Apparently, cryptocurrencies make no sense.
The author offers the following qualities as being important for a currency;
- facilitating transactions;
- a store of value;
- lending of last resort.
And then goes on to explain why cryptocurrencies, specifically Bitcoin, fail to tick any of those three qualities.
Tellingly though, he hints at the reason why our current currencies do provide those features;
Fiat currency passes his three tests not because “the government guarantees it” but because we believe that guarantee.
Money is fungible, a unit of measure and a store of value because we have bought into the idea*. When enough of us cease to believe in a concept, it stops being real.
Some examples of this include; the 12 gods of classical Greek religion, purgatory, the noble savage, copper bracelets for arthritis and the Bermuda triangle.
Sure, cyptocurrencies are a million miles away from being trusted stores of value or tools to transact exchange today. However, should enough people find that they trust the concept enough to use it in a limited way, there is nothing to distinguish “Billy Occam Coin” from good old greenbacks.
In the meantime, if you distrust those central bankers but don’t want to buy a cryptocurrency that fluctuates 10% up or down daily, gold seems to have passed the test of time as a value store. You might find your local bartender reticent to give you change from an ounce of it when you order a beer, though.
*I disagree about the “lender of last resort” requirement – many of our economic issues today would have been avoided without this “public service”. Let failed banks die and new ones fill the space.