HERIOT-WATT UNIVERSITY DUBAI CAMPUSResearch Proposal.docx

HERIOT-WATT UNIVERSITY DUBAI CAMPUS
Research Proposal
Title of Course and Code:
Research Methods: C39RE
Course Lecturer:
Dr. Esinath Ndiweni
Title of Course Work:
The investment potential of art markets
Name of Student
Registration No:
H00178570
Program title
BA Accountancy & Finance
Word Count:
1976 words

1) Dissertation Title
The investment potential of art markets
2) Background
Art in its various forms has been an essential part of human
culture since prehistoric times. Nevertheless, a purposeful usage
of artworks as means of investment is a relatively recent
phenomenon that has started to attract more attention of
investors as well as academics. This is partially fueled by the
increasing need for profitable and diversified investments in the
world where, some argue, there is more money to invest than
attractive opportunities to absorb it. Despite a number of
considerable articles published on the topic in the last 30 years,
there is still a lack of evidence especially when comparing to
the literature on other investment assets such as stocks or
bonds. This might also be one of the reasons for misbeliefs
about art markets that sometimes result to suboptimal
investment decisions by unsophisticated individuals and
companies.
The following dissertation contributes to the existing research
on the topic by presenting results that to some extent are more
relevant than those of a number of previous papers. First, the
samples that it uses are more appropriate from the timing
perspective as they capture the most recent years. Second, it
pays sufficient attention on the forms of investment in art other
than purchasing and selling individual artworks on auctions.
This as well as some other features of this study make it
potentially beneficial for different groups of readers including
current and future investors.
3) Research Question, Aim and Objectives
3.1 Research Question
Can art be considered as suitable asset class for investment
purposes?

3.2 Research Aim and Objectives
This dissertation aims to research and analyze the financial
implications of investing in various artworks in order assess
their potential attractiveness for investors.
The research addresses the following objectives:
1. To investigate the returns and risks of various forms of
investing in art;
2. To compare risk-return profiles of artworks to those of other
investment options;
3. To study the possibility of using art as a suitable
diversification or hedging tool.
4) Potential impact of the dissertation
Although the majority of empirical evidence does not find
investing in art to be more profitable than investing in other
assets, additional research on the topic might still yield to a
different result. First, due to limitations of some studies, poor
risk-return figures of artworks might not be the case for some
categories of art such as particular artistic movements, subject
matters, schools or periods. In other words, a detailed research
might still find the attractiveness of certain types of art as
means of investment. Second, despite generally lower expected
returns, art might still be worth investing in if it proves to be
useful for diversification purposes. Correlation among
international markets has increased from 50% - 60% in 1990s to
over 90% after 2008, thus reducing the benefits of international
diversification (Forbes, 2017). In the light of this as well as
decreased effectiveness of diversification among different asset
classes, finding the diversification potential of art markets
becomes a more relevant field of investigation.
The findings of this dissertation can potentially benefit all
readers who are interested in the topics of investments or art
and especially those who might become potential investors in
artworks but have currently a lack of understanding. There are
still widespread misbeliefs about the art markets that usually

result to overestimation of potential returns and
underestimations of related risks. An additional recently
published paper showing a more realistic picture can definitely
serve as a good warning for unsophisticated potential investors.
On the other hand, obtaining a result that is contrary to the
majority of empirical evidence would also be an interesting
experience for any researcher. Findings showing, at least to a
certain extent, the attractiveness of investing in artworks could
not only encourage further research than the opposite results
would but could potentially benefit different individuals and
organisations including art investors, collectors, auction houses
and art funds.
A potential feature of this dissertation that is not present in
many similar studies is taking into consideration foreign
exchange rates when calculating the returns of investing in
artworks. Doing this has become more relevant in the recent
decade not only due to higher exchange fluctuations of USD,
EUR and GPB but also due to increasing weight of China in art
markets. Another characteristic of the research is higher focus
on structured opportunities of investment in art as many of the
previous papers considered simple transactions such as buying
and selling artworks on auctions. The financial attractiveness of
indirect investments in art through art funds is still a fruitful
field of research. There are also art related derivatives that have
already attracted attention of some scholars. Examples include
an article by Kraeussl and Wiehenkamp (2012) who studied the
implications of a call option on art index that would allow
investors to hedge their exposure to art market.
5) Theoretical Context
A large number of papers that study art as an investment
possesses similar characteristics. For instance, majority of
academics use art indices either in the form of readily available
ones or constructed by themselves. Some other similarities in
research tools and samples can also be seen in a number of
studies. A comparison between art and other means of

investments often includes stocks, bonds as well as their sub-
categories such as small-cap or large-cap stocks and government
or corporate bonds. In addition, many studies on the topic
focused not on art as a whole (that would be difficult and
unreasonable to do), but on paintings, which represented around
80 percent of total auction turnover (Vosilov 2015).
Nevertheless, common features of many papers do not preclude
them from presenting a variety of interesting findings.
One of the most cited paper on the topic written by Baumol
(1986) demonstrates that investing in paintings gave almost 2%
less returns than investing in government securities. The real
expected returns would be even lower as the research did take
into account some related costs such as maintenance costs and
sales commissions. Moreover, author concluded that investing
in paintings has a significant risk. Frey and Pommerehne (1989)
found similar results in their study and showed that investing in
paintings is riskier but less profitable than investing in financial
assets. A more recent paper by Worthington & Higgs (2003)
considers different paintings markets such as Old Masters,
Contemporary European, Impressionists, among others and
presents similar evidence on lower returns but higher risks of
investment. The authors assume though that it might still be
possible to use some paintings markets for diversification
purposes.
Some authors, rather than primarily investigating whether
investing in art is better than investing in other assets, have also
focused on using art together with alternatives in order to
diversify an investment portfolio. Goetzmann (1993) states that
due to strong correlation between demand for art and equity
markets performance, art does not serve as an appropriate hedge
against equity market fluctuations. The author also, unlike many
other scholars, found that art as an investment yields to
relatively high returns. However, these returns are justified by
higher risks and after considering those risks, do not appear
attractive anymore. An evidence showing paintings as poor
diversification vehicle was also obtained by Stein (1977) who

did not see support for a popular belief that art is less
susceptible to recessions. The author obtained more neutral
results on risk-return figures of paintings showing that they are
no more and no less lucrative than other investment
alternatives. Contrary to the evidence above, some academics
have found the usefulness of investing in art for diversification
purposes. Campbell (2008) observed low correlation between art
and other assets and thus an opportunity for diversification even
when taking into account transaction costs. Mei and Moses
(2002) state that artworks may be an important component of a
diversified portfolio due to their low correlation with other
asset classes. Similarly, Kraeussl (2010) suggests using art to
diversify a portfolio, but warns on its high volatility and poor
ability to hedge against stock markets.
An empirical evidence showing the attractiveness of art as an
investment asset is less common but is worth considering.
Buelens and Ginsburgh (1993) used Baumol’s (1986) paper as a
starting point and found that his conclusions about low
profitability of paintings were too pessimistic due to higher
weight of British paintings, which distorted the results, and the
atypical artwork prices from 1914 to 1950. Authors argue that
the low return of paintings over the period of 300 years still
allows for 20 to 40 year periods of higher returns for some
paintings markets. They also state that paintings might be a
good opportunity for investment as tastes change slowly, but the
returns will highly depend on factors such as period, artistic
school and movement, etc. Tucker (1995) presents an even more
positive evidence showing that art had the second highest return
and the second lowest risk among the selection of seven asset
classes. The findings suggested that artworks should be
included in an optimal investment portfolio and should play a
significant role in it.
Most of the authors who have studied art as means of
investment have used either repeat-sales regression (RSR) or
hedonic regression in their researches. In the repeat-sales
regression used by a number of authors (e.g. Pesando 1993;

Goetzmann 1993; Mei and Moses 2002) only those artworks that
have been sold at least two times are taken into account. The
benefit of this approach is that it controls the quality factor of
works since the same items are sold (Goetzmann 1993).
Alternative approach used by a number of academics such as
Renneborg and Spaenjers (2009), Kraeussl (2010) and Frey and
Pommerehne (1989) is hedonic regression. This method uses
characteristics of items (e.g. artistic movement, artist’s name or
subject matter) to obtain input values. The benefits of using
hedonic regression approach include having larger samples by
considering all sales and avoiding the need to use artworks of
the same quality in order to make comparisons (Bialynicka-
Birula, 2012) as well as giving more precise results (Chanel et
al. 1996).
Besides various findings and opinions existing the topic of art
as an investment and making it difficult to give a single answer
on the research question, the shortcoming and limitations of
many studies make the task even more complicated and require
additional consideration. The limitations of some papers are
easier to spot and avoid in future studies. For example, Baumol
(1986) did not consider transaction costs in his study and the
author’s sample did not go beyond year 1961. Similarly, Stein’s
(1977) research does not cover the period after 1960s. In
addition, both papers as well as some other articles on this topic
were either limited to data from Anglo-Saxon markets or put too
much weight on it. These shortcomings are overcome by Frey
and Pommerehne (1989) by including more countries,
considering transaction costs and covering extended a period or
research until 1987. Some other limitations are more difficult to
eliminate as they are inherent to research methods and design of
papers. The repeat-sales regression used by many scholars is
subject to sample selection bias, since the approach considers
only artworks that were sold at least twice (Goetzmann 1993).
For this reason, a survivorship bias also takes place as the
limited sample only includes works the demand for which was
high enough to result in at least two sales. Moreover, a so-

called “backward-filled data” bias does exist in some articles
(e.g. Tucker et. al. 1995) as prices of artworks taken from
historical sales of prominent auction houses such as Sotheby’s
and Christie’s might gravitate to the higher end of market.
Other major drawbacks of using auction results for making
conclusions about the art market are the infrequency of sales of
individual artworks (Pesando 1993) and the fact that auction
sales account for only around 25 percent of the transactions on
the market (Sagot- Duvauroux 2003).
References:
1) Baumol, W. (1986) “Unnatural value: or art investment as
floating crap game”,
American Economic Review, 76, 10-14.
2) Bialynicka-Birula J. (2012) “Investment in art: Specificity,
Risks and Rates of Return”, Cracow University of Economics.
10-20
3) Blanding, M. (2017), ‘Why Global Diversification Is Still A
Safe Bet For Your Investment Portfolio’, Forbes, (13 Jun),
available:
https://www.forbes.com/sites/hbsworkingknowledge/2017/06/13
/why-global-diversification-is-still-a-safe-bet-for-your-
investment-portfolio/#256a49c960a1 [ accessed 14 February

