Bitcoin: Flash in the Pan or a Window into the Future?

Abstract

Since emerging on the scene in 2009, the digital currency bitcoin has sparked an intense debate online and in the financial presses about its relative virtues and vices as well as its implications for the future of money. In this paper, I examine whether it is likely that bitcoin will emerge as money, i.e. a generally accepted medium of exchange. I outline its unique attributes and defects to explain both its surprising popularity and its limited prospects for attaining the status of money. I conclude that, although the odds of bitcoin itself ever becoming money are slim, the innovations that its unique programming protocol unleashes could potentially have profound and far-reaching implications for monetary institutions, particularly in nations with corrupt and poorly managed money.