One of the most well known tests for 'money soundness' is Mises' Regression Theorem.

There has actually been a lot of discussion surrounding its applicability (or not) to Bitcoin/cryptocurrency.

i would start your begin around that.

https://www.equibitgroup.com/media-center-blog-old/btc-and-regression-theorem

https://tucker.liberty.me/bitcoin-and-misess-regression-theorem/

https://pdfs.semanticscholar.org/febf/17eeb185fa9f22dee47ae350f316090d7563.pdf

There is also some good research from the American Institute of Economic Research (AIER) on the issue.

Can recommend "Is Bitcoin a Real Currency? An Economic Appraisal" by Yermack David (2015).

@MariusVogel while that Yermack David paper good, it is starting to become extremely dated it its appraisal, especially since most of the research was completed some five years ago.

the whole crypto space, and the blockchain industry as a whole, has matured immensely since, in my opinion - which is the main reason i point to some of the work being done at the AIER, which is much more current.

Marius Vogel recently published a paper in which he cited a paper of mine (False Premises and Promises of Bitcoing) saying I considered Bitcoin to be without value as Yermack does. This is an interpretation of my paper that is superficial and not correct. My paper is much more nuanced than that. In the conclusion, the last paragraph says,

• "There may be a useful place for alternative forms of electronic money. However, an improvement requires serious study of money, financial institutions, finance history, and understanding of how and why our system works as it does today. Bitcoin is an unintentional throwback to pre-medieval finance at best."
• (Note that pre-medieval finance was finance. The Roman Empire obviously worked quite well. Babylon was a wealthy power. We have records from the Assyrians of financial transactions using their money. A throwback type of money is still usable as money.)

Cryptocurrencies are mediums of exchange and stores of value to the degree they are used as such. It is quite clear that bitcoin is used as a medium of exchange, even though it derives most of its value from speculation. It acts as a store of value for some, although I would quibble that it resembles a gambling token more than a store of value.

Humans have used shell beads (native American wampum), feather belts (Papua New Guinea), and huge quarried rocks (South seas), as money. Money, with a little bit of thought is obviously an abstract, not a physical thing, so we can attach this abstract to anything and if others accept it - it's money. Money is a cultural/social construct - like the law. Money in the modern world is units of accounting. Since humans are using cryptocurrency as a medium of exchange it is a form of money. There are obvious limitations (as well as positive features) to shell beads on a string, feather belts, and rock wheels 9 feet in diameter. (The latter are very hard to steal.) But, societies used those forms of money for eons too. The physical conception of money held the world economy back for eons of time.

What I say in my paper is that current day Bitcoin and cryptocurrencies cannot and do not provide what they claim they do for the most part, and that this is due to the designer's near complete lack of education on what money is, how money in economies operates, and utter ignorance of how the banking system of the world works. My paper discusses those factors in quite a bit of detail.

The most important problems with cryptocurrency are the impossibility of banking using cryptocurrency and the idea that deflation of currency (more or less continuous increase in value of currency relative to goods and services) is a good thing for a currency used in an economy. Both of these fundamentals of cryptocurrency's design are simply risible buffoonery. That should be the takeaway from anybody reading my paper carefully.

Engineers in the modern world learn math pretty well. They learn physical sciences, and computing. But engineers, even many that operate companies, are completely ignorant of macroeconomics and banking. (Trust me, I've lectured many an MBA class.) However, in the naive interactions that engineers have with money, they know that banks have money in them. They know they get paid money and they usually stick the money into a bank, where by some mysterious process the bank will give them interest on the money (maybe, depending on the larger economic conditions). They have heard of loans, and most have used a credit card, which is a form of loans. Most either have or know people with home mortgages and car loans. They get those from a bank. Engineers also get cash in their pocket. If you ask them to show you some money, they'll pull out some coins or bills. Pretty much that's what engineers today know about money.

From that level of naive interaction with money, the engineers who examine cryptocurrency for a class project or in grad school (like Marius Vogel and every other person who commented here) are just unequipped to do so. Even with a paper like mine that leads them by the nose through it, they miss everything. I have multiple times had the experience of engineers expressing angry disbelief that banks actually work as they do. It would be funny if it weren't so pathetic.

One metaphor is that engineers working on cryptocurrency are like poetry majors walking in to lecture you engineering students and announcing from the front of the lecture hall that they have designed a new electrical power generation system. To support their qualifications and ideas, they tell you that they know exactly how to plug their kitchen appliances into the wall socket, and demonstrate their ability to do that at the podium. After this, they put up a slide on their projector that shows wires coming into buildings, and announce that wiring is the key to electricity.

You would react with laughter and possibly stunned disbelief, not so?

Please don't take this personally. It's a deficit in your basic educations because engineers just don't learn about money, banking, and finance. It just means that you need to improve that. You can start by really reading my paper carefully and absorbing the concepts that are there.

Article The False Premises and Promises of Bitcoin

If you want the ArXiv version, go there. arxiv.org(slash)abs(slash)1312.2048

ResearchGate insists an replacing link with their own.

Thanks. Interesting question and good answers.