Barbarians at the Monetary Gate - Project Syndicate

...A 2016 working paper by the International Monetary Fund distinguished digital currency (legal tender that could be digitized) from virtual currency (non-legal tender). Bitcoin is a cryptocurrency, or a kind of virtual currency that uses cryptography and distributed ledgers (the blockchain) to keep transactions both public and fully anonymous....


...But the danger of cryptocurrencies extends beyond facilitation of illegal activities. Like conventional currencies, cryptocurrencies have no intrinsic value. But, unlike official money, they also have no corresponding liability, meaning that there is no institution like a central bank with a vested interest in sustaining their value.

Instead, cryptocurrencies function based on the willingness of people engaged in transactions to treat them as valuable. With the value of the proposition depending on attracting more and more users, cryptocurrencies take on the quality of a Ponzi scheme.

As the scale of cryptocurrency usage expands, so do the potential consequences of a collapse. Already, the market capitalization of cryptocurrencies amounts to nearly one tenth the value of the physical stock of official gold, with the capability to handle significantly larger payment operations, owing to low transaction costs. That means that cryptocurrencies are already systemic in scale....

https://www.project-syndicate.org/commentary/bitcoin-cryptocurrencies-monetary-risk-by-andrew-sheng-and-xiao-geng-2017-08?utm_source=Project+Syndicate+Newsletter&utm_campaign=bad924b54a-sunday_newsletter_3_9_2017&utm_medium=email&utm_term=0_73bad5b7d8-bad924b54a-93854061