“CRYPTOCURRENCY”

(A Case Study Analysis)

December 12, 2020

 I. Fact of the Case

Cryptocurrencies and Bitcoin are just two of the buzzwords that are all over the news
in recent times. The huge media attention crypto currencies have gotten in the recent time is
just one reason why it has reached its current popularity. The crypto currency Bitcoin
(Nakamoto, 2008) was created in 2009 but most people were not aware of its existence. Now
that new exchanges are coming up that make the trade of Fiat money to crypto currencies
relatively easy and the news has spread through social media it seems that everybody knows
what crypto currencies are (Guzman, 2018, p. 2). It is widely unknown that there are more
than 1.500 different crypto currencies that can be traded on different exchanges
(Coinmarketcap, 2018e). The total market capitalization of all crypto currency has risen
within one year from $83 billion in June 2017 to approximately $300 billion by June 2018
(Coinmarketcap, 2018g).

This enormous increase in market capitalization was one of the main reasons why
crypto currencies got a lot of media attention. The underlying technology of crypto currencies
is the blockchain and they are only one field of application for this technology. With the
adoption of blockchain technology, it is possible to use the products build on top of the
blockchain. These are namely crypto currencies and similar value-exchange mechanisms that
have the potential to change the way we transact on a day to day basis (Guzman, 2018, p. 2).
At the same time, such an increase in media attention and market capitalization has an effect
on people and the real economy.

The economic impact of crypto currency worldwide has not been given much
attention and therefore this research paper has the aim to shed some light on the buzzword
crypto currency and show on the one hand how they emerged and on the other hand, what
impact such a fast increase in market capitalization and adoption has on the economy.
Therefore, this research paper aims to answer the research question of what impact, if any,
crypto currencies have on the economy. For this, the three crypto currencies Bitcoin,
Ethereum, and Monero are used. Another economic impact is originating from the crypto
currency exchange industry. Exchanges generate their profit by charging transaction fees on
all trades and transaction that occur using their platform. If a token should be listed on the big
exchanges it not unusual to pay between $50.000 and $1 million in listing fees (Sedgwick,
2018, p. 1). Exchanges and transaction processors can be seen as the big winners in the
crypto industry because they enable people to transact and participate in that market. It is no
surprise that the big exchanges have a daily trading volume of over $1 billion.

II. Point of View

The current research in this field is focused on a very technical perspective. Areas
like the usability, privacy issue, and security concerns are the main focus of researchers
(Yli-Huumo, Ko, Choi, Park, & Smolander, 2016, p. 10). The economic impact of crypto
currency worldwide has not been given much attention and therefore this research paper
has the aim to shed some light on the buzzword cryptocurrency and show on the one hand
how they emerged and what use cases they have and on the other hand what impact such
a fast increase in market capitalization and adoption has on the economy.

III. Problems /Objectives

Problems:
1. The economic impacts of cryptocurrency.
2. Reasons behind allowing Cryptocurrencies in the market even if there are no proper
or legal protections from the Government or any allowable accessibility through the
higher authorities.
3. The possible huge impact of cryptocurrency in the new or beginner investors.

IV. Areas of Considerations (SWOT ANALYSIS)

STRENGTHS WEAKNESSES
 Crypto Currencies has its underlying  Crypto currency market is very
techno named block chain. With the young and has not matured yet.
adaptation of block chain
technology, it is possible to use the  There are a lot of risks associated.
products.
 There are projects designed to be
 A crypto currencies are scams and stealing user's funds.
decentralized it is censorship
resistant. No government or other  In regard to the age of the
entity can take money away technology as well as the existing
data, it is currently not possible to
determine or express the economic
 Crypto currencies transaction costs impact of crypto currencies in
are very low compared to other numbers
payment solutions
 Cryptography is being used to  It is underlying in technology, there
ensure that the transactions are are no assurances that the money is
 served to prevent users from safe, there might be hacking, crypto
spending the same balance more jacking, ransoms, and phishing that
than once, and to govern the supply will try to gain access to user's
of digital notes in circulation. funds.
 The crypto currencies can be used
anywhere in the world. It also used
degree of anonymity.
 It has a Bitcoin blockchain,
Ethereum's Block chain and a Block
chain
 Bitcoin was ranked as number 1
cryptocurrency in regards to market
cap, which was above $140 billion
of trading volume of roughly 4
billion.

 Ethereum is a smart contract which

is programmable that execute under
a certain condition to a certain time.
 A certain company that adopted
bitcoin and any crypto currency
marked as a big help to its investors
and in the market.

