DIGITAL MONEY
GAVIN KEETON: A tulip by another name is still not a lasting currency
‘In theory, popular distrust in governments’ ability to ‘print’ money is the underpinning of the new cryptocurrencies’
Over the past 18 months, the price of the cryptocurrency bitcoin has risen eightfold. This extraordinary performance has piqued global interest. Cryptocurrencies are digital currencies whose supply is managed by computer algorithms. For their supporters, they represent valuable assets with the potential to become global instruments of exchange through which prices can be set and purchases transacted at low cost everywhere. Critics argue that cryptocurrencies are not money and investors will be deceived — just as those who lost their savings in the Dutch tulip bulb bubble of 1637. Money is a critical component of modern economies. Without it, prices and value cannot be measured and the exchange of goods and services is almost impossible. Yet the banknotes and deposits in our bank accounts have no value in their own right. Their value is derived from the transactions for which they can be employed. So, a central requirement for the long-term use of money is a strong societal sense of ...
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