Bitcoin and other cryptocurrencies are the logical "next step" for money and are close to becoming a mainstream form of payment, according to a new study.

Researchers from Imperial College London and the trading platform eToro assessed the fundamental roles of traditional currency and measured how close cryptocurrency had come to fulfilling these.

They list the three main criteria as being able to act as a store of value, a medium of exchange and a unit of account. Bitcoin and other major cryptocurrencies are already serving one of those roles, as millions of people are using them as a store of value.

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In order to fulfill the final two criteria, the researchers said bitcoin and other cryptocurrencies will need to overcome challenges like scalability and regulation.

"The world of cryptocurrency is evolving as rapidly as the considerable collection of confusing terminology that accompanies it. These decentralised technologies have the potential to upend everything we thought we knew about the nature of financial systems and financial assets," said Professor William Knottenbelt from Imperial.

“There’s a lot of scepticism over cryptocurrencies and how they could ever become a day-to-day payment system used by the man on the street. In this research we show that cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment.”

Should cryptocurrencies continue to progress in terms of functionality, Professor Knottenbelt said they represent a viable technological update to the way we spend money.

Dr Zeynep Gurguc from Imperial added: "New payment systems – or asset classes – do not emerge overnight but it is worth noting that the concept of money has evolved – even in our lifetime – from cash to digital or contactless payments. The wider use of cryptocurrencies and crypto-assets is the next natural step if they successfully overcome the six challenges [scalability, usability, regulation, volatility, incentives and privacy] we set out in our report.”

Considering each evolutionary iteration of money has made the process of paying for something easier, the research paper concludes that the underlying technology of cryptocurrencies make them the next natural step towards reducing the friction of payments.

One possible way this could happen would be for cross-border payments, which currently involve lengthy and costly transaction times. The decentralised nature of cryptocurrencies mean they are borderless by design, and therefore negate such issues.

"The history of money is a history of evolution, of new technology replacing old to improve the transfer of value from one person to another. Cryptocurrencies represent a next step on this journey," said Iqbal Gandham, the UK managing director of eToro.