlines the historical context of global monetary systems and introduces the research objectives regarding Bitcoin's potential as a world currency.
2. Definitions: Provides the foundational definitions for traditional currency and introduces the technical and operational basics of cryptocurrencies and the Bitcoin system.
3. Is Bitcoin a currency?: Analyzes whether Bitcoin satisfies the standard monetary functions and addresses critical academic perspectives on its viability as a currency.
4. Advantages and disadvantages of cryptocurrencies: Evaluates the economic and technological pros and cons, including security aspects and regulatory risks identified by authorities like the EBA.
5. The idea of the world currency - a historical thought: Discusses historical attempts at monetary unions and explains why political integration is often a prerequisite for a unified currency.
6. Potential of Bitcoin being a world currency: Synthesizes the findings to assess if Bitcoin’s decentralized nature could overcome the political and technical hurdles of creating a global key currency.
7. Conclusion: Summarizes the study's findings and offers a critical outlook on the future evolution of financial systems in light of digitization.
Keywords
Bitcoin, Cryptocurrency, World Currency, Monetary Policy, Decentralization, Blockchain, Financial System, Digital Assets, Global Economy, Currency Functions, Mining, Regulation, Monetary Union, Transaction Costs, Financial Innovation.
Frequently Asked Questions
What is the core subject of this thesis?
The thesis investigates the suitability and potential of Bitcoin to serve as a world currency within the modern global financial landscape.
What are the primary thematic areas covered?
The paper covers the definition of currencies, the technical mechanics of the Bitcoin system, historical concepts of world currencies, and a comparative analysis of Bitcoin's advantages and disadvantages.
What is the central research question?
The research seeks to answer if the decentralized Bitcoin system is capable of functioning as a globally accepted world currency or if it serves a different role in the financial evolution.
Which scientific methodology is applied?
The work utilizes a qualitative analysis, relying on a literature review to synthesize expert opinions, historical economic theories, and technical assessments of cryptocurrencies.
What topics are discussed in the main part?
The main part analyzes the fundamental functions of money, the benefits and risks of Bitcoin, the historical barriers to world monetary unions, and the current developmental status of Bitcoin.
Which keywords best characterize this work?
Key terms include Bitcoin, Cryptocurrency, World Currency, Decentralization, Blockchain, and Global Financial System.
How does the author view the "hen-egg" problem regarding Bitcoin?
The author identifies a cycle where Bitcoin's acceptance is hindered by price volatility, while greater stability and broader acceptance are mutually dependent, creating a barrier to its adoption as a primary currency.
Why does the author conclude that a single world currency is unlikely?
The author argues that differing economic dynamics among nations and the desire for sovereign financial control make the formation of a single world currency highly unrealistic, favoring regional currency blocs instead.
- Citation du texte
- Finn Schwarz (Auteur), 2019, Bitcoin‘s potential of becoming a world currency, Munich, GRIN Verlag, https://www.grin.com/document/508583
