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The Importance Of Bitcoin

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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 …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, …show more content…

In the past, many BitCoin owners have lost their virtual money through online theft. Standard currencies give a possibility to protect it against theft either by physically hiding it or by deposing it in a bank. BitCoin is a virtual currency and thus it cannot be physically hidden. BitCoins must be held in computer accounts known as virtual wallets. The security of BitCoin wallets has often been a major problem. Even BitCoin exchanges were subject to cyber-attacks and thefts as they are common target of hackers. The most prominent example is the collapse of the largest BitCoin exchange, MtGox, in February 2014 allegedly leading to a loss of 850 thousand Bouri, Molnár, Azzi, Roubaud, & Hagfors, (2017) ; Williams, (2014). Moore & Christin, (2013) find that 45% of the total studied BitCoin exchanges closed down, and 46% of the exchanges that closed did not reimburse any claims to

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