1.1 Introduction
Cryptocurrency is a relatively new phenomenon. Currency with no underlying value traded in vast online communities and networks, have become a common occurrence. It started off as a fascinating idea, and has grown to become the source of billion dollar currencies and a large speculation market. The most popular among these cryptocurrencies is Bitcoin.
Bitcoins are a digital, or virtual, currency that uses peer-to-peer technology to facilitate instant payments that was created in 2009 by Nakamoto, (2008). Since Bitcoins are not a fiat currency (currency that a government has declared to be legal tender, but is not backed by a physical commodity), they are not controlled by a single entity like a central bank and are therefore sometimes referred to as a decentralized currency Spagnuolo, (2013)
Bitcoin attempts to overcome the weaknesses of both fiat and …show more content…
Currency, or money in general, is typically defined as having three main functions which are as a medium of exchange, a unit of account, and a store of value. There are two competing views in the literature on whether BitCoin fulfils the three criteria of a currency as a medium of exchange, a unit of account, and a store of value. One part of the literature argues that BitCoin does not behave as a real currency, but rather resembles speculative investments (Velde, (2013) ; Hanley, (2013) ; Yermack, (2013) ; Williams, (2014).This is because BitCoin may fail to become a global medium of exchange, as it is used in too few exchanges of goods and services and it has a negligible market presence globally Yermack, (2013). Other line of research, stresses the positive aspects of BitCoin and perceives it as a global virtual currency with strong future potential (e.g Luther & White, (2014); Folkinshteyn & Lennon,