Can Cryptocurrencies Fulfil the Functions of Money?

Abstract

This paper analyses five cryptocurrencies’ monetary supply growth, credibility, and stability, to evaluate whether these currencies can perform the functions of money. While all cryptocurrencies can theoretically serve as a medium of exchange, they are inherently too unstable to be used as a unit of account. Of the five, only Bitcoin could serve as a store of value, due to its strict commitment to low supply growth, credibly backed by the network’s distributed protocol and very large processing power. Other cryptocurrencies’ low processing power, centralized control, and use as tokens for specific applications make them unlikely to fulfil monetary functions.