The European Parliament’s Committee on Economic and Monetary Affairs has recently released a report that’s been requested. It’s written by Marek Dabrowski and Lukasz Janikowski- both from the Center for Social and Economic Research.
It’s a document on the current state of cryptocurrencies, or virtual currencies (VCs). The document is 33-pages in length and goes over some of the risks and benefits of VCs, but one thing’s for certain- crypto is here to stay.
When you have a currency that’s blowing up, it only makes sense for citizens to get curious and learn more about it. The demand for the report has been published just a few days ago and is accessible to the public here.
Here are some interesting highlights from the report:
Definition of VC
“VCs have no intrinsic value in the sense that they are not linked to any underlying commodity or sovereign currency. However, in this respect, they do not differ from most contemporary sovereign currencies. VCs’ value emerges solely from the ability to transfer it from one place to another inside the particular VC’s ‘electronic ecosystem’, and relies entirely on trust, as there is no legal way of forcing anybody to accept it as a means of payment.”
“An important feature of VC transactions is that units of VC are sent directly from one place in the electronic ecosystem to another, without the involvement of any intermediary (e.g. financial institution).”
“The behaviour of Bitcoin’s exchange rate clearly displayed features of an asset bubble, which eventually burst on 17 December 2017, resulting in rapid depreciation (by 64.7% over less than 2 months). However, in April 2018, it remained the most popular VC with nearly 17 million units in circulation and market capitalisation of over US$ 140 billion.”
“The use of VCs in day-to-day transaction remains negligible. During 2017, the number of Bitcoin transactions in the world was, on average, around 275,000 per day, compared to over nine million card transactions per day in Sweden and 295 million traditional transactions per day in Europe in 2014.”
“The VC with the third-largest market capitalisation, as of 20 April 2018, is Ripple. More precisely, Ripple is the name of the payment settling system and a unit of the VC is called an ‘XRP’. Ripple is very different from Bitcoin in many aspects.”
“The average transaction cost is currently approximately 10,000 times lower than in the case of Bitcoin, the limit of transactions per second is 150 times higher, and the transaction time is just about 3-4 seconds; and Ripple uses a negligible amount of electricity as compared to Bitcoin.”
“Block time in Ethereum is shorter than in Bitcoin (14-15 seconds compared to 10 minutes) which allows for faster transaction times.”
“Ethereum discourages centralised pool mining and encourages decentralised mining by individuals using their computers.”
“VCs are a contemporary form of private money, which was largely absent from economic life in the 20th century. Thanks to employing Blockchain technology (which may also be used in the financial industry for other purposes), the transaction networks of VCs are relatively safe, transparent, and fast. Unlike their 18th and 19th century paper predecessors, VCs are used globally, disregarding national borders.”
“The economists who attempt to dismiss the justifications for and importance of VCs, considering them as the inventions of ‘quacks and cranks’ (Skidelsky, 2018), a new incarnation of monetary utopia or mania (Shiller, 2018), fraud, or simply as a convenient instrument for money laundering, are mistaken. VCs respond to real market demand and, most likely, will remain with us for a while.”
VCs are here to stay
“One cannot rule out that future progress in the area of information technologies can bring even more transparent, safe, and easier to use variants of VCs. This might increase the chances for VCs to effectively compete with sovereign currencies, including the major ones.”
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