(As many Alt‑M readers will know, my interest in Bitcoin goes back to its earliest days, and even before that: like my grad school mentor and regular Alt‑M contributor Lawrence White, I took part in the 1990’s “cypherpunk” movement that prefigured Bitcoin’s development. Not quite two years after Bitcoin’s January 2009 launch, when one Bitcoin was worth less than $5, I wrote “Synthetic Commodity Money,” one of the earliest research papers addressing the economics of cryptocurrency. That paper wasn’t published online until August 2014. Soon after that I wrote a second paper, “Bitcoin: Problems and Prospects,” for Hillsdale College’s 2014 Free Market Forum, which neither Hillsdale nor I ever bothered to publish. I publish it here for the first time, leaving it to my readers to decide whether, and to what extent, the opinions I express in it have withstood the test of time.–Ed.)***Anita Folsom, in inviting me to take part in this year’s Free Market Forum, originally suggested that I write about the problems of Bitcoin. Although I suppose I might have done so easily enough, I have chosen instead to review both Bitcoin’s problems and prospects. I’ve made this choice because, while I recognize Bitcoin’s shortcomings, some of which are indeed serious, and while I even go so far as to wonder whether Bitcoins will still exist when this paper appears in print, I nevertheless consider them a wonderful development, and one that holds out some enticing possibilities for the future of money.
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