2018]
4) Buelens, N., Ginsburgh, V. (1993) "Revisiting Baumol’s Art
as Floating Crap Game", European Economic Review, 37, 1351-
1371.
5) Campbell, R. (2008) “Art as a financial investment”, Journal
of Alternative Investments, (10), 64–81
6) Chanel, O., Gerard-Varet, L. and Ginsburgh, V. (1996) "The
Relevance of Hedonic Price Indices", Journal of Cultural
Economics, 20, 1-24.
7) Goetzmann, W. (1993) “Accounting for Taste: Art and the
Financial Markets over Three
Centuries”, American Economic Review, 83 (5), 1370-1376.
8) Frey, B. and Pommerehne, W. (1989) “Art Investment: An
Empirical Inquiry”, Southern Economic Journal, 396-409.
9) Kraeussl, R. and Lee, J., (2010) “Art as an investment: The
top 500 artists”, VU University Amsterdam, 4.
10) Kraeussl, R. and Wiehenkamp, C. (2012) “A call on art
investments”, Review of Derivatives Research, 15(1), 1-23.
11) Jinping, M. and Moses, M. (2002) “Art as an Investment
and the Underperformance of
Masterpieces”, American Economic Review, 92(5), 1656-68
12) Pesando, J. (1993) “Art as an Investment: The Market for
Modern Prints”, American Economic Review, 83(5),
1075-89
13) Renneboog, L. and Spaenjers, C. (2013) "Buying beauty:
On prices and returns in the art market", Management Science,
59(1), 36-53.
14) Sagot-Duvauroux, D. (2011) “Art Prices.” In A Handbook
of Cultural Economics, 2nd ed., R. Towse, ed. (p. 43–48).
Northampton, MA: Edward Elgar.
15) Stein, John P. (1977) "The Monetary Appreciation of
Paintings", Journal of Political Economy, 1021-1035
16) Tucker, M., Hlawischka, W. and Pierne, J. (1995) “Art as an
Investment: A Portfolio Allocation Analysis", Managerial
Finance, 21 (6), 16-24
17) Vosilov, R. (2015) “Essays on art markets: Insight from the

international sculpture auction market”,Umea: Umea School of
Business and Economics
18) Worthington, A. and Higgs, H. (2003) “Art as an
Investment: Short and Long-Term Co-movements in Major
Painting Markets”, Empirical Economics, 28, 649-68
Dissertation Title: The state of public awareness regarding
cryptocurrencies in the United Arab Emirates.
by
Aditya Mishra
Dissertation Supervisor: Dr. Ullas Rao
Word Count: 13,002
Dissertation submitted in partial fulfilment
of the degree of

MA (Hons) Accountancy and Finance
at
School of Social Sciences, Heriot-Watt University
Edinburgh
March 2019
Acknowledgements and Declaration of Authorship
I would like to express my sincere gratitude to Dr. Ullas Rao
my dissertation supervisor for his support, guidance and
valuable advice throughout my research. His guidance drove me
in the right direction for the research. I would also like to thank
Dr. Esinath Ndiweni for her support provided throughout my
research. I would also like to thank all the participants who took
part in this survey helping me to gather important information
without whom this study would not have been possible. Last but
not least, I want to thank my family and friends who have
supported me throughout my time at university and in giving me
the determination to complete my dissertation.
Declaration of Authorship
I, Aditya Mishra, declare that this dissertation is the result of
my own work. I have made full acknowledgement of the work
and ideas of others wherever appropriate and a list of references
is included in the end. I verify that I have read and understood
the SMLUndergraduate Dissertation Courses: Regulations and
Procedures. I also confirm that I attained ethical approval for

my study in the approved manner. I understand that as a student
I am required to abide by the Regulations of the University and
its discipline and ethical policy.
Signature: _______________________
Date: __________________
Abstract
The recent rapid rise in prices of cryptocurrencies and its crash
has gained the attention of people who were still unaware of
them. The literature on cryptocurrencies is scarce although now
rapidly increasing. Many investors have gained, and a lot lost in
the ‘crypto bubble’ of 2017. However, despite its recent
popularity, there still seems to be a majority of the general
public who still have no idea what bitcoin or cryptocurrencies
are and its usefulness. It is without a doubt that
cryptocurrencies will be becoming more common and will gain
a lot more users over the years.
The focus of this research is to study the current state of
awareness among the general public about cryptocurrencies in
the United Arab Emirates. A questionnaire was asked to be
filled by people working in various disciplines to get
heterogeneous responses. Questions were related to the current
understanding and willingness of people to use cryptocurrencies

and also why they would be reluctant to do so.
In summary, it was found within the research that there is a lack
of awareness and understanding about cryptocurrencies amongst
residents in the U.A.E. Young generations are more willing to
adopt new innovative technologies. People who invest in shares
are more likely to invest in cryptocurrencies then those who
invest in commodities or bonds. It was also found that there are
mixed responses when it comes to regulation on
cryptocurrencies by the government, however, it seems that
regulation would be a big boost for cryptocurrencies to raise
trust and awareness amongst people.
Future researchers can focus more on studying multiple
cryptocurrencies and the culture that form one. Studies are also
lacking in consumer behaviors towards cryptocurrencies. There
are currently a lot of misunderstands and information
asymmetry when it comes to cryptocurrencies. Research also
needs to be done on building up more awareness of
cryptocurrencies to build a stronger user base and increase the
applications. More studies need to be performed looking at how
cryptocurrencies could be brought mainstream.
Table of Contents
Acknowledgement and Declaration of Authorship2
Abstract3
Table of contents4
List of abbreviations 6
List of Figures6
Chapter One: Introduction8
1.0 Introduction8
1.1 Background information8
1.1.1 Research objectives9
1.1.2 Value of research10
1.2 Overview of Research methodology10

1.3 Contribution11
1.4 Structure of this dissertation11
Chapter Two: Literature Review13
2.0 Introduction13
2.1 Origins of cryptocurrency13
2.2 How cryptocurerncies work15
2.2 Commodity-Backed cryptocurrencies19
2.2.1 Cryptocurrencies based on Sharia law20
2.3 More insights into current research21
2.3.1 Innovation diffusion theory28
2.3.2 Technology acceptance model28
2.3.3 Crowdfunding and
ICOs……………………………………………………..29
2.4 Links to illegal activities and cause for regulation31
2.5 Chapter summary34
Chapter Three: Methodology35
3.0 Introduction35
3.1 Research strategy35
3.1.1 Ontology and epistemology36
3.1.2 Epistemological orientation Interpretivism vs
Positivism….....……….....….36
3.1.3Ontological orientation Objectivism vs
Constructivism……………………..36
3.2 Research Literature37
3.3 Data collection37
3.4 Data analysis framework39
3.5 Limitations39
3.6 Conclusion40
Chapter Four: Results and Analysis41
4.0 Introduction41
4.1 Descriptive analysis and discussion41
4.2 Conclusion57

Chapter Five: Conclusion58
5.0 Introduction58
5.1 Summary of findings58
5.2 Implication and recommendations59
5.3 Limitation and further research direction60
Reference List61
Appendix A: Blank Questionnaire form68
List of abbreviations
ICO
Initial coin offerings
Altcoins
Alternatives to bitcoins

Sharia compliant
In this context of study means coins which are complaint with
Islamic laws and principles
DLT
Distributed Ledger Technology
BTC
Bitcoin
EMH
Efficient Market Hypothesis
List of Figures
Fig 1. Source: trends.google.com
Fig 2. Hash rate for bitcoin. Source: (blockchain.com,2019
Fig 3. Factors affecting cryptocurrencies price, from
(sovebetov,2018).
Fig 4. categories of risk, (Kiran and Stannett, 2014).
Fig 5. Factors affecting cryptocurrencies price, from (Chuen et
al., 2017).
Fig.6 status of cryptocurrencies of different countries,
(Sovbetov,2018).
Fig 7. Q1 - What is your gender?
Fig 8. Age group of participants
Fig 9. Age difference’s compared with gender
Fig10. First instance of knowing about cryptocurrencies.
Fig 11. Participants view on popularity of cryptocurrencies
Fig 12. Cryptocurrencies and cyber security
Fig 13. Ownership of cryptocurrencies
Fig 14. Cryptocurrencies vs fiat currencies
Fig 15. Commodities usually invested in.
Fig 16. Riskiness of cryptocurrencies
Fig 17. Comparison of investor risk ideologies of traditional

assets vs cryptocurrencies
Fig 18. Acceptance level of cryptocurrencies in the UAE.
Fig 19. Transaction rate of cryptocurrencies due to zero
transaction costs
Fig 20. Respondents view on future cryptocurrencies prices
Fig 21. Effect of intangibles on investment decision
Fig 22. View on regulation in the UAE
Chapter One: Introduction
1.0 Introduction
This chapter aims to provide a synopsis of this dissertation.
Chapter one is organized as follows: background information,
an overview of the research methodology, brief look of key
findings, contribution provided and the remaining structure of
this dissertation.
1.1 Background
The age of digitization we are currently in possess major
changes in regard to classifying financial operations. Cash is
getting digitized not just in ways of virtual cryptocurrencies but
also current fiat currencies by the use of apps. But
cryptocurrencies have always somewhat been a mystery to most
of the population due to its complex working system. Its
underlying use of blockchain technology also confuses some
with hi-tech words and information technology related terms.
With the invention of Bitcoin in 2009, the world had seen its
first cryptocurrency. Although unaware of its importance and
use. Over the years many Altcoins (alternates to bitcoins) have
been issued and gained substantial market capitalizations,

