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:: Volume 11, Issue 3 (Summer 2016) ::
J. Mon. Ec. 2016, 11(3): 245-265 Back to browse issues page
Crypto Currencies and the Blockchain Technology: An Evolutionary Review of Money and the Payment Systems
Seyed Ahmad Reza Jalali-Naini Dr 1, Hasti Rabie Hamedani Dr2
1- Institute for Management and Planning Studies
2- Monetary and Banking Research Institute
Abstract:   (367 Views)
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” (Chokerlakota 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 and the current payment 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, high price volatility undermines the store of value function of money and this factor plus 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.
Keywords: Cryptocurrency, Money, Payment Systems, Blockchain, Return volatility
Full-Text [PDF 440 kb]   (160 Downloads)    
Type of Study: Research | Subject: Economics
Received: 2018/05/29 | Accepted: 2018/12/9 | Published: 2018/12/9
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Jalali-Naini S A R, Rabie Hamedani H. Crypto Currencies and the Blockchain Technology: An Evolutionary Review of Money and the Payment Systems. J. Mon. Ec.. 2016; 11 (3) :245-265
URL: http://jme.mbri.ac.ir/article-1-268-en.html

Volume 11, Issue 3 (Summer 2016) Back to browse issues page
Journal of Money and Economy Journal of Money And Economy
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