Digital Currencies: A Comparative Analysis

This assignment delves into the topic of digital currencies, exploring various perspectives and research findings. It presents a comparative analysis of studies by authors like Roel Ali, Florian Glaser, Ree Grinberg, and Gerald Dwyer. The document examines the economic implications of digital currencies, their potential risks to financial stability, legal concerns, and user intentions. It also highlights limitations in existing research and suggests future directions for exploration.

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DIGITAL CURRENCIES
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Digital Currencies
This structured abstract reviews the concept of digital currencies through the evaluation of the
research of Robleh Ali, Florian et al., Reeuben Grinberg, and Gerald Dwyer.
Brief Summary of the Concept and Progression in the Field
Currency is one of the oldest and most complex aspects of human civilization. It is argued that
the development of currency has shaped human civilization over the years (Gilpin, 2014).
Today, the concept of currency has evolved, bringing forth the idea of digital currency (CNN).
Fundamentally, digital currency refers to a type of currency that is produced and stored
electronically. Unlike traditional currency, it permits instantaneous transactions and transfer of
ownership and may be used to purchase services and goods.
According to Ali (2014), digital currencies represent a new form of currency to the world and a
significant innovation in the field of payment systems. In his research, he examines the
economics of digital currency and risks associated with the same. From the perspective of
economic theory, whether digital currency may be considered as money depends on the degree to
which it acts as a unit of account, medium of exchange, and store of value. In his research, Ali
notes that although the currency can be used by anybody, its role as money is limited and only
few individuals are able to use it so far. At the time of his research, he indicates that this form of
currency did not pose any form of material risk to the financial and monetary stability of the
banking system.

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Just like Ali, other researchers found the concept of digital currency as intriguing and, thus,
conducted pertinent research on the same. In the view of Dwyer (2014) and Grinerg (2014),
technology has made it possible for individuals to transfer digital currencies from one person to
another without the intervention of financial intermediaries. Digital currencies such as Bitcoin
utilize open-source software and peer-to-peer connectivity.
On the other hand, unlike Ali, Florian et al. (2014) argue that digital currencies propose a
diversion away from the established design of the traditional financial system infrastructure.
Mainly, this is because technological solutions and information systems like cryptographic
algorithms and peer-to-peer networks allow for decentralized organization, transparency and
operational security that oppose the centrally coordinated and less transparent contemporary
monetary system structures.
It is evident that the factors that Ali acknowledges within his own research have also been
considered in greater detail by other authors in the field. It can be noted that all researchers
recognize that digital currency innovations have changed the shape of the financial system. The
concept of digital currency has emerged as a fascinating phenomenon of the financial markets.
Common findings across the articles
Largely, Ali’s article focuses on the economics of digital currencies and their implications to the
banking system. It also explores the potential risks associated with the use of this currency on the
monetary and financial stability of an economy, and the extent to which digital currency has been
used as a form of money. In its hypothesis, the research seeks to find out the extent to which

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digital currency such as Bitcoin has been used as a form of money. The findings of his research
indicate that digital currency has the status of money.
Likewise, Florian et al. (2014) explore the topic from the same angle. In their research, they
explore the technical issues and risks that are associated with using electronic currency. The
research highlights the fact that the anonymity associated with the use of the currency poses a
significant risk to its users. In the same view, Grinberg adds that many users of digital currencies
are concerned about the legal status of digital currencies such as Bitcoin as there are possibilities
of government crackdowns on its systems. There are many vices that could be linked to the
currency among them tax evasion, money laundering and trade in narcotics. Therefore, there are
significant risks linked to the same.
Different themes across the articles
While reading through the four articles, the reader can notice that the research conducted by Ali,
Florian et al., Dwyer and Grinberg have various differences in the approach used.
While Ali focuses mainly on the economics of digital currencies in terms of the risk that they
pose to the monetary and financial systems of a country, the other authors focus on entirely
different themes in their research, but on the topic of digital currencies. Dwyer (2014) for
instance explains how the use and limitation of the quantity produced may be used to create
equilibrium. On the other hand, Grinberg focuses his research on Bitcoin as a digital currency. In
his paper, he explains the various risks associated with the use of the currency, among them its
legality and safety for use by its users. Lastly, Florian et al., approach the topic from the angle of
Bitcoin as a digital currency, and whether or not it is an asset or a currency.

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Study Limitations and they differ across the various study designs
Given that the research conducted by Ali is solely qualitative, the author acknowledges that the
data could benefit significantly from validation by way of an empirical study. On the other hand,
the study of Florian et al. (2014), a quantitative research notes that its findings are limited by the
fact that their analysis was based on a single data set, and believe that it could be conclusive if it
included a sample of various data sets to come up with a representative conclusion. Lastly, the
study of Grinberg and Dwyer suffer from the lack of empirical and qualitative research.
Therefore, they could be improved if the researcher conducted an analysis of either data.
Future research directions proposed in the articles
In his conclusion, Ali recommends that future research should be conducted on the potential
risks on the financial and monetary stability that may arise over time due to the pervasive nature
of digital currencies. Florian et al. suggest that further research should be conducted on the same
topic using various data samples in order to obtain a representative conclusion on the subject
matter. On the other hand, Dwyer recommends that further study be conducted on the possibility
of digital currencies to undermine government’s ability to control the monetary system and
financial stability. Lastly, Grinberg suggests that further research on the measures that
governments can undertake to reduce the vices arising from the use of digital currency should be
conducted.

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Reference List
Ali, R. (2014). The economics of digital currencie. Bank of England Quarterly Bulletin, 3. pp.
217-286.
Gilpin, L. 10 things you should know about Bitcoin and digital currencies. [Online] Tech
Republic. Available at http://www.techrepublic.com/article/10-things-you-should-know-about-
bitcoin-and-digital-currencies/ [Accessed 27 August 2017].
Glaser, Florian and Zimmermann, Kai and Haferkorn, Martin and Weber, Moritz Christian and
Siering, Michael, Bitcoin - Asset or Currency? Revealing Users' Hidden Intentions (April 15,
2014). ECIS 2014 (Tel Aviv). Available at SSRN: https://ssrn.com/abstract=2425247
Grinberg, R. (2011). Bitcoin: An Innovative Alternative Digital Currency. Hastings Science &
Technology Law Journal, 4. pp. 2-50
Gwyer, G. (2014). The Economics of Private Digital Currency. Munich Personal RePEc
Archive, 1, pp. 2-29.
Wagner, A. Digital vs. Virtual Currencies. [Online] Bit Coin Magazine. Available at
https://bitcoinmagazine.com/articles/digital-vs-virtual-currencies-1408735507/ [Accessed 27
August 2017].
What is Bitcoin?. [Online] CNN. Available at
http://money.cnn.com/infographic/technology/what-is-bitcoin/ [Accessed 27 August 2017].