 Acceptance of crypto currencies for

payments is growing rapidly; there
are even companies that are issuing
credit cards, so users can spend their
crypto currency in every store.
OPPORTUNITIES THREATS
 Locate mining operations next to  Many businesses will anonymously
power plants in order to use the create a scam projects.
energy surplus that otherwise would  Crypto currency’s advantage of not
have been wasted. being traced and having the freedom
 The whole industry of crypto of spending like one prefers it,
currencies and the blockchain increases the ability to do illegal
technology needs to observed and transactions, launder money or even
further developed. finance terrorism
 Engage in a less energy consumption  There might be a ransomed, crypto
jacking and phishing who will
intentionally scammed investors’
money.

 Continue to innovate and make an

impact that will provide sources of
funds for those who wanted to have
income.
 Promote and let people invest and
know how it will help them.
Especially those who are eager to
gain some income.

V. Courses of Action
1. Blockchain uses a cryptographic proof mechanism for two parties that are willing to
execute a transaction using the Internet. In order for the transaction being protected,
digital signatures are deployed.
2. The company Mycelia wants to revolutionize the music industry by using smart
contracts. Their plan is to program contracts that automatically take the revenue of
customers listing to music and distribute it fairly to the artists, producers and other
stakeholders (Heap, 2014 pp. 1-5).
3. There is a company that wants to raise funds for their project is giving out their own
digital token, mostly using the Ethereum ERC-20 token standard, that has some kind
of use case in exchange for crypto currencies like Bitcoin or Ethereum.
4. The energy consumption issue was noticed by King and Nadal (2012) and he
proposed a different method for finding consensus in a network. PoS uses validators
(equivalent to miners in PoW) that have to stake coins that have a respective age.

VI. Conclusion

Over the last nine years, the crypto currency industry developed itself, at the
beginning very slow with an exponential growth that is still occurring today, sometimes
stronger and sometimes weaker. With the technology only existing nine years it is very
early to determine an exact economic impact but as this paper presents, by today the
economic impact of crypto currency is slowly starting to appear on the surface of the
overall global economy. On a more regional level, it can be said the economic impact is
relatively big. Regions transforming themselves into a new hotspots for crypto business
generating jobs and other economic value, while giving these businesses the room to
grow. The same can be said for the mining and exchange businesses that formed around
the crypto currency industry. Just the announcement that companies starting to accept
currencies or forming partnerships would drive the price up and also down. Longfin Corp.
announced that it would engage in a partnership with a blockchain technology company
and the stock price rose by 2000% (Sen, 2017, p. 1). An economic impact can also be
seen in the regard to the electricity consumption the mining operations require. These
have started using so much energy that other businesses and communities had electricity
shortages. With the global electricity consumption already rising the additional power that
crypto currencies require need to be produced. With today’s growth and practices, this
will not be sustainable for long. Even governments have started to limit to the energy
consumption of mining operations. Different solutions have been proposed to solve this
energy consumption problem one of which the switch from PoW to PoS is. Ethereum
wants to try to upgrade their network to run with PoS and it is anticipated and feared at
the same time that the migration process will result in issues for the network. Another
anticipated solution is to locate mining operations next to power plants in order to use
their energy surplus that otherwise would have been wasted. It is clear that the
community needs to find a solution in order to scale the systems and reach the
mainstream adoption. The whole industry of crypto currencies and the blockchain
technology needs to be observed and further developed. Within the next ten years, many
new business and use cases will be developed based on crypto currencies and the
blockchain technology. With the future development and adoption, the economic impact
of crypto currencies will also grow and gain importance.

VII. Recommendation
1. To address the problem about the economic impact of currency is provide financial
services to the people so that they can protect themselves against the situation of
financial shortage.
2. The government must influence the supply of crypto currencies.
3. They must require high technological standards.
4. Overcoming the lack of social trust by increasing access to financial services.
5. The state must influence the flow of money which do not limits the power of the
government.

VIII. References
Federal Trade Commission Consumer Information.What to Know About
Cryptocurrency.https://www.consumer.ftc.gov/articles/what-know-about-
cryptocurrency#:~:text=Cryptocurrency%20is%20digital
%20money.,cryptocurrencies%20continue%20to%20be%20created.
Hawle, J. (2018). Crypto Currencies – A Case Study. https://blog.bankfrick.li/wp-
content/uploads/2019/01/bank-frick_blog_cryptocurrency-case-study_julien-
hawle.pdf