According to the Economist in January 2015, Bitcoins have three useful qualities in a currency: they...

According to the Economist in January 2015, Bitcoins have three useful qualities in a currency: they are “hard to earn, limited in supply and easy to verify.” Why therefore do many economists doubt that crypto-currencies can provide an alternative to conventional fiat money? What lessons from the historical evolution of money might the “Cartalist school” of money point to in the crypto-currencies debate?

Expert Solution

Economists doubt that crypto-currency can provide an alternative to fiat money because they are not easy to use.Using fiat currency is easy whether in paper or online transactions.Money is a legal tender which is easy to use while other financial products are not easy to use.Everyone is not comfortable trading on the stock market as it is complex. Similar is the case with crypto currency.In the real world ,crypto currency is a system which is very difficult to accept by people.The technology associated with it is difficult and the soft ware is not user friendly.Given a choice people will not use it.Just as internet took some time to be accepted ,similarly crypto currencies will take time to be accepted by all.

There are two schools of thought about the origin of money.According to the first theory ,the buyers and the sellers agree upon a common commodity to use as a medium of exchange.The second group the cartalist group lays emphasis on the role of government.They feel that currencies can only become money with the involvement of the state.For eg setting a mint to mint coins or stamping notes with the image of the head of the state.So according to cartalist crypto currencies are not accepted.

Rahul Sunny answered 2 years ago

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