I have a new working paper for the Center on Capitalism and Society analyzing whether cryptocurrencies can perform the three traditional functions of money.

The paper’s abstract:

This paper analyzes five cryptocurrencies’ monetary supply growth, credibility, and stability, to evaluate whether these currencies have a viable monetary role as a medium of exchange, store of value, and unit of account. While all cryptocurrencies can theoretically serve as a medium of exchange, they are inherently too unstable to be used as a unit of account. Of the five, only Bitcoin could potentially serve as a store of value, due to its strict commitment to low supply growth, credibly backed by the network’s distributed protocol and very large processing power. Other cryptocurrencies’ low processing power, centralized control, and use as tokens for specific applications make them unlikely to fulfil any monetary function.

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