Essays on Issues Surrounding the Creation of Virtual Currency Case Study

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The paper “ Issues Surrounding the Creation of Virtual Currency” is an engrossing variant of the case study on finance & accounting. Virtual currency schemes, such as Linden and Bitcoin Dollars, are a product of a uniquely designed monetary system and are considered to be greatly decentralized as they are not controlled by any central monetary system. Linden and Bitcoin dollars can be purchased from any platforms provided that the selected ones are favorable to the supplier as well as the purchaser. Although the virtual currency scheme seems to be so decentralized and quite open, the creation and introduction of new money into the system can only be done by rewarding the “ miners” .

In the virtual currency system, the “ miners” are responsible for “ validation of transactions carried out using virtual money” (ECB 2012, p. 24). The supply or circulation of money in the virtual currency system is not affected by directives of any virtual central bank; the supply entirely depends on the behavior of the interested users who are expected to use the virtual money for a specific purpose. The circulation and supply of Lindens and Bitcoins are technically and skillfully “ designed and are expected to occur at a predictable pace” (ECB 2012, p.

24). It is difficult for participants or the central authority in the virtual currency system to alter the supply or flow of money in this system given that these factors are already pre-determined. The virtual currency system, according to its participants, is supposed to be free from economic crises such as inflation and deflation. The fact that it has been pre-determined that the supply of the virtual dollars would reduce up to as low as 21 million, can bring about deflation or inflation in the virtual currency system as many people may decide to hoard the dollars and release them when the supply goes down (ECB 2012, p.

25). 1.2. Issues Affecting the Creation of Virtual Currency SchemesThe virtual currency system has made it easy for majority to sell and buy digital content. Many people continue to rely on the virtual currency system to trade digitally because the system is open, decentralized and controlled by any central monetary authority.

Reference

European Central Bank 2012, Virtual currency schemes, viewed 29 April 2013, .
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