Cryptocurrency: A New Financial System

This assignment delves into the emerging world of cryptocurrency, examining its underlying principles, technological advancements, and economic implications. It analyzes various aspects of cryptocurrency, including its role in e-commerce, remittance transfers, and micro-pricing. Furthermore, it explores the theoretical frameworks that underpin money demand and interest rate determination in the context of cryptocurrencies. The assignment also discusses the regulatory challenges and opportunities associated with this innovative financial technology.

Running Head: CRYTOCURRENCY VERSUS REGULAR CURRENCY; A
COMPARATIVE ANALYSIS
Crytocurrency Versus Regular Currency; A Comparative Analysis
Name of the Student
Name of the University
Author note

1CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
Table of Contents
Introduction................................................................................................................................2
Conceptual framework for regular currency and cryptocurrency..............................................3
Drawbacks of cryptocurrency..................................................................................................14
Acceptability of crypto currency over regular currency..........................................................17
Conclusion................................................................................................................................18
References................................................................................................................................20
Word Glossary.........................................................................................................................23

2CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
Introduction
In any economy currency plays an important role. Apart from acting as a medium of
exchange currencies help to measure values, acts as a store of value and a unit for
standardizing values of material goods and services. Regular currency includes paper notes,
coins and money issued by central bank of a nation1. Currency is actually capture in form of
circulating bank notes and coins within an economy. Government regulates the designing and
operation of these currencies, which are subject to law within the boundary of a nation.
Money can be broadly categorized into Fiat money and Commodity money. In the
monetary system, Fiat money is the currency that does not have any intrinsic value. However,
it is established as money without any use value only because government values it and
buyers and sellers agree on its value for transaction2. Commodity money on the other hand is
defined as one that is created from a good mostly precious metals like gold, silver and has a
use other than an exchange medium. Such a good is called commodity and so it known as
commodity money3.
In the twenty first century, the rapid spread of internet has made business and
industries increasingly digitalized. With a growing E-commerce market, a new digital
currency has introduced and gained attention of investors in the economy. In transaction
between two parties in the e-commerce market, banks play the role of an intermediary.
However, in such transaction the possible transaction reversal might be troublesome to the
sellers. To resolve this issue, the system of e-currency or e-payment has been designed4. The
1 Abner, Ben. "Ethereum: A look into the world of Ethereum and how to trade and invest this cryptocurrency!."
(2016).
2 Bernanke, Ben, Kate Antonovics, and Robert Frank. Principles of macroeconomics. McGraw-Hill Higher
Education, 2015.
3 Heijdra, Ben J. Foundations of modern macroeconomics. Oxford university press, 2017.
4 Al Shehhi, Aamna, Mayada Oudah, and Zeyar Aung. "Investigating factors behind choosing a
cryptocurrency."Industrial Engineering and Engineering Management (IEEM), 2014 IEEE International
Conference on. IEEE, 2014.

3CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
new system is considered as much cheaper than traditional system of banking. This system is
known as Bitcoin and digital form of currencies thus invented is called cryptocurrencies.
The rise of cryptocurrency and spread of digital currency makes this an attractive
area of research. The essay aims to find to what extent cryptocurrencies can act as a regular
currency. An intensive research has been conducted between these two form of currencies
using economic concepts related to money market. Additionally, the associated benefits and
risks of cryptocurrency to draw a clear conclusion.
Conceptual framework for regular currency and cryptocurrency
Before making a comparative analysis it is important to understand the basic
functioning of these two currencies and its implication in the money market.
Money market equilibrium for regular currency
Equilibrium in the money market is determined from the interaction of forces of
money supply and money demand. The money demand explains the relationship between
quantity of money that people willing to hold at a certain point of time and factors
influencing this desired quantity. There are different purposes for holding money. Based on
these purposes the money demand is classified in three categories- transaction demand,
precautionary demand and speculative demand. Transaction demand is demand for money for
making payment of any anticipated payment of goods and services. Precautionary demand for
money is when people hold money for unanticipated emergency expenditure. In line with
fluctuating prices of bonds the demand for bonds and hence, money demand also fluctuates5.
In times of rising bond price people increases their demand in expectation that it will increase
further. This creates speculative demand for money. The two major determinants of money
5 Johnson, Harry G. Macroeconomics and monetary theory. Routledge, 2017.

4CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
demand are income and interest rate. Income has a positive influence on money demand.
With rise in income people willing to hold more money and vice versa. When bank raises
interest rate then people find it more profitable to keep money in banks rather than keeping it
at home6. Following the inverse relation between money demand and interest rate the money
demand curve is downward sloping.
Money supply is the quantity of money available in an economy at a certain point of
time. For regular or institutional currency, the money supply is determined by the central
banks and hence, the money supply is given as a vertical straight line.
The money supply and money demand together helps to determine interest rate. This
is known as the ‘Theory of Liquidity Preference’. The central bank thus by changing money
supply can control the interest rate.
Figure 1: Money market equilibrium7
Cryptocurrency market
Crypto currency is an alternative medium of exchange and treated as subset of virtual
currencies and alternative currencies. They are also termed as digital currency. The path-
6 Johnson, Harry G. Macroeconomics and monetary theory. Routledge, 2017.
7 Heijdra, Ben J. Foundations of modern macroeconomics. Oxford university press, 2017

5CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
breaking feature of these currencies is the implantation of cryptography. Cryptography is a
practice or technique that provides a security in communication in the presence of third party.
Cryptography was developed in order to meet the need of secured communication while the
Second World War8.With the combined effect of mathematical and computer science theory,
there has been evolution in this system that allowed it to be used as mode of secured
communication and transaction of information and money online. The application of
cryptography makes the conversion of information into a code, which cannot be hacked or
cracked. This also helps in tracking purchase and transactions. The cryptocurrency market
uses cryptography in order to secure transaction between parties. Since the issuance of these
kinds of currencies lies outside the discretion and operation of central authority, it enjoys
immunity from the interference and manipulation of the government9. The inbuilt anonymity
of this digital currency makes the nefarious transactions like evading taxes and laundering
money well-suited. Reflection of public imagination was materialized and well-captured in
Bitcoin currency.
A group operating with pseudonym Satoshi Nakamoto in 2009 first introduced e-
currency. Within only 6 years that is by 2015, 14.6 million currencies were circulated having
gross market value of $.3.6 billion. The successful existence and operation of bit coins
boosted the appearance of various competitive crypto currencies like Namecoin, Litecoin
PPcoin and so on. Starting from introduction of Bit coin in 2009, there has been numerous
others currencies in the existence made of applying cryptography. In 2011 Litecoin and
8 Danilina, M. V., A. G. Podlinnova, and A. S. Silaev. "«E-gold»: the Advantages and
Disadvantages." Глобальный научный потенциал 1 (2015): 101.
9 Androulaki, Elli, et al. "Evaluating user privacy in Bitcoin."International Conference on Financial
Cryptography and Data Security. Springer, Berlin, Heidelberg, 2013.

6CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
Namecoin were launched. Ripple, Dogecoin, Primecoin and Mastercoin came in to operation
form the year 2013. Aurorarcoin has been launched very recently in 201410
Compared to physical existence of real currencies, crypto currencies follow electronic
creation and storage so that they can be saved on websites and computers for further use.
These currencies are helpful in purchase of virtual elements like internet services, hosting,
and domain and so on beside the things that physical currency can purchase11. These make
crypto currencies appealing in the modern era of digitized market system.
Supply-demand interaction in Bitcoin market
The interaction of supply and demand is one of the key drivers of Bitcoin price. The
demand for Bitcoin depends on is value as an exchange medium or by the value for future
exchange. The Bitcoin stock in circulation determines the supply of Bitcoin. Suppose B
represents the current stock of Bitcoin and PB is the exchange rate Bitcoin. The total Bitcoin
money supply is then given by
M S =PB B
Now suppose the Bitcoin demand in circulation is denoted as MD. Assuming that the demand
depends on general price level, P, size of Bitcoin market, Y and Velocity of Bitcoin in
circulation. The Bitcoin demand is then given as
M D = PY
V
The equilibrium price of Bitcoin is then determined as
M S =M D
10 CryptoCurrency Facts. (2017). How Does Cryptocurrency Work? - CryptoCurrency Facts. [online] Available
at: http://cryptocurrencyfacts.com/how-does-cryptocurrency-work-2/ [Accessed 30 Nov. 2017].
11 Bulgakov, Dmitry, et al. "Problems of Using Digital Cryptocurrency Bitcoin." (2014).

7CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
¿ , PB B= PY
V
¿ , PB = PY
VB
The price of Bitcoin thus increases with expansion of Bitcoin economy and level of inflation
while price decrease with an increase in velocity and stock of Bitcoin12.
The basic functions of a regular currency
The four basic function of money include use of money as a medium of exchange, as
a unit of measure, a standard of measure and a store of value.
Medium of exchange
Money is an acceptable medium of exchange for both parties of transaction. It
therefore provides a more efficient medium for satisfying wants.
Unit of measure
Money act as a common denominator to measure the value of goods and services. All
the goods and services are measured in terms of money. Money thus enables people to
compare goods and services in terms of their relative price based on their relative values13.
Standard of deferred payments
In addition to act as medium of current exchange, money also serves the purpose of
future deferred payments. This actually forms the basis for credit transaction.
Store of value
12 Ciaian, Pavel, Miroslava Rajcaniova, and d’Artis Kancs. "The economics of Bitcoin price formation." Applied
Economics48.19 (2016): 1799-1815.
13 Arestis, Philip, and Malcolm Sawyer, eds. Finance and the Macroeconomics of Environmental Policies.
Springer, 2015.

8CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
People uses money as a suitable way to store wealth for future. Money thus acts as a
store of value14.
In order to behave like a regular currency, cryptocurrency need to satisfy the
properties of a regular currency. The next section makes a comparative analysis of potential
supply growth, credibility and stability between cryptocurrency and that of a regular
currency.
Supply Growth
In the list of well-documented cryptocurrencies, Bitcoin is the currency having the
lowest projected supply growth in future. After passing the initial phase of high growth rate
the supply growth of Bitcoin has now reached to the level of stable global currency reserve.
By the early 2020’s the supply is projected to fall below that of gold reserve. The supply
growth of Litecoin, came shortly after Bitcoin is not much above than the Bitcoin. However,
the supply is expected to increase in future though in both currencies the growth rate is
projected to fall below 1% by the late 2020’s15. For Ethereum, the supply growth is expected
to remain at a moderately high level without dropping below 5% until 2030.
14 Bernanke, Ben, Kate Antonovics, and Robert Frank. Principles of macroeconomics. McGraw-Hill Higher
Education, 2015.
15 Raymaekers, Wim. "Cryptocurrency Bitcoin: Disruption, challenges and opportunities." Journal of Payments
Strategy & Systems 9.1 (2015): 30-46.

9CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
Figure 2: Present and future growth of Bitcoin, Ether and Litecoin16
When the supply growth of Bitcoin is compared with the growth rate other national
currencies and gold, Bitcoin is found to experience a relatively short life of transition from a
phase of high supply growth to its current rate similar to regular currency. The figure below
represents growth of global currencies reserve and that of gold from the past 25years to future
25 years and compares it with the growth rate of Bitcoin supply. From this projection, the
supply of Bitcoin in the coming 25 years will increase by 27% while for Gold it is 52%, for
Yen it is 64% and for Swiss Franc, US dollar, Euro and British pound it is 269%, 372%,
386% and 530% respectively17. If the current trend continues then Bitcoin might have appeal
as a store of value.
16 Ammous, Saifedean Hisham. "Can cryptocurrencies fulfil the functions of money?." (2016).
17 Cohen, Benjamin J. Currency power: understanding monetary rivalry. Princeton University Press, 2015.

10CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
Figure 3: Comparison between expected growth of cryptocurrency and that of national
currency18
Credibility
The digital currencies will gain a monetary role like a regular currency only when it
can assure the potential holders that there will be no unanticipated issuance of currency
supply. In the cryptocurrency list, only Bitcoin has achieved a credible commitment in terms
of announced issuance schedule19. In contrast to other coins, for Bitcoin no free allocation is
allowed to the creators. People have to obtain it either buying or mining it. Ethereum has not
yet committed to a clear issuance schedule. It rather has a high degree of discretionary
autonomy over the decision of supply growth20. Litecoin involves more than fifty percent
chance to attack or to collusion among miners and coders. Unlike regular currencies,
cryptocurrencies do not receive any political or democratic oversight on its issuers and
therefore lacks credibility.
18 Ammous, Saifedean Hisham. "Can cryptocurrencies fulfil the functions of money?." (2016).
19 Franco, Pedro. Understanding Bitcoin: Cryptography, engineering and economics. John Wiley & Sons, 2014.
20 Ammous, Saifedean Hisham. "Can cryptocurrencies fulfil the functions of money?." (2016).

11CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
Stability
Without presence of central bank to control the money supply, cryptocurrencies fail to
offer stability. Because of highly volatile and unpredictable demand, the predicted supply
does not match with predicted purchasing power. The values of cryptocurrencies since their
introduction have revealed a highly volatile trend21. The cryptocurrencies could become
stable when it will be the only form of money used globally and no one will exchange it with
other currencies. This in turn implies such currencies are unlikely to be used as a unit of
account.
Benefits of Cryptocurrency
Elimination of Middleman:
Most impressive benefit of this currency is that it discards the options of intermediary
component in transactions like expensive brokers, lawyers and so on. In transaction made
through real currencies upon purchasing real properties these brokers and intermediaries play
huge role to raise the prices that in turn raises the cost22. Crypto currency can actually act as
large property rights database, which further can be used in execution of two party
transacting contracts in the automobile, real estate sector. These eliminate the cost of legal
fees and brokerage charges23.
Market accessibility:
21 Frieden, Jeffry A. Currency politics: The political economy of exchange rate policy. Princeton University
Press, 2014.
22Lipovsky, W. and Lipovsky, W. (2017). The Benefits of Using Cryptocurrency - Due. [online] Due. Available
at: https://due.com/blog/benefits-using-cryptocurrency/ [Accessed 30 Nov. 2017].
23 Narayanan, Arvind, and Jeremy Clark. "Bitcoin's Academic Pedigree." Queue 15.4 (2017): 20.

12CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
Huge amount of people even including the developing nations population are now part of
service facility of mobile linked internet usage24. This is widely used in financial transaction
of various services bringing forth huge market accessibility option for crypto currency. The
application such currency can be hugely accepted in the era of online purchase and business
inclination25. The good attributes about crypto currency transaction is that it does not require
any transaction fee and overall it incurs lower cost. With increasing access to mobile phones
and internet connections, the popularity of these currencies should increase.
Universal Recognition
Exchange rate risk is normal phenomenon in events like global business transactions,
frequent travelling which demands transaction on regular basis. The exchange-taking place
involves some fees for conversion26. Sometime the exchange cab also becomes problematic
event. The usage of crypto currency like Bitcoin as excludes such conversion fees or charges
by eliminating the fact that conversion is needed anyhow. These are universally accepted
currencies. This also saves the time for price determination in any transaction-taking place
making the currencies more approachable in global financial and monetary transaction
making them agile and free of complexities27.
Better handling:
Away from third party involvement, money retention regarding all of the funds are
done much easier compared to situation under real currency. In real currency systems,
24 Reeves, Michael. "Cryptocurrency-Remittance Transfers Futuristic Technologies & Poverty Alleviation."
(2017).
25 Rivera, Francisco, and Sathvik Palakurty. "Distributed Consensus Technologies in Cryptocurrency
Applications." (2014).
26 Sharma, Sunil Kumar, Nahida Nisar Krishma, and Er CK Raina. "Survey Paper on Cryptocurrency." (2017).
27 Van der Veer, Peter. "Market and money: a critique of rational choice theory." Social Compass 59.2 (2012):
183-192.

13CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
operations like banks, brokerage, high the services like PayPal take control of the accounts
and funds of the individuals who are left on the terms and services of these systems28. The
suspension of account and loss of money are totally under the discretion of them subject to
violations caused against their rules and laws. This can reduce funds for important
transactions. Such problems are not encountered in the crypto currency system as the entire
amount of money is retained and only individual have the ability to change the terms if
required.
Decentralized system:
Global networks use Blockchain technology in order to manage jointly the database
taking control of the Bitcoin transaction tracking. There is an individual network that
manages the transaction of Bitcoins and it lies outside of the interference of central
authority29. This type of decentralized system ensures the operation of network on user-to-
user basis. It leads to formation of mass collaboration
The virtual money is not bound by the interest rates, exchange rates, transaction or
other charges in any nation under any transactions. This makes it universally accepted and
ready to be used without single node of difficulties. It makes transactions easy, quick saving
time and money. The greatest thing about such currencies are that it allows the user to be
complete owner of it without losing a single bit of money in terms of fees and violation
penalties with securing global transactions at higher speed30. With the spread of the benefits
and positive attributes of crypto currencies to the layman, the acceptance would be more and
eventually that will change the global economic system.
28 Cohen, Benjamin J. "The benefits and costs of an international currency: getting the calculus right." Open
Economies Review 23.1 (2012): 13-31.
29 Heid, Alex. "Analysis of the Cryptocurrency Marketplace."Retrieved February 15 (2013): 2014.
30 Narayanan, Arvind, et al. Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction.
Princeton University Press, 2016.

14CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
Easy Transfer of value:
Crypto currencies make transfer of currencies easy without facing any problems
regarding geographical boundaries. The concept of cross border transaction and transfer of
values are done easily through this currency system31.
Drawbacks of cryptocurrency
Lack of regulation:
One of the biggest problems that come with using crypto currency system is the
regulatory concern. It facilitates unlawful operations in terms of various illegal transaction
taking place online. These transactions are denominated in Bitcoins and many other type of
crypto currencies. Silk road as one of the dark web facilitates illegal drug purchases in
Bitcoins in 2014. This virtual money is increasingly used for money laundering32. The
sources are hardly detectable as the funding are collected through clean middleman brokers.
It makes the government to suffer in tracking and seizing the black operations allowing the
criminals to operate easily.
Potent for Loss:
The data loss in this system can cause substantial financial losses. Earlier it was
believed by the proponents of cryptocurrencies that with adequate securities digital currencies
ca actually act as alternative to the physical cashes carried by people with higher risk
inherently and make users deviate from using it33. With application of source codes that can
31 Vandervort, David, Dale Gaucas, and Robert St Jacques. "Issues in designing a Bitcoin-like community
currency."International Conference on Financial Cryptography and Data Security. Springer Berlin Heidelberg,
2015
32 Walton, Joseph Buckler. "Cryptocurrency Public Policy Analysis." (2014).
33 Yamada, Yuki, Tatsuo Nakajima, and Mizuki Sakamoto. "Blockchain-LI: A Study on Implementing Activity-
Based Micro-Pricing using Cryptocurrency Technologies."Proceedings of the 14th International Conference on
Advances in Mobile Computing and Multi Media. ACM, 2016.

15CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
be cracked, authentication protocol that cannot be penetrated and hacking defenses, the
storage of money in cloud or other physical storage of data become easier compared to
carrying real currencies in purse. These benefits are observable only if the crypto currency
users take proper precautions so that data loss can be avoided. Storing private data in cloud or
other physical storage exposes the user to higher loss if the devices get stolen or destroyed
anyhow. It will cause greater financial harm. Using single cloud service in storing data can
cause loss if the server is destroyed physically or disconnected from internet.
Loss of a wallet:
Maximum of the crypto currency users store their currency in their computer locked
in a wallet file34. These fall victim of stealing by using malware or can be lost on crashing of
hard disk.
Insecure ICOs
Investment in projects of crypto currencies and block chains is new trend among these
currency holders. This fundraising is called Initial Coin Offering.
Higher volatility in price:
Having fewer outstanding units, crypto currencies are concentrated within handful
number of individuals including the people who create them and are closely associated with
them35. These few holders of the currency manipulate the supplies of it which leads to higher
swinging in the value leading to volatility in the market.
Hacking payment gateway:
34 Tu, Kevin V., and Michael W. Meredith. "Rethinking virtual currency regulation in the Bitcoin age." Wash. L.
Rev. 90 (2015): 271.
35 Frieden, Jeffry A. Currency politics: The political economy of exchange rate policy. Princeton University
Press, 2014.

16CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
In spite of using authentic payment gateway with citing proper address money can be
lost. Hackers with their knowledge of social engineering techniques can convince the host or
provider that they are the real owners of the domain36. This way they get access and start
intercepting flow of cash.
Error in the users’ address:
This is one of the very common issue under crypto currency system that causes loss of
money and wealth just because of putting wrong address of the recipients of the transferred
cash.
No Refunds or Charge-backs facility:
The miners of crypto currency act as quasi-intermediaries in transactions but they lie
outside of the responsibility for dispute-staking place between parties involved in transaction of
such currencies. This attribute of arbitrator imposes violation over the decentralization impulses
of the modern crypto currency design. There won’t be anyone to be approached for if individual
gets cheated by such system of currency.
In the system of crypto currencies problem of scalability exists in a huge manner. The
solution of the problem lies in pulling in more customers and users in too the system under
such currencies. Improvement of the database, codebase and legal framework, the system can
be improved. Irrespective of developed or developing nations, legalization of the currency is
taking place37. Conservative countries like Russia are also improving the situation by
allowing the market to come out of the black and shadowy effect of crypto currency
transactions. Switzerland and Singapore are two countries to be proactive on this matter
quite a lot.
36 Franco, Pedro. Understanding Bitcoin: Cryptography, engineering and economics. John Wiley & Sons, 2014.
37 Vandervort, David, Dale Gaucas, and Robert St Jacques. "Issues in designing a Bitcoin-like community
currency."International Conference on Financial Cryptography and Data Security. Springer Berlin Heidelberg,
2015

17CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
To bring changes in the protocol is seemed as one of the way to get rid of the
deficiencies of the crypto currency system. However, the changes are not that easy to achieve
as it takes up much longer time to materialize the changes and the procedures are complex as
well. The persistence in communal effort can help in bringing the changes and allow the
execution of the proper planning pertaining to changes. Volatility of prices is one of the
common phenomenon that appears in the class of new assets. Changing price reflects the
adaptability of technology over time which plays better role in securing the application
cryptography in currency. Attracting and including more customers into eco system is biggest
step toward solving the issues associated with the currency system.
Acceptability of crypto currency over regular currency
After discussing the positive as well as negative side of the crypto currency the
authenticity and usability of the currency is quite evident to us. It can certainly be stated that
such virtual currencies have to go a long way in order to replace the physical currencies
exiting in present time. The newly introduced digital currency carries wider acceptability and
logical reasons to accept it. The amalgamation of technology and economies brings forth
wondrous possibilities for the economy as a whole in any nation38. However, with aid and
assistance provided through up gradation of technology, the currencies can gain greater
acceptance among aware people. Cryptocurrencies are technically able to fulfill function of
money as a medium of exchange. These electronic currencies are fully operational from any
device if connected to the internet. However, these are completely unsuitable to use as a unit
of account because of its fluctuation in demand and inflexible supply. Only Bitcoin can be
used as a store of value because of some degree of credibility and predictability39.
38 Deepika, Er Puneet Er, and Er Rajdeep Kaur. "Cryptocurrency: Trends, Perspectives and Challenges."
39 Dwyer, Gerald P. "The economics of Bitcoin and similar private digital currencies." Journal of Financial
Stability 17 (2015): 81-91.

18CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
As per the regulatory authorities and their concern, in recent times, full swing
operation of the virtual currencies over fiat currencies is quite impossible due to various
economic concerns. The study reveals how crypto currency can lead to substantial losses
within an economy in numerous form ultimately affecting the growth and development of the
system as a whole. Apart from having lot of problems tapped within it, crypto currencies
provide some unattractive appeal to the people as a whole in form of lack of support and legal
status40. The system lying outside of the government regulation leads to lack of proper and
formal framework to resolve the issues of people. These leads to higher possibility of
customer grievances to camouflages and stay unnoticed or addressed. The platform
exchanges under these currencies are not backed and protected by proper law and regulation.
This leads to potential financial losses which make the currency very risky to be applied on
by business entities.
Conclusion
From the discussion it is evident how important role currency plays in building upon
the monetary system of an economy. It can take form of paper currency, coin, legal tender or
the virtual currency. Crypto currency as one of the virtual and digitized money is earning
greater importance in the modern economy based on online purchase and sales. While
carrying physical currency and using them as mode of payment are found to become risky
and subject to time consumption, the online payment or paying money in form of digital
currencies on virtual platform is attracting the attention of people mostly who are aware of
these up gradation in mobile and internet usage. Due to increasing pattern in online
transaction the use of such currencies have gone up due to the security it provides. However,
the analysis in this paper also revealed the dark side of such currency system operating
outside government supervision and regulation. These insufficiencies and insecurities of
40 Eyal, Ittay, et al. "Bitcoin-NG: A Scalable Blockchain Protocol." NSDI. 2016.

19CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
crypto currency are making it less practical or less apt to be used in modern economic system
replacing the existing currency including paper money an d coins. For crypto currency to
behave like real currencies, it has to attract more customer base and improve technologically
overtime in order to provide more security backed by regulation and legality. Moreover,
internet networking usage as well as mobile handling should be spread among mass in order
to make people inclined toward online transact. This further expands the market for crypto
currencies and forces them to come up with better attributes.

20CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
References
Abner, Ben. "Ethereum: A look into the world of Ethereum and how to trade and invest this
cryptocurrency!." (2016).
Al Shehhi, Aamna, Mayada Oudah, and Zeyar Aung. "Investigating factors behind choosing
a cryptocurrency."Industrial Engineering and Engineering Management (IEEM), 2014 IEEE
International Conference on. IEEE, 2014.
Ammous, Saifedean Hisham. "Can cryptocurrencies fulfil the functions of money?." (2016).
Androulaki, Elli, et al. "Evaluating user privacy in Bitcoin."International Conference on
Financial Cryptography and Data Security. Springer, Berlin, Heidelberg, 2013.
Arestis, Philip, and Malcolm Sawyer, eds. Finance and the Macroeconomics of
Environmental Policies. Springer, 2015.
Bernanke, Ben, Kate Antonovics, and Robert Frank. Principles of macroeconomics.
McGraw-Hill Higher Education, 2015.
Bulgakov, Dmitry, et al. "Problems of Using Digital Cryptocurrency Bitcoin." (2014).
Ciaian, Pavel, Miroslava Rajcaniova, and d’Artis Kancs. "The economics of Bitcoin price
formation." Applied Economics48.19 (2016): 1799-1815.
Cohen, Benjamin J. "The benefits and costs of an international currency: getting the calculus
right." Open Economies Review 23.1 (2012): 13-31.
Cohen, Benjamin J. Currency power: understanding monetary rivalry. Princeton University
Press, 2015.

21CRYTOCURRENCY VERSUS REGULAR CURRENCY; A COMPARATIVE ANALYSIS
CryptoCurrency Facts. (2017). How Does Cryptocurrency Work? - CryptoCurrency Facts.
[online] Available at: http://cryptocurrencyfacts.com/how-does-cryptocurrency-work-2/
[Accessed 30 Nov. 2017].
Danilina, M. V., A. G. Podlinnova, and A. S. Silaev. "«E-gold»: the Advantages and
Disadvantages." Глобальный научный потенциал 1 (2015): 101.
Deepika, Er Puneet Er, and Er Rajdeep Kaur. "Cryptocurrency: Trends, Perspectives and
Challenges."
Dwyer, Gerald P. "The economics of Bitcoin and similar private digital currencies." Journal
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Word Glossary
Fiat money: Paper money or coins of little or no intrinsic value in themselves and not
convertible into gold or silver, but made legal tender by fiat (order) of the government.
Commodity money: A form of currency in which the value of the currency comes from the
material of which it is made.
E-commerce: commercial transactions conducted electronically on the Internet.
e-currency: One of the types of e-money that can be used to buy things on the internet.
Money demand: The quantity of money demanded at a certain point of time.
Transaction demand: Quantity of money demanded for transaction purpose.
Precautionary demand: Demand for money balances to cover unforeseen contingencies.
Speculative demand: Money held to purchase bond in anticipation that prices will fall.
Theory of Liquidity Preference: The theory of interest rate determination based on supply
and demand for liquidity.
Cryptography: The art of writing or solving codes.