Bitcoin and the blockchain technology are wonderful inventions; its anonymity, decentralized technology and speed of transaction just to mention a few features that have aroused supporters. The extension of competition into the domain of money that it represents is perhaps even more welcome, coming as it does after almost a century of completely dominant fiat currency regimes (or feeble gold exchange systems). A bit like the internet of the 1990s, many are the proponents of cryptocurrencies predicting and imagining all the wonderful things BTC and its technological brethren will accomplish.

But is it really that great? As BTC-USD exchange rates soar even higher, its zealous followers grow bolder, prouder and more firm in their beliefs. Is the impressive gain and media hype really the vindication of their beliefs, or are most of its ardent followers simply blinded by vertigo?

The internet wiz’s of the 1990s were eventually right in substance but wrong in timing; their enthusiasm was premature, the then-fantastic technology lacking consumers’ willingness to embrace it. A similar story may unfold itself for BTC, its proponents cashing in its success way ahead of time. To show this, I’d like to draw your attention to an often-overlooked aspect of monetary theory: the quality of money.

Many economists have spent entire careers surveying and arguing aspects of money, the brightest shining star in that tradition was of course Ludwig von Mises. Among his most recent disciples, Phillip Bagus has taught us many important things about money – for instance: different monies and their accompanying monetary regimes have different qualities and that those characteristics matter for whether market participants are likely to adopt them:

“Money’s quality can be defined as ‘the capacity of money, as perceived by actors, to fulfill its main functions, namely to serve as a medium of exchange, as a store of wealth, and as an accounting unit.’1


The quality of monetary systems influences the demand for money and, thereby, money’s purchasing power. While much emphasis has been put on the quantity of money and its influences on money’s purchasing power, money’s quality, and the quality of monetary systems are equally important for money’s price, if not more so. In fact, money’s quantity may be interpreted as one of several characteristics that determine money’s quality and the likelihood and capacity of monetary regimes to increase or decrease money’s quantity is one of the important characteristics of the quality of a monetary regime.2

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