Virtual and alternative currencies

Abstract

This paper attempts to understand the viability of adoption of virtual currency like Bitcoins as a national currency. This study aimed at understanding the virtual currency analyses whether the virtual currencies fit the formal definition of money. It compares the predetermined fixed supply of bitcoin system to the classical gold standard where the money supply is fixed by the amount of gold the government holds. It also sees the viability of any central bank accepting it as a national currency because of its unregulated nature and lack of credit generation ability. With these comparisons, it establishes whether the virtual currencies will ever be accepted as the national currency in the future.