upwards of billions of dollars. Over the last decade, research
interests in cryptocurrencies have risen. Governments have also
taken notice of them, some of them even introducing regulations
regarding them.
According to Google Trends (Fig. 1), Bitcoin was the second
most trending global news of 2017 which shows that more and
more people are taking interests in knowing what it is.
Fig 1. Source: trends.google.com
There are ongoing debates on whether to classify
cryptocurrencies as investment assets or currencies because they
function as both simultaneously. The notion has been more
towards classifying it as a commodity. In the midst of all this
confusion and complications cryptocurrencies have also been
linked to criminal activities which cause further fear to the
naïve from using them. There is significant information
asymmetry when it comes to cryptocurrencies or rather the lack
of information and knowledge itself. Firms are also starting to
consider launching ICOs (Initial coin offerings) as a source of
finance. A lot of advancements and improvements have been
made to the workings of cryptocurrencies over time. There are
also new types of cryptocurrencies coming into the picture like
commodity backed cryptocurrencies (e.g., OneGram which is
gold backed coin launched in Dubai which is also compliant
with sharia law). However, the success of all such prospects
depends on the awareness, transparency, and knowledge of
people on cryptocurrencies. Due to the lack of public
awareness, there is a misunderstanding of cryptocurrency.
People have not had the time to educate themselves on the topic
(Baur, Bühler, Bick, & Bonorden, 2015). Even though people
have embraced the idea of cryptocurrencies, many have not
weighed the pros and cons, which could make them vulnerable
to being scammed and lose all their wealth. Hence this study
aims to look at the current state of awareness among people. It

looks at the topic from the perspective of the general public and
their attitude towards cryptocurrencies. Cryptocurrencies and its
various related aspects are also discussed in this paper.
1.1.1 Research aims and objectives
This study aims to assess the awareness and knowledge of
cryptocurrencies amongst the general public who have earnings
and capacity to make investments. It also tries to bring out the
reasons why some people are still hesitant to use
cryptocurrencies and their attitude towards them. In addition, it
will gather the opinions of participants towards the current state
of cryptocurrencies and where it stands regarding using them in
the first place.
To form an understanding of the issues mentioned above the
research objectives are created:
· Objective 1 – To explore the workings, uses and various types
of cryptocurrencies available in the market.
· Objective 2 – To identify the critically the benefits and flaws
of cryptocurrencies over fiat currencies.
· Objective 3 – To understand the role of cryptocurrencies in the
fields of investment and financing with an overview on
international regulations about them.
· Objective 4 – To understand by interpreting the data collected
the reasons for low level use of Cryptocurrencies.
1.1.2 Value of Study
The concept of cryptocurrencies although is now a decade old,
research has only gained momentum a couple of years ago.
There is still intensive empirical research to be done and a lot
more to explore in this field. We need to gain more knowledge
to eliminate misunderstandings, increase transparency while
developing and improving upon the current technology on
cryptocurrencies. Researches are still debating upon the

classifications of cryptocurrencies as an investment asset or a
competitor to widely used fiat currencies. Hence it still remains
a widely controversial and less researched topic. This research
will not only educate the reader on cryptocurrencies but also
provide useful insight to the current perception of the general
public on them, which can be useful for retailers or investors
thinking of adopting cryptocurrencies as payment methods. The
results of this research will signal as to why consumers are not
willing to accept or are willing to transact in cryptocurrencies.
It will build upon the existing literature considering user
perception into picture.
1.2 Overview of Research methodology
The study adopted a qualitative research approach with
inductive research philosophy to generate a deeper understating
of the subject area. A questionnaire was used with a mix of
qualitative and quantitative data to some aspect to gather
information on the awareness of cryptocurrencies amongst the
participants. The results were then interpreted stating the
reasons and the implication of the results obtained. The research
is conducted under the interpretivist paradigm as it develops
ideas through induction from the data and tries to understand
what is happening.
1.3 Contribution
The most interesting piece of this research is the attitude of
investors towards cryptocurrencies. This will support future
research understanding the behavior of people towards
cryptocurrencies and if it differs while dealing with other asset
classes. Hence this research is distinctive and adds to the
existing knowledge in noteworthy ways. Firstly, it will study
the psychology behind the adoption of cryptocurrencies by the
people. This will help in making transparency clearer, and
which could help generate alternative types of cryptocurrencies

unlike the one's today which are not that preferred by people
today. Secondly, it will also find out if there are gender and age
biases when it comes to the general awareness of
cryptocurrencies. The results of this could clarify the
demographic which is likely to use this technology and adopt
them; this can potentially be advantageous to companies to use
this information to more efficiently allocate their resources or
for those who are just getting started with implementing
cryptocurrencies. Furthermore, the one hundred plus responses
to the study from participants in various disciplines and
industries should add credibility to the research and can help
future researches with similar areas of focus.
Lastly, this research also contributes to the scant literature on
new asset classes of cryptocurrencies and will be one of the
very first studies to look at the level of awareness of
cryptocurrencies. This research will stand out from the existing
ones that focus more on volatility, classifications and, economic
and legal perspectives. This study, therefore, extends the
literature by analyzing the state of awareness acceptance, and
usage of cryptocurrencies amongst people post the crash of
2018.
1.4 Dissertation Structure
In what follows from here on, the rest of the paper is structured
as follows: Chapter two will provide a theoretical context in
understanding on the workings of cryptocurrencies while
identifying the gaps in existing literature. Chapter three will
build a research methodology which is best suited to help
answer the research question and explaining how the research
was designed. Chapter four will analyze and interpret the results
from the data collected. The last section of this study, Chapter
five will conclude upon the findings of this research while also
proving recommendations for new investors and users into the
field. It will also consider the limitations of this research and
possible future areas of study.

Chapter Two: Literature Review
2.0 Introduction
This section aims to deliver a detailed summary on
understanding cryptocurrencies. It also reviews the current
literature on cryptocurrencies along with any gaps that occur
within the literature. This attempts to meet the objective of
exploring the workings and types of cryptocurrencies as well as
its pros and cons. The chapter is divided in to five sub sections:
Origins and need for cryptocurrencies, how cryptocurrencies
work, commodity-backed cryptocurrencies, current research and
evidences, links to illegal activities and cause for regulation,
and chapter summary.
2.1 Origins of cryptocurrencies
What are cryptocurrencies?
Cryptocurrencies are digital tokens that are created and stored
digitally. They use strong cryptography to keep them secure.
The first successful cryptocurrency ‘Bitcoin’ (₿) was
introduced in the year 2009 right after the financial crisis of
2008. Someone by the name of Satoshi Nakamoto published a

paper on the bitcoin.org forum in 2008, called ‘Bitcoin: A Peer-
to-Peer Electronic Cash System’ in which it is explained how
bitcoin would work and the blockchain technology that is
implemented under. It is still a mystery as to who this person is
as the identity has not been revealed. It is interesting to note
that Satoshi Nakamoto invented the blockchain technology to
work along with bitcoin (Nakamoto, 2008). Bitcoin was devised
to not only challenge the current form of currencies but also
brought along with it many advantages. It is assumed that
Satoshi launched bitcoin after the financial crisis of 2008 as he
saw a need for a revolutionary system, one that wouldn’t cause
panic in the economy in case of market crashes.
Cryptocurrencies can be seen as a subset of digital currencies
which are painful to counterfeit (Gilpin,2014). Cryptocurrencies
use a peer-to-peer method for instant payments. They are not
controlled by a central bank or the government and are hence
often mentioned as decentralized currencies.
Bitcoin challenges to overcome the flaws of fiat currency,
functioning as a digital currency with a limited supply and
growth rate embedded within its algorithm. According to the
quantity theory of money, it suggests that hyperinflation is the
result of increasing the money supply in the long run (Pollin,
1991). During 2008 the U.S government used Quantitative
easing to create more money electronically to stimulate
economic growth. Traditional fiat currency can cause problems
like inflation due to this. However, since bitcoin is limited to an
output of 21 million, this would cause the currency to be
immune to inflations. On the other hand, since bitcoin will get
rarer over time, it causes people to hoard on it rather than spend
it, which could lead to a state of depression. Governments or
other central authorities cannot control the supply of Bitcoins
(Yermack, 2013). Although the acceptance of cryptocurrencies
is growing it is still limited.
Cryptocurrencies do not have a physical existence in any way
shape or form and can be used in online transactions as a
medium of exchange. These transactions are also under the

control of its network (Chohan, 2017). Users can even do
microtransactions for as small as a Satoshi which is
0.00000001BTC. A Satoshi is a bitcoin to eight decimal places.
It lowest denomination is called one Satoshi or 0.00000001BTC,
which is worth about $0.0000398780 today. Like other
currencies, the value of bitcoin is depended the value that a
person would be willing to pay.
The incarnation of cryptocurrencies led to a revolution in the
online payments sector; this also led the way for new
cryptocurrencies to use blockchain system and others derived
from it to power digital, decentralized cryptocurrencies (Glaser
& Bezzenberger, 2015). Today there are over 2,000
cryptocurrencies in existence, while bitcoin holds roughly 50%
of the market share (CoinLore, 2019), many new ones form
every day and quickly fail, however, there are some are fake
ones looking cheat people of their money with a promising
launch scheme. Some of the common ones are listed below in
terms of their market share:
· Bitcoin
· Ethereum
· Bitcoin cash
· Litecoin
· Ripple (CoinMarketCap, 2019).
Traditionally we have relied on third parties for processing
financial transactions which tend to work pretty slow due to
institutional controls. They also charge a fee per transaction. Its
image has become linked with “speculators, profit-driven
entrepreneurs, market-fundamentalist…and technology experts”
(Yelowitz and Wilson 2015).
Here is an interesting fact, the first ever use of a cryptocurrency
was done on 22nd May in 2010 by a person named Laszlo
Hanyecz, a software engineer from Florida, who agreed to pay
for two large pizzas with BTC 10,000. (Yermack, 2013). Back
in 2010 the value of a single bitcoin was less than $0.01. At the
peak of bitcoin price in 2018 that would have cost $197.8

