Dissertation/research method on the impact of Cryptocurrencies in the UAE

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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 Authorship 2 Abstract 3 Table of contents 4 List of abbreviations 6 List of Figures 6 Chapter One: Introduction 8 1.0 Introduction 8 1.1 Background information 8 1.1.1 Research objectives 9 1.1.2 Value of research 10 1.2 Overview of Research methodology 10 1.3 Contribution 11 1.4 Structure of this dissertation 11 Chapter Two: Literature Review 13 2.0 Introduction 13 2.1 Origins of cryptocurrency 13 2.2 How cryptocurerncies work 15 2.2 Commodity-Backed cryptocurrencies 19 2.2.1 Cryptocurrencies based on Sharia law 20 2.3 More insights into current research 21 2.3.1 Innovation diffusion theory 28 2.3.2 Technology acceptance model 28 2.3.3 Crowdfunding and ICOs……………………………………………………..29 2.4 Links to illegal activities and cause for regulation 31 2.5 Chapter summary 34 Chapter Three: Methodology 35 3.0 Introduction 35 3.1 Research strategy 35 3.1.1 Ontology and epistemology 36 3.1.2 Epistemological orientation Interpretivism vs Positivism….....……….....….36 3.1.3Ontological orientation Objectivism vs Constructivism……………………..36 3.2 Research Literature 37 3.3 Data collection 37 3.4 Data analysis framework 39 3.5 Limitations 39 3.6 Conclusion 40 Chapter Four: Results and Analysis 41 4.0 Introduction 41 4.1 Descriptive analysis and discussion 41 4.2 Conclusion 57 Chapter Five: Conclusion 58 5.0 Introduction 58 5.1 Summary of findings 58 5.2 Implication and recommendations 59 5.3 Limitation and further research direction 60 Reference List 61 Appendix A: Blank Questionnaire form 68

List of abbreviations

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

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.

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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.

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 to increase demand”, “leads to misuse and scams”, “refrain use till 100% sure and educated on technical workings”, “no control and regulation”, “not trustable for use or deals”, “awareness before use”, “works on speculation only”, “should become centralized”, “complex technology”, “enhance transparency”, “very volatile”.

The raw data of the responses received along with the metadata are submitted along with the dissertation in a USB drive.

4.6 Conclusion

The purpose of this chapter was to present the findings from the responses received from the participants. A questionnaire was used to get responses of 91 participants. We infer that the young generations are more willing to respond to new innovative technologies. We looked at the attitude of UAE based residents on different aspects related to cryptocurrencies. It was evident from the responses that there is a lack of awareness and understanding of cryptocurrencies among the participants. The conclusion on the entire study is provided in the next chapter.

Chapter Five: Conclusion

5.0 Introduction

This chapter provides the conclusion of the entire dissertation study. Firstly, the literature review provided a deeper understating of what cryptocurrencies are and how they work. This information helped us develop a questionnaire to gather information on the current level of consumer knowledge regarding cryptocurrencies in the UAE. We also decided that an inductive approach was needed to carry out the dissertation and a questionnaire was best suitable method for gathering information. Various aspects of information were gathered from the participants which helped in arriving at the goal of this dissertation which was to study the awareness of understanding of cryptocurrencies. It was found that majority of the population reported with a lack the knowledge and awareness on cryptocurrencies, they also have a negative stance on using cryptocurrencies due to lack of knowledge of using them, high volatility, no regulation to protect them and its complex nature. The participants also conveyed that more regulations need to come, and more awareness programs are needed to make using cryptocurrencies common and until there is a large user base and regulations the prices will keep fluctuating which will be a cause of hindrance for consumers using cryptocurrencies. A brief summary and future implications and recommendations are mentioned below.

5.1 Summary of findings

In the beginning we set out dissertations goals as follows:

· 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.

These goals were all we achieved. We interpreted from the data various things, there is a gender gap between the knowledge of cryptocurrencies based on this study, however the bias can be wrong as the study doesn’t employ a significant number of respondents. Furthermore, one interesting finding was that investors who invest in shares are more likely to invest in cryptocurrencies than those who invest in commodities or bonds. Cryptocurrencies along with blockchain technology do have potential to revolutionize many industries. However, currently there are boundaries present in both regulations and understanding the concept. People need to get educated on the topic before taking huge leaps with cryptocurrencies. People don’t have the motives to be using cryptocurrencies right now, due to its complex nature, links with criminals, and price volatility. Many respondents were unsure about the future of cryptocurrencies due to such factors and hence refrain investing or buying them.

5.2 Implications

The results have implications on many stakeholders of this research. It can help entrepreneurs looking to raise finance through ICOs or just implement cryptocurrencies as a mode of payment, especially for businesses based in the UAE. It provides how people in UAE behave towards cryptocurrencies and why they do so. This can help them build a cryptocurrency that meets all the criteria to make the perfect cryptocurrency.

The impacts of this research paper will be vast. Firms, investors, auditors and even the state can find this paper useful. The knowledge gained in the literature review will also help spread the awareness as it can educate people on how cryptocurrencies work. This will act as a guide to people who are just learning about cryptocurrencies. It can also act as a base for further research done regarding cryptocurrencies in the UAE.

5.3 Limitation and further research direction

This study has some limitations and thus the results have to be interpreted with caution. First of all, the study sample size is relatively small at 91 respondents, the results would have been interpreted better with a larger sample size. Secondly the study the use of questionnaire may not be the best and accurate method in collecting meaningful data. The answers given by respondents can be biased or not correct. The study is also based on residents in the UAE only and is the results could be interpreted with limitation to the UAE only.

The results of this study foster several queries that create potential areas for further research. Perhaps a similar study involving a more distinct group of participants would produce a more representative set of results. Using the results from this paper future researchers can test the findings and conclusions arrived at. Future researchers can focus more on studying multiple cryptocurrencies and the culture that form one. Studies are also lacking on 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 either through more regulations or marketing.

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Appendix: A

1. What is your gender?

· Male Female

2. What age group do you belong to?

18-25 25-35 35-45 45-55+

3. When did you first hear about cryptocurrencies?

2009-2012 2013-2016 2017-2019

4. Which ones do you think are the reasons for recent popularity in cryptocurrencies?

Its speculative bubble.

Peer to Peer transactions with no fees.

Its use of blockchain technology

Can’t say

5. From a cybersecurity standpoint, on a scale of 0-5 how safe do you see cryptocurrencies as?

6. On a scale of 0-4 how many cryptocurrencies do you own, or have you owned?

7. 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?

8. What types of securities do you usually otherwise invest in?

Bonds

Shares

Commodities.

9. On a scale of 1-5 how accepted do think cryptocurrencies are for transactions in the UAE?

10. On a scale of 1-5 how risky do see investments in cryptocurrency as with regards to its price fluctuations and volatility?

11. How likely on a scale of 1-5 are you to transact in cryptocurrencies because of their zero transaction costs?

12. In 5 years’, time what do you think will cryptocurrencies be worth?

Will increase in price

Will decrease in price

Stay Volatile

cant say

13. On a scale of 1-5, what impact does the intangible aspect of cryptocurrencies affect your decisions to transact or invest in them?

14. 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?

15. 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.

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