A recent research report published by Imperial College London states that “cryptocurrencies are already fulfilling one of three criteria of money.”
The report, commissioned by social trading platform eToro, notes that Bitcoin (BTC) and other digital currencies might become one of the world’s “mainstream” payment methods “within the next decade.”
Titled "Cryptocurrencies: Overcoming Barriers to Trust and Adoption," the report was prepared by Dr. Zeynep Gurguc, a research associate at Imperial College Business School, and William Knottenbelt, professor of applied quantitative analysis at Imperial College’s engineering department. In the 25-page write-up, the researchers assert that cryptocurrencies are an emerging asset class and that many of them already serve as a legitimate “store of value.”
"[cryptocurrencies] have the potential to upend everything we thought we knew about the nature of financial systems and financial assets...In this research we show that cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment."
Research: Concept Of Money Won’t Change
In order to be considered real money, Knottenbelt and Gurguc argue that cryptocurrencies would also have to become an effective “medium of exchange” and “unit of account”, which is how value is determined in the traditional fiat-based financial system.
Moreover, the report says that cryptos still lack a proper a regulatory framework and issues related to their scalability and “design” must also be addressed. If or when this is taken care of, the authors believe that cryptocurrencies could become a mainstream payment option.
The report explains that the researchers’ analysis of digital currencies was done by examining “the evolution of money [over time] and assessing which particular aspects of cryptocurrencies are different from government backed fiat money.”
Before coins, currency notes, and debit/credit cards came into circulation, the research paper reminds us of the use of the centuries-old barter system in which one set of services or objects of value were exchanged for another. At present, the most advanced money transfer systems include mobile-based payment apps and online banking services.
Cryptocurrencies Might Become As Spendable As Fiat Money
Although many new payment systems have been invented and adopted - replacing older monetary exchange methods - the research document asserts that “the three main roles of money” (as mentioned) have not changed over time.
Moving forward, if cryptocurrencies can continue to evolve and become a reliable medium of exchange, units of account, and better stores of value, they could potentially become just as spendable as fiat currencies, the research believes.
Another important step for digital currencies, according to the researchers, is for them to be able to “[reduce] friction in the global economy.”
Notably, Imperial College’s crypto research was commissioned by Iqbal V. Gandham, Managing Director for eToro’s UK branch.
Commenting on the cryptocurrency evolution, Gandham remarked:
"The first email was sent in 1971, but it took nearly three decades for the technology to become commonplace with a user-friendly interface in the form of hotmail. The first ever Bitcoin transaction took place a little over eight years ago and today we are already seeing it begin to meet the requirements of everyday money.”