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Virtual currencies and distributed ledger technology: What is new under the sun and what is hyped repackaging?

Author

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  • Leinonen, Harry

    (Chief Executive Officer, PSS Consultancy, Finland)

Abstract

Virtual currencies and distributed ledger technology are today ‘hype’ issues in payment developments. However, a considerable number of elements in these development proposals seem to be repackaging old solutions. This paper analyses distributed ledger technology and virtual currencies based on a general framework for funds transfer systems. The main conclusions are that distributed ledger technology can provide increased efficiency and security in ledgers, which today are already distributed, like those custodian systems used for book-entry shares and bonds. However, virtual currencies constructed as non-redeemable and non-interest-bearing bearer bonds will probably have major difficulties in finding long-term market demand. One interesting observation is also made concerning the possibility for the markets to move towards a unit of account (currency) based on a basket of real assets instead of fiat currencies.

Suggested Citation

  • Leinonen, Harry, 2016. "Virtual currencies and distributed ledger technology: What is new under the sun and what is hyped repackaging?," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 10(2), pages 132-152, June.
    • Handle: RePEc:aza:jpss00:y:2016:v:10:i:2:p:132-152
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    More about this item

    Keywords

    virtual currency; Bitcoin; distributed ledger technology; payment system innovation; payment developments; fund transfers;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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