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Critical success factors for bitcoin economics
Santiago-Boothby, Alejandro D.
Santiago-Boothby, Alejandro D.
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Abstract
Bitcoin is a relatively new topic with limited research into its economic and financial
implications. While originally described as a peer-to-peer electronic cash system, Bitcoin has
popularly come to be known as the world’s first cryptocurrency – an assertion that has generated
controversy, yet has received little academic scrutiny. To better understand Bitcoin economics,
this thesis led exploratory research identifying Critical Success Factors driving Bitcoin growth
and adoption as currency by businesses and individuals. The Critical Success Factors identified
were transaction costs, technical efficiency, governance, payment security, distribution, quantity
and velocity. Although Bitcoin successfully serves as a fungible medium of exchange, it lacks
enough widespread adoption and trading volume to achieve price stabilization – a shortfall
significantly diminishing its function as a reliable storage of value. In practice, many merchants
also choose to convert bitcoins at the point of sale into other traditional currencies, effectively
leveraging Bitcoin as a payment system, rather than a currency on its own accord. In light of
these findings, we conclude that Bitcoin is best described as a cryptocommodity rather than a
cryptocurrency.
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Date
2015
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Keywords
Bitcoins, Currency, Cryptography