million. It is fair to say that bitcoin has gained quite an
attention in recent years along with other cryptocurrencies.
However due to its increasing price people have looked at them
as more of an investment rather than a payment option.
2.2 How cryptocurerncies work
Bitcoin and most of the other cryptocurrencies out there use a
network protocol called Blockchain. Blockchain can be
understood as a mechanism where a distributed network of
computer nodes, on regular intervals, cross-check a set of new
transactions (Swan, 2015). More simply put blockchain consists
of blocks of data which are linked together like a chain. The
entire thing forms the DLT (distributed ledger technology). For
example, in Bitcoin each block is limited to a data size of one
megabyte however there are no limits on the volume
transactions that can be added to a block unless it reaches the
one MB file size. (BitcoinWiki, 2016). The Blockchain
“represents all verified and valid transactions between users of
the network” (Glaser, et al., 2014).
Every single Bitcoin has its own unique address with both the
private and public keys. These keys are very important, the
public keys can only be retrieved from the private ones. A
transaction is only given a go sign when the private key
corresponds with a public key. This allows the users to use
blockchain to prove ownership of a bitcoin without the need for
a third party for verification. The maximum volume of bitcoins
that can exist is limited to 21 million, coded within its software
and the estimated year for the last bitcoin mined is 2140.
Protecting that private key is very important as it is unique, if it
gets lost or stolen it cannot be recovered. It is estimated that the
value of lost Bitcoins is US$ 950 million (Berke, 2017).
It is suitable to look at blockchain as a database of transactions
that get built gradually by participants who are running the
same software, guided by the inbuilt rules of the software itself.
This process continues as so long the software is being run by

the participants. Because of these participants, who are placed
all over the world the system can keep running even if one
individual person pulls out from the system. Meaning that an
individual participant cannot cause disruption or modifications
to the block, as all participants have a copy of the up to date
block and can verify the data with the network at all times. The
information inside the blockchain is available for the public to
see and is shared amongst other participants. As a result,
duplicating transactions or counterfeiting are next to
impossible. This solidifies trust and security in the system.
Blockchain in itself is a revolutionary technology whose source
code can be improved and modified to benefit the application
into consideration. This opens the possibility for blockchain to
store all sorts of data for example, legal contracts, shares and
bonds, and ownership titles of assets (Lee 2015), it can also
record voting outcomes (Noizat 2015). All such advancements
have given rise to block chain 2.0 developments, which is
simply the application of the technology to record items which
are not currency related (Swan 2015). Different coins can use
different complex mechanisms and have different features, and
some agree that these features aren’t yet fully discovered
(Phillip, Chan, & Peiris, 2018).
Investors in cryptocurrencies can be categorized into two, the
miners and traders. The miners are those who pool together the
resources to carry out mining (Wang & Liu, 2015), and the
traders who buy and sell cryptocurrencies through trading
platforms like Bitfinex and Coinigy. When it comes to digital
security many cryptocurrencies including bitcoin are designed
to use SHA 256 Hash algorithm. It’s full forms is Secured Hash
Algorithm 256-bit, which was designed by the NSA, this is a
secure algorithm can be used to authenticate the integrity of
data. Cryptographic hash functions are digitally run
mathematical operations. When miners are mining for
cryptocurrencies, they basically enter a completion of whose
block gets added to the chain next. They all have to guess the

answer to a mathematical question and guess because it can be
solved logically. Because of this large computing power is
required to guess the right answer first. As more and more
miners participate the answer to the question gets harder to
guess. This system of working is known as proof of work. The
rate at which these calculations to find the answer can be simply
put as the hash rate. It is possible for anyone to use this
function to generate an output when given an input, but it is
impossible to find out from the hash generated, what the input
data was. This makes it very secure to be used in
cryptocurrencies mining. An important thing to remember is the
higher the hash rate the more immune the cryptocurrency would
be to alterations and fraud.
Below is a picture showing the hash rate for bitcoin:
Figure 2. Hash rate for bitcoin. Source: (blockchain.com,2019)
Currently the hash rate for bitcoin stands at about 47 million
tera-hashes per second. This is an incredibly large amount of
computing power from across the globe to keep the network
secure. Although it has decreased from mid 2018 since the crash
indicating that some miners have stopped mining or the new
ones that hopped on the train have dropped out.
This decentralization of bitcoin and other cryptocurrencies is
built upon Satoshi’s idea of merging proof of work (PoW) ideas
with other techniques, the hash of a block is linked with that of
the previous one (Sovbetov, 2018). Thus, an attacker wanting to
counterfeit or modify data within the bitcoin mining network
would have to match that hash rate or have a higher rate. If an
attacker otherwise tries to generate an invalid block, it will get
refused by the other miners as the hash of that invalid block
will need to match the last one and that of the previous one and
so on until the very first block which was generated by Satoshi
himself (Sovbetov, 2018).

However, cryptocurrency mining under PoW protocol is tedious
and expensive requiring application specific Integrated circuits
(ASIC), these machines are built for the very purpose
cryptocurrency mining. Instead, these days most upcoming
cryptocurrencies use proof-of-stake (PoS) procedure which is
more eco-friendly requiring less computing power and thus less
energy, it is also cheaper to operate under than PoS.
Here are how the transactions in the bitcoin and some altcoins
work:
1. A public address is given to each person who has a wallet.
2. People can control that public key with a private one similar
to an ATM pin.
3. They then Identify themselves on the bitcoin network and
request for transfer of the cryptocurrency from their public
address to someone else’s.
4. The miners can then verify this transaction and add it to the
blockchain. The concerning parties can then view the
transaction as complete using their public address (Scott, 2016).
Decentralized cryptocurrencies have the potential to change the
existing retail system drastically and it is important to
understand factors that influence their adoption. Acceptance of
digital currencies as a supplementary payment method could be
a marketing tool that makes firms stand out (Roussou and
Stiakakis, 2016). The adoption of cryptocurrency as a payment
option is rapidly increasing, with firms such as Microsoft, eBay,
Dell, and Paypal, now accepting Bitcoin payments (Ussel,
2015). Cryptocurrency payments are anonymous, it does not
overtly identify the payer, or the payee involved in a
transaction, transactions are also irreversible.
Today bitcoin faces many competitors with different attributes
to gain competitive advantage. Nevertheless, the importance of
cryptocurrencies is increasing day by day. There have been

various cryptocurrencies unique in their own way, such as
Freicoin, this was a way to puposley include an inflation within
the system inorder to stop the trend of people hoarding on their
currencies and not suing them. Some have even built their own
cryptocurrencies based on their prefrences and culture,
Dogecoin for example which was built out of fun from an
internet meme which today sits at $241 million in market
capitalization. Regardless of their philosophies and culture.
They have, in the general sense have become related to liberal
thought.
The understanding of the workings of cryptocurrencies is
important for people to be confident enough to use them.
Although this paper only covers the workings of bitcoin and a
few other altcoins as covering all of them is out of the scope of
this paper. As mentioned earlier there are more than 2,000
cryptocurrencies today and some are unique in how they
operate. This brief coverage should give the readers an
understanding of most of them work.
2.2 Commodity-Backed cryptocurrencies
Due to the volatile nature of cryptocurrencies recently a lot of
commodity-backed cryptocurrencies have surfaced. They are
unique in some ways and promise to provide a more stable price
and value. Commodity-backed cryptocurrencies have very little
academic research done on them. It seems commodity backed
cryptocurrencies can be backed by any tangible, existing
commodities. The idea is that some physical thing is tied to the
value of the coin. The first commodity backed cryptocurrency
was ZrCoin which was backed by Zirconium Dioxide used an
industrial material launched in 2017, the value of which is
$1.95 today. A similar recent example is of a Swiss-based
company Tiberius Group AG has launched Tiberius Coin (TCX)
which backed by not one but seven different metals. These are
all ‘technology metals’ which is a mix of copper, aluminum,

nickel, cobalt, tin, gold and platinum, which are used in the
manufacturing of technology. This coin is also regulated by
Swiss law rather than some unregulated ICO. There is an
endless list of commodities backed cryptocurrencies and more
are upcoming every month.
Recently the Venezuelan government launched their own
commodity backed cryptocurrency called El Petro which would
supplement the current failing currency (Chohan,2018). This is
backed entirely by its oil reserves. And because it is backed by
oil, even if the value were to fall to zero it could be traded in
for a barrel of oil. This way the risk for the investor is not
greater than their initial investment.
Garrick Hileman (2015) from LSE has suggested ranking
countries like Zimbabwe, Venezuela, Argentina as the countries
who seem like the main candidates to use Bitcoin in the future.
In Argentina and Venezuela, the main reason could be inflation
of their national currency and use in illegal markets. Hileman
argues that within such a scenario the anonymity offered by
cryptocurrencies can help criminals in engaging with illegal
activates.
2.2.1 Cryptocurrencies based on Sharia law
(Singhal A. and Rafiuddin A, 2014) have studied the role of
bitcoin in the economy with special emphasis in Dubai. They
study the compliance of bitcoin with regards to Islamic banking
to figure out whether or not it is compliant with sharia law.
They say bitcoin does follow the definition of money according
to Islamic laws, i.e. it is abundant and available freely, it is
durable and does not spoil, and it acts as a medium of exchange.
They also suggest that the UAE government could allow the use
of bitcoins through regulation to encourage a transaction less
and tax less usage. Although the Islamic laws prevent certain

activities which are illegal in the Islamic law domain such as
gambling that bitcoin and other cryptocurrencies could be used
for. There needs to be a sophisticated way to identify and stop
the use of cryptocurrencies against such things if the UAE were
to adopt it.
A study by (Evans, 2019) analyzes the relationship between
cryptocurrencies running on blockchain management system
(BMS) and Islamic Banking and Finance (IBF). They find that
BMS can conform with the prevention of riba (interest or usury)
and incorporate the philosophies of maslaha (public interest),
and mutual risk-sharing. He concludes by saying that that
Bitcoin or a similar cryptocurrency might be a more appropriate
medium of exchange for Islamic Banking and Finance than
interest-backed fiat currency (Evans, 2019).
In 2018 OneGram coin or OGC was launched in Dubai. This is a
true sharia complaint cryptocurrency which has also won the
best Islamic cryptocurrencies award by The Islamic Retail
Banking Awards (IRBA) in Dubai. What is unique about this is
that each OGC is backed by a minimum of one gram of gold, 1
OGC = market price of 1 gram of gold, this provides it a stable
floor price. What is strikingly different about the OGC is that
there are transaction fees incurred as they happen. The
transaction fee is then 70% invested to increase gold reserves
and this makes the currency stronger with every transaction
(Onegram.org, 2019). OGC also incorporates the PoS method
rather than the PoW. Like Bitcoin OGC also has a limited
supply, but at 12.4 million OGCs, but it not reliant on bitcoin to
assess its value.
2.3 More insights into current research
Although the literature on cryptocurrencies is scarce, it is
growing and there have been a few studies on various aspects
like volatility and improvements and suggestions form an IT
standpoint. There have been studies based on awareness and
knowledge of cryptocurrencies but from country-specific

