Using cryptocurrencies as a means to make good money

This thesis comprehensively studies currency and develops practical requirements for cryptocurrencies to create "good money." The requirements are based on the concepts of economist and philosopher Friedrich August von Hayek to achieve this goal. The thesis first examines currency, specifically its definition, functions, types, and monetary systems, with a focus on Hayek's theories of currency competition. Critiques and responses to Hayek's theory are then explored, followed by an analysis of the negative ramifications of poor monetary policy. Finally, a comprehensive overview of cryptocurrencies and their theoretical foundations is provided. The practical section of the thesis centers on scrutinizing the cryptocurrency market and its correlation with Hayek's conception of a perfect currency. It investigates the performance and growth of significant cryptocurrencies, such as Bitcoin, by examining their market capitalization, volatility, and linkages with traditional financial instruments. The paper assesses if and how particular cryptocurrencies - stablecoins among them - meet Hayek's criteria for what makes a "good currency." The standards include stability in purchasing power, flexibility in supply, transparency, and limitations on government involvement. The paper synthesizes the outcomes and talks about how cryptocurrencies may evolve according to Hayek's concepts. The paper highlights that while no current cryptocurrency satisfies Hayek's ideal currency concept, certain features like decentralization and resistance to government intervention indicate substantial potential for future advancements in this field. Therefore, the research provides critical knowledge regarding the ongoing evolution of digital currencies and their potential influence on global financial models and economic theories.