Rise of Internet Enables Bitcoin to Compete With Fiat, Researchers Find

A new research paper explores the role the Internet has played in allowing private forms of money like bitcoin to compete against fiat alternatives.

AccessTimeIconApr 7, 2016 at 7:43 p.m. UTC
Updated Sep 11, 2021 at 12:13 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

A new research paper co-authored by an economics advisor at the Federal Reserve Bank of Philadelphia explores whether private currencies, such as digital currencies like bitcoin, can compete with government-issued alternatives.

"Can competition among privately issued fiat currencies such as Bitcoin or Ethereum work?" the paper, published on 3rd April, asks. "Only sometimes. To show this, we build a model of competition among privately issued fiat currencies."

The paper, co-authored by Jesús Fernández-Villaverde of the University of Pennsylvania and Philadelphia Fed researcher Daniel Sanches, seeks to unpack how private forms of money, including digital currencies, interact with one another in terms of price stability.

Among the notable arguments is that the rise of the Internet has resulted in an environment in which private monies like bitcoin can competitively emerge.

"Our model highlights how the issuing of a private currency is logically separated from banking. Both tasks were historically linked for logistical reasons: banks had a central location in the network of payments that made it easy for them to introduce currency in circulation," the paper states, adding:

"We will argue that the Internet has broken the logistical barrier."

The full paper can be found below:

Image via Shutterstock

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Read more about