perspectives. A few studies have been done postulating theories
with the investor decision-making process in cryptocurrencies
investments, like (Yilmaz and Hazar, 2018). They examined
five important attributes profitability, convenience, anonymity,
security and bookkeeping which are vital attributes that affect
an investors decision-making process using conjoint analysis.
They provide a matrix of what investors put attention to while
investing in cryptocurrencies based on the attributes mentioned
above.
The market for cryptocurrencies has shown tremendous growth,
even after the crash of 2018 it seems to be now somewhat
stable. The total market valuation of cryptocurrencies stands at
$141 billion (CoinMarketCap, 2019). This marks a vital
importance for the financial markets.
Despite the recent popularity investors seemed to not have
adequately understood theoretical foundations of
cryptocurrencies (Chohan, 2017). There are a couple of
academic studies on the same as (D’Alfonso et al.,2016) and
(Lee et al.,2015), who suggest that due to the lack of
comprehensive understanding investors may shy away from
making such investments. However, investments can only
increase in the field if common awareness interest and
understating among people increases, which is also the focus of
this research.
A study by (Folkinshteyn D.,2015) looks into the motives for
people from undeveloped or developing countries to be using
cryptocurrencies. These include:
• Using them as a means to facilitate low-cost remittances
internationally at no cost.
• Ease of use, just by downloading a wallet app rather than
going through a lengthy procedure from financial institutions.
• The technology that cryptocurrencies underpin, offering the

basis for a richer set of financial services (Folkinshteyn
D.,2015)
In the study conducted by (Bruijl, 2017), it was observed that
cryptocurrencies are still limited to highly educated people. A
paper by (Schuh and Shy, 2016) also have similar findings in
the US; consumers are still less aware of bitcoins. Males are
more aware than females about cryptocurrencies. High income
and education individuals also have more awareness relating to
cryptocurrencies. Studies settle that the new generations are
more advanced into the Internet and communications
technologies related things (Arora & Rahul,2017).
Another research conducted on Greek populace by (Tsanidis et
al.,2015) showed that males with a graduate degree are more
aware of the concept. Most of the participants in the research
came to know about bitcoin in the last two years. The study was
concluded stating the success of Bitcoins was not clear and
there is still a lack of awareness in Greek populace about
Bitcoins. A study by (Alaeddin & Altounjy, 2018) found that in
Malaysian students there was a significant impact of awareness
and trust that generated an intention to use cryptocurrencies. A
few people actually use cryptocurrencies; this can be credited to
it not being acknowledged widely due to its fluctuating price. A
few countries have hence chosen to characterize them as a
digital asset rather than currencies. Another study by (Shahzad
et al., 2018) in central land China proposes that awareness and
trust play a significant role in determining the purpose to use
Bitcoin.
Studies have been conducted studying the factors that can
influence the price of cryptocurrencies, mostly on Bitcoin. A
research conducted by (Sovbetov, 2018) examined the factors
that affected the price of one of the most widely used
cryptocurrencies today like Bitcoin, Litecoin, Monero,
Ethereum and Dash They also discuss that block halving could
play a role in the increased price of bitcoins. This first
happened on 28th November 2012, where the block rewards

were reduced from 50 bitcoins per block to 25. Following this,
the prices increased to $260 per bitcoin in April next year and
$1,163 per bitcoin by the end of 2013 (Sovbetov, 2018).
However, it is still uncertain if block halving plays a significant
role in increased prices in bitcoins in these circumstances.
Studies (Kristoufek, 2013 and Buchholz et al., 2012) have
attempted to establish the factors influencing the value of
bitcoins. They find that price is mainly influenced by supply
and demand of Bitcoin, and its fascination that investors have
and international financial and macroeconomic changes. On the
contrary, Ciaian et al. (2014) have contrasting views that the
macro-financial advances are influencing the price of bitcoin.
News related to cryptocurrency regulations also seem to affect
the prices of them, a study by (Bartos, 2015) find that negative
news has a higher impact on the price of bitcoin than positive
news.
The following figure from (Sovbetov, 2018) show the factors
they determined to affect the price of bitcoins:
Fig. 3 Factors affecting cryptocurrencies price, from
(sovebetov,2018)
Their findings related to pricing were as follows:
Firstly, factors related to the markets such as market beta, no.
of transactions, and price fluctuations seem to be the main
elements for all five currencies in the study, in short run as well
as the long-run. Secondly, the level of attractiveness also
matters concerning determining their price. However, this seems
to be only in the long-run. Which indicates that the
attractiveness of a cryptocurrency has time factor tied to it.
Lastly, the SP500 index did not seem to have an impact on
Bitcoin in the long run.
Studies have also been performed in the volatility of

cryptocurrencies. (Nashirah and Sofian, 2017) carry out such
research on bitcoin in specific, in their paper ‘High Volatility
Detection Method Using Statistical Process Control for
Cryptocurrency Exchange Rate: A Case Study of Bitcoin’, it
calculates the volatility of Bitcoin from January 2017 to
October 2017 based on daily closing prices of the asset.
Their paper labels volatility as "a statistical measure of
dispersion of returns for investors." They use Shapiro Wilk
statistical measure to evaluate volatility and use graphical
illustrations based on the box-whisker plot, which is an
excellent mechanism to identify outliers.
In their study, the plotting revealed 18 outliers exchange rate
information which implies high volatility for bitcoin. They also
reported a further 515.7% increase in volatility when comparing
the rate with the beginning and end of the test period. They
conclude by classifying Bitcoin as a high-risk investment which
could justify as to why its seen more as a speculative
instrument. The importance of studying volatility of Bitcoin is
to predict the future price of the asset, which is beneficial to
investors to bet on its price. (Kongslip and Mateus, 2017).
Thus, volatility could also be added to the list of reasons why
it’s not widely accepted as a payment method, “its high
volatility, a result of speculative activities, is hindering its
general acceptance as a means of payments for online
commerce” (Popper, 2013). The volatility creates a loop
scenario: if further people get involved, the coin values will
stabilize due to a larger the user base, one user would thus have
fewer impacts on the influence price.
The figure below by (Kiran and Stannett, 2014) categorize risk
associated in different categories and allocate a level of risk to
each of them:
Fig.4 categories of risk, (Kiran and Stannett, 2014).
In a paper by (Chuen et al., 2017), they do an insightful

analysis a select number of cryptocurrencies from the viewpoint
of an investor. They calculate the rewards and risks based on a
cryptocurrency index ‘CRIX’ which they had formed. The study
was conducted to give light on the debate of classifying
cryptocurrencies either as an asset or an investment.
Interestingly they find that there was negligible amount of
relation between traditional investment assets and
cryptocurrencies. Using sentiment analysis, the results came
out that the there was a return of 12.39 % annual returns. They
also conducted a Sharpe ratio test of which the results were a
figure of 8.21which indicates that is a good opportunity for
investors. The below figure from their paper shows that their
CRIX index outperformed traditions indices although there are
very high risks associated with it.
Fig 5. Factors affecting cryptocurrencies price, from (Chuen et
al., 2017).
In a paper by (Bartos, 2015), he studied the effect of new
announcements regarding cryptocurrencies on the value of
bitcoins to test if it reflects the EMH. Efficient markets refer to
markets where the prices on the market reveal all publicly
available information and react to that information quickly
which changes the price accordingly. This means no investor
can outperform the market consistently without insider
information, other than luck. Efficient market hypothesis and
behavioral finance contradict each other in terms of investor
rationality. According EMH investors decide rationally, but
according to behavioral finance investors could be irrational.
There are market anomalies that EMH can’t explain the
movements of.
The is presence of anomalies in the real-world markets like the
January effect, the merger and acquisition effect etc. Behavioral
finance is a new topic and being researched greatly in the recent
years. The empirical analysis by (Bartos, 2015) verify that of

cryptocurrencies react on new publicly available news,
especially bitcoin and hence follows the EMH. Specifically, it
was found that BTC prices were higher during positive events
and negative while there were no innovations. This analysis
established the importance of events on prices of
cryptocurrencies (Bartos, 2015). (El Bahrawy and Alessandretti,
2017) observe behavior of the whole market (which was 1469
cryptocurrencies at that time) 2013 & 2017. They find that even
though new cryptocurrencies come and go everyday their market
capital is still rising rapidly and most have maintained stable
prices.
There are two theories Innovation Diffusion Theory and
Technology Acceptance Model that we take a look at next,
which could be linked to studying and understanding
cryptocurrencies better.
2.3.1 Innovation Diffusion Theory
Innovation diffusion theory is a theory which attempts to
describe the rate at which new technologies and ideas spread
along with reasoning for why it would spread. Innovation
diffusion theory has been used in studies like (Bohr and
Bashir,2014) and (Chang et al.,2016) where a positive influence
of awareness towards usage of technology was observed.
An interesting study by (Wonglimpiyarat,2015) was conducted
to find the chances of bitcoin to replace our cash-based society
in 2015, the study looked into understanding the technology
change using the technology S curve. The results indicated that
there were parallel S-curve trajectories in innovations of
electronic money which signified a direction towards a lower
level of cash-based society by (Wonglimpiyarat,2015). Their
results hence supported the diffusion of bitcoin and other
cryptocurrencies. Moreover, if the diffusion were to happen on
a large scale, it could even affect the operations of the monetary
system (Stevens, 2017). Economies and bankers would pay key

