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Does Bitcoin Presage a Digital Recasting of the Monetary System?
The Bitcoin could be a classic speculative bubble, but the digital currency may shed light on the future of money. Whether or not the Bitcoin survives, the technology that spawned it could prompt the creation of numerous decentralized currencies.
The decentralized, computer-generated Bitcoin has been in circulation since 2009, soon after pseudonymous developer Satoshi Nakamoto published its specifications online. But as Birch points out, todays international monetary system dates only to 1971. Its having a bit of a midlife crisis, he says. Theres no reason to imagine that a sort of ramshackle system that was held together from 71 onward is the optimal way of organizing money.
The Bitcoin may not survive, but Birch foresees a world in which people keep hundreds of electronic currencies in smartphone wallets. He says central banks have nothing to fear, giving the example of saving for retirement by forgoing unpredictable U.S. dollars for money based on kilowatt hours and cubic feet of water. If the priority of a central bank is price stability, then I would have thought they would be in favor of a wide variety of currencies, he says.