We analyze how network effects affect competition in the nascent cryptocurrency market. We do so by examining the changes over time in exchange rate data among cryptocurrencies.
13 May 2014 Understanding Platform-Based Digital CurrenciesGiven technological advances and the widespread use of the Internet, various digital currencies have emerged. In most cases, Internet platforms such as Facebook and Amazon restrict the functionality of their digital currencies to enhance the business model and maximize their profits. While platform-based digital currencies could increase the efficiency of retail payments, they could also raise some important policy issues if they were to become widely used outside of the platform. Thus, it is important to closely monitor the evolution of these digital currencies.
This paper reviews some recent developments in digital currency, focusing on platform-sponsored currencies such as Facebook Credits.