attention to them.
2.3.2 Technology acceptance model
The TAM is similar to innovation diffusion theory in the sense
that these models test how readily users accept and apply new
technologies. Technology Acceptance Model (TAM) was
developed by Davis (1989) and is deployed in many studies
relating to technologies adoption theories. In the TAM model,
there are two factors, perceived usefulness (PU) and the second
being perceived ease of use (PEOU) which together determine
the intention to adopt new technology. According to the model
the better the perceived usefulness and perceived ease of use of
new technology, the more positive attitude people have on the
technology, which motivates them to adopt and use it.
Venkatesh, Morris, Davis, and Davis (2003) later introduced the
Unified Theory of Acceptance and Use of Technology with
additional factors (Jonker, n.d.). Technology acceptance model
has been adopted in a lot of studies like Chin, W. (2010),
Chuang, L. (2016) and Davis, F. D. (1985). Awareness is
important in the adoption of innovative technology as it
provides information about applications of such innovative
ideas. (Aloudat A. et al., 2014),
There have been a few studies on the practicality of acceptance
of cryptocurrencies as a payment method. The reason why its
acceptance has persisted to be limited is that most retailers feel
it is limited or no added value of such payments in contrast to
other payment methods (Jonker, n.d.). Jonker conducted a study
amongst 768 retailers in the Netherlands based on the TAM. A
crucial factor limiting crypto adoption by retailers was found to

be low consumer demand. He suggested that further research is
needed to gain more insight into the factors influencing
adoption of cryptocurrencies and the barriers consumers
encounter. My research is thus focusing on awareness and also
to seek some factors through the participants' perception.
.
2.3.3 Crowdfunding and ICOs
We have seen that the use of cryptocurrencies can help address
the limitations present in many online payment processing
systems today. Its advantages over current payment systems like
such as the speed of processing payments, no transaction fees,
and its inherent privacy and anonymity make it an ideal
alternative in Crowdfunding payments. Bitcoin and altcoins
could solve the bottlenecks of high charges present in using
traditional payment options. However, the actual scale and
nature of its applications and outcomes will be depended upon
how it addresses the challenges such as the regulatory
environment (Gebert M., 2014).
An initial coin offering (ICO) is a mechanism through which
new ventures raise capital by selling virtual coins to a crowd of
investors (Fisch, 2019). ICOs are highly debated due to their
controversial aspects. Because they are mostly unregulated, they
enable startups to raise large amounts of capital, avoiding the
compliance costs and intermediaries who would otherwise
charge fees. Because of the high investment risk and potential
for fraud, some jurisdictions, such as China and South Korea,
have recently banned ICOs (Russell, 2017). In the United
States, the Securities and Exchange Commission (SEC) has
issued a warning to investors but also acknowledged the
innovative potential of ICOs (SEC, 2017).
(Fisch et al., 2018) Explore investment motives in ICOs or
blockchain coin sales. Based on primary data of 517 ICO
investors, they find that investors are driven by:
• ideological motives,

• technological motives, and
• financial motives.
In further analysis, they differentiate investors according to the
motives identified. One distinguishing feature noted of ICOs in
the study was that investors partially follow ideological motives
when investing in ICOs. This notion can help differentiate
against other forms of raising capital like ventures. There is
sync with crowdfunding with both in terms of delivering new
means of financing and as new investment opportunities (Fisch
et al., 2018).
ICOs can be modified to work in different ways; they do not
have to mean a loss of ownership of the company and can be
used just as an alternate means of raising finance. Through
2015-2016 NEO earned $4.5 million through offerings. It went
from 0.03 cents a token to $50 each, earning investors a
staggering 150,000% return (Investopedia, 2019).
2.4 Links to illegal activities and cause for regulation
Governments are now starting to recognize the potential of the
cryptocurrencies and are issuing more and more regulations
regarding them, some have even gone to the extent of banning
while some still trying to classify it as an asset or a currency.
These can be seen as either to protect against fraud or illegal
cases. There is still discussion happening on various areas
regarding cryptocurrencies such as how to tax them, how to
account for cryptocurrencies and how to form regulations for
them.
Bitcoin has been negatively associated with use in the illegal
dark web commerce sites (Barratt, 2012; Trautman, 2014).
Cryptocurrencies also face the problem of money laundering
and dealing with illegal substances of various kinds (Brezo &
Bringas, 2012). Silk Road was a popular darknet website that

allowed people to buy drugs online and it accepted only bitcoins
as payment. The website has now been shut down by the FBI as
of 2013. However there still many websites on the darknet
which conduct the sale of illegal services and activities all
accepting payments in cryptocurrencies. This is due to the
anonymity that cryptocurrencies offer. The websites are
accessed using the Tor or Onion browser which makes them
more anonymous online and harder to track down and they
present new challenges to the governements.
Brown (2016) rationalized that the go to currency for
cybercriminals was bitcoin. Its distinguishing characteristics of
decentralization and unrecognizability were the factor that
gained the interest of criminals, and yet some see bitcoin as
posing very minimal levels of money laundering . A paper by
(Stokes, 2012) examines that if criminals were to use BTCs for
money laundering systems, then it could be easily identified
through the price rate fluctuations as the market remains
volatile. Due to the price volatility, criminals might not want to
use bitcoins or other cryptocurrencies as a gateway to money
laundering (Stokes, 2012). However even today Bitcoin
constitutes a considerable hazard in terms of criminal
organizations and law enforcement officers (Dallyn, 2017).
Recently it was reported that the U.S federal court ruled out
cryptocurrencies as commodities like gold or oil after a $6
million fraudulent case of an illegitimate cryptocurrency called
My Big Coin (MBC) (Canellis, 2019).
Cybercriminals could also be using the computing power from
your devices for cryptocurrency mining operations. Recently
such an attack as reported at large scale when unpatched
versions of Windows 2003 Web servers were infected with
modified mining software. The loss due to this was estimated to
be more than US$ 63,000 (Seals, 2017).
The figure below from (Sovbetov, 2018) shows a list of

countries and their status towards cryptocurrencies from:
Fig.6 status of cryptocurrencies of different countries,
(Sovbetov,2018).
2.5 Chapter summary
Current literature is still growing on the topic, as more and
more cryptocurrencies and ideologies appear new studies will
have to be conducted to test their viability and suggest
improvements until the perfect cryptocurrency is made. There
are many gaps still existent in the literature like the study of
awareness and acceptance on a global scale, making networks
safer, researching about the different types of modified DLTs,
tax and regulatory impacts on consumer adoption, etc. Most of
the research currently is done only on bitcoin; other currencies
are left out the equation, including them can help gain fruitful
and expansive results. New business models could be developed
by gaining a better understanding of the approach and models
used by entrepreneurs
Most of the research on cryptocurrencies are quantitative, and
more research needs to be done in the qualitative aspects such
as how culture in countries could affect the idea of
cryptocurrencies, etc. There also need to be a trend in order to
make cryptocurrencies more understandable to the public to
gain more user base. Full understating amongst people of non-
IT backgrounds has still not been reached.
Cryptocurrencies are still viewed as an unused, complex
technology that is limited to the knowledge of experts. Two
things would be needed for the broader adoption of
cryptocurrencies, they must become more comfortable to use as
a currency, and it has to disconnect from the negative relations
to solidify trust amongst the public. Eventually, its wider

adoption will boil down to the level of trust that consumers hold
in it as a reliable medium of exchange. Hackers and criminals
damage this trust. Smart regulation must be put in place to
protect users and build trust, but this, however, goes against the
concept of decentralization.
Chapter Three: Research Methodology
3.0 Introduction
In the last chapter current research and studies related to bitcoin
were discussed. It was observed that more qualitative research
focusing cryptocurrencies was needed to gain a better
understanding of the subject, for example current awareness
levels in countries and consumer perception towards
cryptocurrencies. This paper studies the level of awareness and
understanding of people in the U.A.E. This chapter thus designs
a research methodology around gathering and interpreting this
data. This chapter is constructed as follows: Research strategy,
data collection, data analysis framework, limitations and
conclusions.
3.1 Research strategy
The methodology if this research consists of gathering and
interpreting primary data to build upon the existing literature
and then also discussing the results of the analysis. This is

largely is qualitative approach study. To understand how this
was a suitable method for the study let’s take a look at the
differences between a qualitative and a quantitative study.
Qualitative
Quantitative
Principal basis of reasoning
Induction based, generating theories and hypothesis.
Deduction based, verifying theories through testing.
Ontological Approaches
Constructionism
Objectivism
Epistemological orientation
Positivism
Interpretivism
Research type
Exploratory
Conclusive
Table 1. Differences between qualitative and quantitative
research methods. (Bryman and Bell, 2011).
3.1.1Reasoning: Inductive vs Deductive
With inductive reasoning, a researcher builds theories through
primary findings and observations. (Bryman and Bell, 2011).
With deductive reasoning however it the complete opposite, a
researcher tests the existing theories and knowledge through
hypothesis building and testing.

This paper attempts to uncover the level of understanding of
cryptocurrencies between people through collecting primary
data. This study therefore reflects an inductive approach when
no theory is tested but knowledge is built upon.
3.1.2 Epistemological orientation Interpretivism vs Positivism.
Both epistemology and Ontology are important philosophies
when it comes to knowledge. Epistemology is the study of
theory of knowledge and the approach adopted for making
advancements in knowledge, it is also concerned with the
rationality of belief (Saunders et al., 2008). Interpretivism and
positivism have different approached and views. Positivists
believe that only statements that can be verified through
observtion are to be considered important (Ryan et al., 2002).
On the contrary interpretivists believe that it is importnant for
studies should factor human behaviours (Bryman and Bell,
2011).
Thus the approach of this study is Interpretivism as the aim of
the research is to study the human behaviour towards
cryptocurrencies. The data collected through consucting this
research will help form theories about cryptocurrencies usage
and awareness in the United Arab Emirates.
3.1.3 Ontological Approaches: Constructionism vs Objectivism
Ontology is the study of being, i.e. the views of a person that
they are surrounded with (Saunders et al., 2008).
Constrctionism is an aspect where knowledge is continously
being built where as objectivism “portrays the position that
social entities exist in reality external to social actors concerned
with their existence” (Saunders & Thornhill, 2012). This paper
takes on a qualitative approach and thus follows the
constructivism paradigm.

