How cryptocurrencies can empower the process of innovation in the economy

Academic Paper from the year 2017 in the subject Economics - Monetary theory and policy, grade: 9,0/10, Fontys University of Applied Sciences Venlo, language: English, abstract: Cryptocurrencies have significantly grown in value over the last couple of years. Nevertheless, there is a real concern about their ability to disrupt existing payment systems by facing complex technological and economic issues. However, cryptocurrencies have been claimed to be an innovation which will change financial interaction between people and businesses. The main innovation in cryptocurrencies is that they are based on cryptographic proof instead of trust, enabling two willing parties to transact directly, anonymously, and irreversibly with each other in a decentralized manner without the need for a trusted third party to verify all transactions. It requires an economic analysis about what issues are keeping cryptocurrencies from being accepted in economy and how these issues might be solved to make a cryptocurrency strong enough to have an impact on world¿s economy. This leads to the main research question: What issues must be solved to make a cryptocurrency a strong currency that is able to strengthen the process of innovation in the economy?