In my opinion, and based on what I wrote in my previous posts, those who dismiss the Bitcoin fever as a typical speculative bubble, as experienced time and time again throughout history, are mistaken. The difference is that Bitcoin is a brilliant invention, the like of which the world hasn’t seen before. It’s a unique thing, which means the outcome cannot be predicted.
As I explained in my previous post, Bitcoin can be an excellent means of avoiding the risks inherent in the existing monetary system. However, it shouldn’t be forgotten that Bitcoin is also part of an entirely different type of system, surrounded by entirely different (systemic) risks.
Based on what I wrote about the anonymity of Bitcoin, many might think that it should be outlawed by all means possible. Of course the question is not so clear-cut. The fact is that in situations of economic stress, it could be an excellent diversification tool.
In my previous post I summarized why Bitcoin can theoretically be used as a means of payment. However, I only mentioned the minimum conditions that it needs to satisfy. That in itself is not sufficient for Bitcoin to replace, if only partially, the tenders currently used. After all, why would anyone switch to Bitcoin, if it does not offer any advantage over money, which is tried and tested? It needs to offer some benefits that traditional money doesn’t.
Imagine a thing that is durable, uniform, divisible and easily deliverable/transferable. My readers, who are doubtless well versed in financial matters, will point out that such a thing could be used as money. However, at least two more conditions need to be met: