17. The Impact of the Virtual Money Mechanisms on Total Cash Flow

Currency wars are one of the reasons why the capital of many subjects directed towards investment in those assets in which the chances of manipulation kept to a minimum. Through a review of the relationship of trust in cryptocurrencies, as well as trust in institutions in this work is estimated what impact will the mechanisms on which is based the virtual money have on total cash flow in the future and what kind of perspective of bitcoin and other cryptocurrencies.

Electronic money bitcoin is gaining its popularity, though most economists around the world for a long time did not give importance to it until its value has not started a dizzying growth. There are three key reasons why bitcoin gained its popularity for a short period of time and they are: 1) simplicity in transferring value; 2) ability to perform microtransactions; and 3) growing trust in decentralized systems.

Simplicity in transferring value was recognized as one of the main achievements of digital money. In the history of human relations, changes in the way of material exchange determined the transition to a new civilization level. After the multifaceted exchange of goods for goods has become more orderly when certain units of measure of equal value have emerged, and the need for such a system to be simplified, to provide more precision and clarity among the trading parties.

Also, since the goods were often perishable, it was necessary to establish what could be a value guard. Due to its limitations, the price and scarcity of gold could not play this role for a long time, which resulted in the emergence of money for the development of the culture of Phoenicians, where all goods could be paid. As it was the case with the majority of types of money, bitcoin, as digital money is also characterized by the change of its value.

The value of bitcoin changes on a daily and even hourly basis,  though the advantage of bitcoin is the possibility to have microtransactions, especially with online payment services that cost less than what the smallest unit of a currency is worth.

For example, if a site owner wants to charge an overview of the content to the extent that price is not a big expense for the visitors, but it, counting on the number of visits, in order to earn from it. If it is related to obtaining passwords for access to electronically, and thus performing the payment, it is much easier to calculate these values in bitcoin than in traditional money. First of all, precise ratio price, as expressed in traditional currencies, where the cheapest services can cost one or two cents, although on the micro level, their value is the same. The difference between one and two cents is still double. With bitcoin price may be expressed in as many decimals as necessary to meet the most precise measurements. At the individual level these questions affect negligible, but if it is multiplied by thousands or millions on a daily or annual basis, differences in earnings are enormous. In doing so, there is no payment of transaction costs, such as those that exist in electronic banking, in order to enable intermediary earnings from commissions.

This article is part of the academic publication Dividing by Zero by Ana Nives Radovic, Global Knowledge 2018

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