This paper examines whether characteristics and functions of money can be applied to Bitcoin. By publishing the whitepaper of Bitcoin in 2008, Satoshi Nakamoto started the story of Bitcoin. It is not just a question whether Bitcoin works as promised to as "a peer-to-peer decentralized virtual currency". It is much more a question of it being accepted by people in general. The fact that various forms and definitions of money have existed throughout history, an approach to apply characteristics and functions of money to Bitcoin is needed, in order to clarify if it can be seen as an alternative form of money. However, due to the fact that sovereign states have already established rules and regulations in regard to currencies and money, the institutions will also assess how to essentially classify Bitcoin, as it is already too big to be ignored.
Table of Contents
- 1.0 Introduction
- 2.0 Money
- 2.1 Definition of money
- 2.2 Characteristics of money
- 2.3 Functions of money
- 2.4 Key takeaways
- 3.0 Value of money
- 3.1 Subjective value of money
- 3.2 Objective value of money
- 3.3 Time tested value of money
- 3.4 Key takeaways
- 4.0 Private versus government money
- 4.1 Government money
- 4.2 Private money
- 4.3 Key takeaways
- 5.0 History of money and current developments
- 5.1 Golden age
- 5.2 Paper money (representative money)
- 5.3 Fiat money and current system
- 5.4 Key takeaways
- 6.0 Bitcoin
- 6.1 Basics of Bitcoin
- 6.2 Functions of cryptocurrencies
- 6.3 Value of cryptocurrencies
Objectives and Key Themes
This master's thesis aims to analyze whether Bitcoin can be classified as money by examining its characteristics and functions in relation to established monetary theories. The study investigates the historical evolution of money, different forms of money (government vs. private), and the valuation of money, both subjectively and objectively. Finally, it applies these frameworks to Bitcoin, exploring its unique properties and potential within the broader context of monetary systems.
- Definition and characteristics of money
- Historical evolution of monetary systems
- The valuation of money (subjective and objective)
- Comparison of government and private money
- Application of monetary theories to Bitcoin
Chapter Summaries
1.0 Introduction: This introductory chapter sets the stage for the thesis, outlining the central research question of whether Bitcoin constitutes money. It briefly introduces the structure of the thesis and the key concepts that will be explored in subsequent chapters. The chapter establishes the importance of understanding the historical context of money and the theoretical frameworks used to define and analyze it, framing the analysis of Bitcoin within this established body of knowledge. The introduction highlights the novelty of analyzing Bitcoin through the lens of traditional monetary theory and its implications for understanding the future of finance.
2.0 Money: This chapter provides a comprehensive overview of the concept of money, beginning with its definition. It delves into the essential characteristics of money, such as its functions as a medium of exchange, a store of value, and a unit of account. Different historical and contemporary examples of money are examined, laying the foundation for a critical assessment of Bitcoin's monetary properties. The key takeaway emphasizes the multifaceted nature of money and the importance of considering its various aspects when evaluating any potential form of money.
3.0 Value of money: This chapter explores the multifaceted nature of the value of money, differentiating between subjective and objective valuation. It examines the subjective value of money as determined by individual preferences and expectations, contrasting it with objective value, which may be based on commodity backing or government decree. The role of time in shaping the value of money is also analyzed. The chapter highlights the complex interplay of factors affecting the value of money, setting the stage for a critical evaluation of Bitcoin's inherent value and volatility.
4.0 Private versus government money: This chapter contrasts the characteristics and functionalities of government-issued money and privately issued money. It analyses the roles of central banks in managing money supply and maintaining monetary stability, comparing this to the mechanisms and implications of private monetary systems. The chapter delves into the potential advantages and disadvantages of each type of system, providing a crucial backdrop for the subsequent analysis of Bitcoin as a form of private money. The historical context of both systems is highlighted, showing their respective successes and failures.
5.0 History of money and current developments: This chapter traces the evolution of money from its origins in commodity money to the current fiat money system. It examines key milestones in monetary history, including the introduction of paper money and the rise of central banking. This historical overview is crucial for understanding the context within which Bitcoin emerged. The chapter analyzes the current monetary system's strengths and weaknesses, particularly its susceptibility to inflation and financial crises, providing a basis for comparing it to the potential of alternative systems like Bitcoin.
6.0 Bitcoin: This chapter provides a detailed introduction to Bitcoin, covering its fundamental technology, functionalities, and the mechanisms through which its value is determined. It examines Bitcoin's role as a medium of exchange, store of value, and unit of account within the context of existing monetary theory, highlighting its unique decentralized and cryptographic nature. This chapter also discusses the ongoing debates surrounding the classification of Bitcoin as a currency, investment asset, or commodity. The chapter analyzes the potential of Bitcoin as an alternative to traditional monetary systems.
Keywords
Bitcoin, money, monetary theory, cryptocurrency, value, fiat money, central banking, decentralized finance, digital currency, store of value, medium of exchange, unit of account, financial innovation, blockchain technology.
Frequently Asked Questions: A Comprehensive Language Preview
What is the main topic of this document?
This document is a comprehensive language preview of a master's thesis that analyzes whether Bitcoin can be classified as money. It includes a table of contents, objectives and key themes, chapter summaries, and keywords.
What are the key themes explored in the thesis?
The thesis explores the definition and characteristics of money, the historical evolution of monetary systems, the subjective and objective valuation of money, the comparison of government and private money, and the application of monetary theories to Bitcoin.
What are the main chapters and their respective focuses?
The thesis is structured as follows: Chapter 1 (Introduction) sets the stage; Chapter 2 (Money) defines and characterizes money; Chapter 3 (Value of Money) examines subjective and objective valuation; Chapter 4 (Private versus Government Money) contrasts the two systems; Chapter 5 (History of Money and Current Developments) traces the evolution of money; and Chapter 6 (Bitcoin) delves into the specifics of Bitcoin and its classification as money.
How does the thesis define and analyze money?
The thesis analyzes money through established monetary theories, examining its functions as a medium of exchange, store of value, and unit of account. It considers both the historical and contemporary aspects of money, including government-issued and privately-issued forms.
How does the thesis evaluate the value of money?
The thesis differentiates between the subjective value of money (based on individual preferences) and its objective value (potentially based on commodity backing or government decree). It also explores the influence of time on the value of money.
What is the role of Bitcoin in the thesis?
The thesis uses Bitcoin as a case study to test existing monetary theories. It analyzes Bitcoin's characteristics and functions in relation to these theories to determine whether it can be considered a form of money.
What is the significance of the historical context in the thesis?
The historical context of money is crucial to understanding the evolution of monetary systems and the emergence of Bitcoin. The thesis traces this evolution, highlighting key milestones and analyzing the strengths and weaknesses of different systems.
What are the key takeaways from the thesis preview?
The thesis aims to provide a thorough analysis of Bitcoin’s monetary properties within the framework of established monetary theories, considering its historical context, valuation mechanisms, and comparison to traditional government and private money.
What are the keywords associated with this thesis?
Keywords include Bitcoin, money, monetary theory, cryptocurrency, value, fiat money, central banking, decentralized finance, digital currency, store of value, medium of exchange, unit of account, financial innovation, and blockchain technology.
- Quote paper
- Tim Clarke (Author), 2020, Is Bitcoin money? Application of characteristics and functions of money to Bitcoin, Munich, GRIN Verlag, https://www.grin.com/document/1133820