3.2 Literature Research
To start off with the research various sources of information’s
were used to gather an understanding of Cryptocurrencies and
relation and impact it has on accountancy and finance. This was
done through reading articles on websites. However, the main
literature research was done with a mix of academic sources and
creditworthy websites, as the literature on the topic is still
limited. The journals were found using the university’s
‘discovery’ portal and using google scholar.
After gaining a thorough understanding the gaps in the literature
were more visible which are many at this point of time due to
the smaller number of studies performed on cryptocurrencies. In
addition to providing a knowledge base for this research the
literature review also provides me an understating of the
research methodologies used in the studies and their drawbacks
and advantages. The methods most widely used are also the
methods adopted in this research which is discussed more in
depth in the next section.
3.3 Data collection
Since this study is based on cryptocurrencies, which work
entirely on the internet, most data in this paper regarding their
figures and status is collected from creditworthy
cryptocurrencies tracking websites such as CoinLore, Coinbase,
Coin Desk, etc. Although the study is based on U.A.E resident
participants, the data on cryptocurrencies included in the
literature review is global, i.e. since it is on the internet, there
are no country barriers in those terms. All of the data collected
on cryptocurrencies in this study was publicly available.
A questionnaire was used to get responses from people of

different backgrounds to get heterogenous responses from
participants. This study mostly works with qualitative data in
order to develop a further understanding of the perception and
awareness of people to cryptocurrencies. A Survey as explained
by (Krishnaiah and Rao, 1988) is very inexpensive and efficient
while being the easiest way to collect new information.
Previous studies like (Duma et al. 2018) conducted a study on
similar work also applied the use of a questionnaire to collect
information. There were no minor age or special groups
included in the research. All participants were informed before
filling in the questionnaire that their confidentiality will be
maintained. As argued by (Shaughnessy, Zechmeister and
Zechmeister, 2015) any failure to conducting research within
ethical boundaries can undermine the research and reduces
public respect on reading academic articles.
The data was collected from the use of an online platform called
Qualtrics, provided by university via login in from university
email. This was a very convenient method of generating a
questionnaire online and also made it easier for the participants
in filling it up. The questionnaire helped gather a significant
amount of responses in a short period of time. The questionnaire
included 15 questions of mixed qualitative and some
quantitative aspects, they were designed to be easy to fill,
typically, the longer the questionnaire with complicated
questions are the fewer responses are received (Galesic and
Bosnjak,2009). The questionnaire questioned the intent of
participants to use cryptocurrencies, their attitude of risk
towards and their stance towards the regulation of
cryptocurrencies. It also included an open-ended question, in
the end, to get the views and opinions of the participants
regarding cryptocurrency awareness and use in the United Arab
Emirates.
A total of 91 responses were recorded for this study. The survey
link was distributed using social media platforms as it is the

most viable method to get responses due to its dynamic nature
quickly. The survey was filled only with people having
previously heard about bitcoin or cryptocurrencies, and thus, a
random sampling technique without replacement was applied
along with the use of snowballing which allowed for more
significant and easier responses. There was also no data
filtration needed as all responses were received in full without
any missing data. A blank questionnaire form is present in
appendix A.
The questionnaire design of this research has also been applied
in previous research by (Duma et al. 2018) in order to underline
patterns emerging from the study whether the working class is
more motivated towards adopting innovation in technology than
the new or younger generations. This paper will also look into if
gender has any role to play when it comes to awareness and
understanding regarding cryptocurrencies.
3.5 Data analysis framework
The data gathered in this study through the questionnaire is
interpreted through descriptive statistics. Due to the small
sample size of 91 using sophisticated analysis techniques for
qualitative methodology like thematic analysis or content
analysis could not be applied as the questionnaire gathers a mix
of quantitative data as well and is not entirely qualitative, there
are also no interviews conducted due to it timely nature, to
justify the use of thematic analysis or content analysis, which
require coding of certain important repetitive words from
respondents. Software like IBM SPSS would also not have been
viable enough to reach a valid conclusion considering the
sample size.

As this study follows a constructivist approach and is based on
inductive principal orientation, there are no test of existing
theories using formulas and models but rather the explanation
and discussions based on the findings of the primary data. Thus,
this is an exploratory study through questionnaire method based
on random sampling technique. However, due to the small size
of the questionnaire analysis, it is more appropriate to avoid
much calculations with numbers, instead the data was used
thoughtfully in a narrative format to allow the reader to get an
idea of the responses received. Interpretations are achieved by
the use of descriptive statistics to explain the reasons for the
results of each of the questions asked in the survey along with a
description and implications. From here patterns and ideas can
be drawn.
3.6 Limitations
This is a study based on a web-based form of currency, the
internet was the essential means of data collection. The internet
is a great source for information without a doubt and provides
easier access to information, access to a larger audience for data
collection, low costs of information and saves time (Benfield
and Szlemko, 2006). Although there are challenges related to
data privacy and custody (Askitas and Zimmermann, 2015).
However as stated earlier all information was publicly available
and participants data was kept anonymous. As discussed by
(Smith,2015) questionnaire results can be biased and will not
always be correct. Computer hardware or software failure could
cause harm to research progress; hence, multiple copies were
kept of all data online as backup to resolve this issue. One main
limitation of using data from internet or getting responses from
questionnaire in general is that the sample may not be
representative of the entire population (Zagheni and Weber,
2015). Another limitation to this study is the fact that its studies

perceptions and awareness of people only in the United Arab
Emirates. This is not helpful in giving a wholistic conclusion on
the awareness and understanding cryptocurrencies on an
international scale.
3.7 Conclusion
The intent of this chapter was to discuss the methodology
adopted by this research which was best suitable for the study.
Following the discussion on ontology and epistemology and
qualitative approach was chosen. The means of data collection
and sampling methods were also highlighted. The upcoming
chapter presents the findings of the study and discusses on those
findings. It will finally enable us to draw up conclusions based
on the findings and which could help raise more awareness
amongst people regarding cryptocurrencies. It will promote the
idea and knowledge of cryptocurrencies while paving a way for
more researchers or organizations to understand consumer
perception and behavior on cryptocurrencies.
Chapter Four: Results and Analysis
4.1 Introduction
This chapter presents the findings of this research. Firstly, a
summary statistic is presented which gives an overview of the
91 responses received from the questionnaires. Secondly,
descriptive analysis is performed to show the results of each of
the questions asked in the survey. Data is presented through the

use of bars graphs and pie chats as they are very easy to
understand. Each question is given a description and is
discussed with the implications of the findings.
4.2 Descriptive analysis and discussion
This section will present the findings through the use of graphs
and charts and discuss upon each question one by one.
Q1 - What is your gender?
Fig 7. Q1 - What is your gender?
Form the 91 responses received most of them were males at
67% with 61 males and 31 females taking part in the study,
these figures could be something to pay attention to. The
questionnaire was open to fill online through a link distributed
on social media, but it looks like most females didn’t even
participate in the survey. We could assume that there is gender
bias present when it comes to understanding cryptocurrencies,
which could be the reason why females were hesitant to
participate. However, females not opting to participate in the
survey cannot conclude on gender biases as other factors may
have also caused this. Nonetheless this gives us a starting point
to compare the differences between the responses received from
both the genders.
Q2 - What age group do you belong to?

Fig 8. What age group do you belong to?
It is clear from the figure above that the young generation
populace show more interest towards cryptocurrencies. The
majority of the people who were willing to fill up the
questionnaire were from the age of 18-25. This result also
corresponds with that of (Arora & Rahul,2017) who show that
the newer generations are more advanced and willing to adopt
new technologies. It is interesting to note however, from the
Fig.4 below, that there were no major differences between the
genders when compared to the age groups. The young
generations showed equal participation, it was the age group of
45-55+ where the lack of female participants was seen.
Although the reasons for this are quite unclear. This
information could be useful to companies in the UAE launching
ICOs, or for companies to target the right demographic for
efficient allocation of resources.
Fig 9. Age difference’s compared with gender
Q3 - When did you first hear about cryptocurrencies?
Fig. 10 First instance of knowing about cryptocurrencies.
This question was drafted to get an idea of when the
participants had first heard about cryptocurrencies. The choices
were divided into three crucial phases of cryptocurrencies,
2009-2012 being the early years when cryptocurrencies werent

given much importance by people, only the experts, miners,
crimnal organizations and a hadful of other aficianados would
have known. The second phase from 2013-2016 was when they
increasing in prices especially bitcoin and gaining a wider
userbase. This is when even governments started to take notice.
U.S passed laws for investors to pay tax on incomes from
cryptocurrencies (forbes,2017), although later they could even
pay them in bitocin (coindesk, 2018). The third phase is when
cryptocurrencies were really booming, a lot of people hopped on
to invest in them raising the prices because of them demand.
Since there were no regulations this went out of control and the
cryptocurrencies market evetually crahsed in 2018. It is still
trying to recover eversince.
It is evident form the results that majority of the people (50%)
have first only heard of cryptocurrencies during this third
period. The awareness among people here is contributed to the
growing bubble. This implies that previously there hadn’t been
much marketing, use and awareness of cryptocurrencies. Most
people who know about cryptocurrencies only came to know
recently, which could mean that there is still possibility of less
knowledge and understanding of cryptocurrencies today. These
results are in parallel to a study conducted in Greece by
(Tsanidis et al.,2015) who also reported that participants have
acquired knowledge of existence of bitcoin in the last two years.
He concludes that there was still a lack of understating amongst
the Greeks regarding bitcoins and cryptocurrencies.
Q4 - Which ones do you think are the reasons for recent
popularity in cryptocurrencies?
Fig 11. Participants view on popullarity of cryptocurrencies

