Network Effects in the Digital Currencies’ Market: Evidence from Bitcoin

Student: Kuzmina Anastasia

Supervisor: Olga Lazareva

Educational Programme: Economics: Research Programme (Master)

Year of Graduation: 2018

The aim of this paper is to explore the network effects in the digital currencies market. It provides a general overview of digital currencies and market participants that use them. I employ Bitcoin as an example of existence of network effects. In the theoretical part, I model the decision to use bitcoins for transaction and speculation. I then test a number of direct network and indirect effects present in the market for digital currencies. The important conclusion is that there is no convergence to the single currency in the digital currencies market, meaning that currency adoption is a less important driver of demand than adoption as a financial asset.

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