Daily Archives: December 9, 2013

Bitcoin System: Some Additional Problems

By Eric Tymoigne

In my last post, I argued that the fair price of a bitcoin as a monetary instrument is zero BTC; a bitcoin contains no promise in terms of income, in terms of convertibility, in terms of maturity, or any other. As a commodity, I have no idea what its fair price is. BOA says it is $1300. I will let those who find utility in the bitcoin payment system and speculators decide how much they are willing to pay in USD for a number credited on their screen in BTC. All I can tell you is: “money does not grow on trees.” Money is not a natural occurrence, it is a man-made financial devise. It looks like the bitcoin creator’s views on money were shaped by the old and erroneous idea that “gold is money.” Gold was at best a collateral embedded in a monetary instrument (gold coin), the metal itself was never money. In today’s blog, I will focus on three other issues with the bitcoin system that prevent it to work well as a monetary system. While I explain what ought to happen to make the bitcoins work properly as a monetary instrument, I am not sure it can be done.

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