Theoretical Analysis And Prospect Of Virtual Currency

With the growth of the internet technique and the popularization of the relevant users, a new form of currency that being put into circulation emerges—virtual currency. Nowadays this newly emerged form of currency is developing rapidly, and it has been assimilating into our economy more and more deeply.What's the difference between virtual money and real money? On the one hand, though it is the newest kind of currency form, it possesses some similar functions as the traditional currency does. For example, the measure of value and the mean of circulation. On the other hand, as the fruit of high techniques on internet, virtual money also has some unique natures, so far it can hardly be the mean of storage and the global currency. Then what's the characters of virtual currency as the result of such difference? It does have a lot of characters, for instance, the issuing authorities are different:traditional currency is issued by government and the virtual currency is issued by the corresponding company. Again, the trade of virtual currency is not subject to the regional confinement. Also, the utility of virtual currency would be decreased as time goes by. The paper discusses these characters one by one. Then modelizes and analyzes the most important two of them. One character is that virtual currency issuing company does not need to pay the interest of the real money that the consumers charge in while making use of it. The other is the marginal cost of the issue of the virtual currency is quite low after the issuing company builds the issuing platform. These two important characters make the profit-making pattern of virtual money quite different from traditional ones.This paper sets up a series of assumptions and applies the interest theory to form a framework, and then analyzes the profit-making pattern by mathematical formulations. So far most papers just discuss the problem in a qualitative way and not analyze the characters of virtual money in detail, while this paper uses a quantitative way. Because of the problem this paper discusses is quite suitable to the framework of interest theory, compared with the quantitative way this paper develops. Interest theory is used here to make up the blank in this field in academic literatures. The paper then discusses the problems virtual currency might face in taxation, such as which type of tax it should be paid, the taxation policy making and the relevant operation of those policies, and then absorbs it into the framework of our model to analyze the impacts of different types of tax to the issuing company.The model used here is very original. Hence, it is in quite an extent an advisory one, which gives an idea for the academic circle to further discuss. Original things tends to be primitive, thus the paper also discusses the way to deepen the model.In the last part, the writer forecasts the bright future of the sunrise industry with the present condition of the virtual currency. The last part predicts the possible form of the future virtual financial system taking into account of the characters of virtual currency, and then analyses the counter-function of the possible virtual financial system to the real financial system.