Grouping the results of this question into the three phases
discussed earlier, it is fair to say that majority of the people
who came to know about cryptocurrencies came to know within
the last two years, i.e. during the growth of the speculative
bubble. Mainly this question intended to find the reasons that
caused the participants to become aware of cryptocurrencies in
the first place. Most have become aware during the third phase
as discussed earlier. Although it seems from the responses
received that most people place more emphasis that the bubble
has made cryptocurrencies more widespread and placing less
emphasis on the underlying technology and features. This could
again imply that there is a lack of understanding of the
operations of cryptocurrencies which is why features like peer
to peer transaction at zero fee are given less importance.
Another interesting point to note is that the group of people
from the study who heard of cryptocurrencies in 2017-2019 who
are 41% of the participants, have mainly voted for can’t say as
an option indicating that they are even unaware of why
cryptocurrencies are trending recently in the first place.
Q5 - From a cyber-security standpoint, on a scale of 1-5 how
safe do you see cryptocurrencies as? (1 being least secure and 5
being highly secure)
Fig 12. Cryptocurrencies and cyber security
This question also intended to test the depth of understating of
how cryptocurrencies work. The participants had to choose on a
Likert scale from 1 to 5. The participants have mostly chosen 3,
with the mean of the results coming to 2.8. The most popular
answer was the one in the middle i.e. 3. Which on its own could

indicate that this option was chosen as participants were unsure
of what to pick. As discussed in the literature, cryptocurrencies
are based on cryptography and hence are highly secure from
getting attacked by hackers. It is even astounding to note that
the number of responses for a 1 one the Likert scale and a 4
were the same at 18 responses. Naturally and rationally one
understanding cryptocurrencies would expect for gradient
within the response of this question going from 1 to 5 while
increasing in responses on 5. However, this was not the case in
this study. Thus, we can conclude based on this response that
once again there is a lack of understanding or rather the
awareness of cryptocurrencies from cyber security perspective.
Q6 - On a scale of 0-4+ how many cryptocurrencies do you
own, or have you owned?
Fig 13. Ownership of cryptocurrencies.
With this question, I wanted to find out how many people have
actually invested cryptocurrencies. It turns out 85% of the
participants have never owned a cryptocurrency. This shows the
level of investment, adoption or use of cryptocurrencies by
people in the U.A.E. This number is significant, given that less
people are motivated to use cryptocurrencies due to its
fluctuating price. This could also be a result of the complex
system of maintaining a wallet and holding cryptocurrencies
which could shy away investors from making such investments.
In addition, this could also be because of various other factors
described in the literature review such as its association with
illegal activities, lack of knowledge of the technology etc. In
order to increase the use of them more trust has to be developed
among the users to create an intention to use them. This also

good news in a way that if people are educated about
cryptocurrencies in the right way there is a huge market in the
UAE for cryptocurrency related transactions and investments
given the high net disposable income per capita that the UAE
has.
Q7 - On a scale of 1-5 how likely do think the use of
cryptocurrencies will lead to a decline in the use of fiat
currency in the next 5 years’ time? (1 being least likely and 5
being extremely likely)
Fig 14. Cryptocurrencies vs fiat currencies.
This question seeks the view of the public regarding
cryptocurrencies becoming mainstream and influencing the use
of fiat currency. Most respondents have a negative stance on the
likelihood of such an event. Results were greatly in the area of
one (extremely unlikely) to three (neutral). This indicates that
consumers are not likely to use cryptocurrencies as much as fiat
in the next 5 years, we have already discussed the list of reasons
why this might be in the literature review. But the implications
of such a response basically concludes with saying that users
are also not very much interested in using cryptos in the UAE or
that they are unable to, which could lead to poor growth of
cryptocurrencies in the region and continue the problems of lack
of awareness in the region.

Q8 - What types of investments do you usually make?
Fig 15. Commodities usually invested in.
This question is was essential in understanding the ideologies of
the participants behind investing. Bonds would indicate a risk
averse investor, shares would indicate a risk taker, commodities
would also indicate a risk taker, cryptocurrencies are also
similar to commodities, this would give an idea about investor
behavior, will investors who invest in commodities have a
higher chance in investing in commodities? Is their approach to
risk with cryptocurrencies the same as it is with commodities or
what they currently invest in? 55% of the participants seem to
invest in shares, while investors in commodities and bonds
seems to be similar in size. To get a comparable answer, it has
to be merged with Q9 of the questionnaire which is discussed
next.
Q9 - On a scale of 1-5 how risky do see investments in
cryptocurrency as with regards to its price fluctuations and

volatility? (1 being extremely risky and 5 being extremely risk-
less)
Fig 16. Riskiness of cryptocurrencies.
Starting off with the response to this specific question we can
see that majority of the respondent view investments in
cryptocurrencies as extremely risky or risky to a great extent.
Which could be one of the main reasons for the low use of
cryptocurrencies by the participants in the UAE. However,
coming the data of this question from the previous one we can
see the results in Fig 12 below:
Fig 17. Comparison of investor risk ideologies of traditional
assets vs cryptocurrencies
The figure above is divided into 5 zones, taken from the Likert
scale of one to five from question 9. It also simultaneously
takes into consideration the investment choices from
participants from questions 8. For example, the number three
circle diagram shows the investment choices of people who
picked a 3 on the Likert scale of one to five in question 9
similarly the number five circle shows investment choices of
people who risk takers are, as they have selected option 5 which
is the view that cryptocurrencies are extremely risk-less. It is
interesting to note looking at the diagrams that participants who
have chosen option four and five compromise largely of

investors who usually invest in shares. The proportion of shares
investors gradually decreases as the we head back to one or is
rather higher in four and five. This indicates that investors who
invest in shares and are risk takers have higher chances of
investing in cryptocurrencies.
Q10 - On a scale of 1-5 how accepted do think cryptocurrencies
are for transactions in the UAE? (1 being least acceptable to 5
being highly acceptable)
Fig 18. Acceptance level of cryptocurrencies in the UAE.
We can get an insightful view with the chart regarding how
accepted cryptocurrencies are for payments and other
transactions in the U.A.E. Majority of the respondents voted
between one and three implying that there is very little to no
wide acceptance of cryptocurrencies in the region for
transactions. Increasing infrastructure in the region to adopt and
use cryptocurrencies online and offline could boost the
awareness and get more people to use cryptocurrencies as well.
Currently this research shows that are less shops and websites
that are willing to accept cryptocurrencies as payment methods.
However, this not only the case with UAE but also most other
countries, like Netherlands, as we saw earlier with (Jonker,
n.d.) who studied 768 retailers, where there was low acceptance
and motives to use cryptocurrencies. This was due to low
consumer demand because of the barriers encountered by
customers. It seems with the results that there is low consumer
demand in the United Arab Emirates as well. The only viable
ways to increase that would be awareness and acceptance.

Q11 - How likely on a scale of 1-5 are you to transact in
cryptocurrencies because of their zero transaction costs? (1
being extremely unlikely and 5 being extremely likely)
Fig 19. Transaction rate of cryptocurrencies due to zero
transaction costs.
We have discussed earlier that peer to peer transactions are an
advantage that cryptocurrencies offer without the existence of a
third party, this results in zero transaction costs and fees. Which
already is an advantage over using traditional third-party
systems. Surprisingly, the response from the participants were
that a majority of them would not use cryptocurrencies even if
there were no transactions cost incurred. This rule out the zero
transactions costs as a main factor of cryptocurrencies
acceptance, at least in the region. Rationally people would opt
to use cryptocurrencies for this feature, but people aren’t
always rational and that’s what behavioral finance and
qualitative researchers’ study, the human emotion aspect
towards things.

Q12 - In 5 years’, time what do you think will cryptocurrencies
be worth?
Fig 20. Respondents view on future cryptocurrencies prices.
The answer to this question could also help in explaining the
reasons why people aren’t up to take cryptocurrencies as
mainstream. 35% of the respondents think that the prices of
cryptocurrencies will stay volatile and hence could be
cautioning and disconnecting themselves from the idea of
getting into cryptocurrency trades. Another 29% of the people
were unsure about the future of cryptocurrencies which would
again also lead to a cautionary stance on cryptocurrencies.
These issues could be resolved by regulation and ensuring trust
to the users, however this would go against the concept of
decentralization that cryptocurrencies are based on.

Q13 - On a scale of 1-5, what impact does the intangible aspect
of cryptocurrencies affect your decisions to transact or invest in
them? (1 being negatively impacted and 5 being positively
impacted)
Fig 21. Effect of intangibles on investment decision.
This question attempts to seek whether the cryptocurrencies
being intangible has any effect on the investment decisions.
Most people seemed to have picked a neutral position, which
indicates that the tangibility or intangibility of cryptocurrencies
does not have either a positive or a negative influence in their
investment decisions made. Although a considerable amount of
respondents’ investment decisions seems to have been
influenced due to its intangibility. It might matter to investors
who usually invest in commodities, but since shares are
intangible, and it will affect shares investors less.
Q14 - On a scale of 1-5 how much would you agree with the
decision of the UAE government to regulate all offerings and
transactions related to cryptocurrencies? (1 being strongly
disagree and 5 being strongly agree)
Fig 22. View on regulation in the UAE.
We have seen that governments are now more actively looking

for implementing rules regulations on cryptocurrencies.
Although some think this against the foundations of
cryptocurrencies, i.e. them being decentralized and not
governed over by any authoritative state. The debate is still
ongoing. This question gathers opinions on whether or not the
UAE government should regulate ICOs and transactions related
to cryptocurrencies. 35% of the people voted for a neutral stand
on regulation of cryptocurrencies. While the next major scale
was picked at five with 24% wanting regulations. This shows us
that given the situations that there were to be regulation, most
people wouldn’t reject the idea. Given that regulation can help
crack down on illegal transactions and provide the users with
safety and trust while using them. Moreover, this would also
help boost the use of cryptocurrencies and, its awareness and
understating.
The last question, Q15 was an open-ended question where
participants could type out their opinion and thoughts regarding
cryptocurrencies:
Q15 - Lastly, what are your opinions on the current state of
awareness and use of cryptocurrencies, should people be using
it? If yes can you suggest some ways in which you could see it
become more mainstream.
This was a great way to get detailed insights into the
perceptions of the respondents. Since I haven’t used any
qualitative data specific methodology, there is no thematic or
content analysis conducted as such. However, there are a key
few words that the respondents answered the question with,
which are:
“Ways to accept multiple cryptocurrencies”, “not exciting
anymore”, “uncertainties with prices”, “”not understood by
most people”, “need education on its functionalities”, “careful
with cryptocurrencies”, “not aware of usage”, “more awareness

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