In the News

Digital currencies see a new price boom

Graham Watson

24th May 2017

This article from BBC news underscores the fact that we're in the middle of a digital currency boom, with Bitcoin and Ethereum traded at record highs.

Reading the piece might prompt you to think about the main characteristics of money, as well as the four key functions of money. to what extent do digital currencies fulfil these functions, and what is stopping them from being more widely traded.

Money is defined best by what money does. Money – in its various forms – fulfils various key functions including a medium of exchange, a unit of account, a store of value and a standard of deferred payment.

Background on Bit Coin

Bitcoin is a digital currency that was launched by a secretive entrepreneur in October 2008, with the aim of being “a new electronic cash system that is fully peer-to-peer with no trusted third party”. Bitcoins are created by users (a.k.a. “miners”) who allow the Bitcoin system to use their computing power to process Bitcoin transactions. These miners are also rewarded with the some of the transaction fees paid by those who use Bitcoin. A few retailers, especially online, accept Bitcoin, partly because the transaction fees are lower than those of credit cards. However, Bitcoin’s value has been volatile. (Source: tutor2u economics glossary, 2017)

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to Tutor2U, reads voraciously and is interested in all aspects of Teaching and Learning.

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