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Spring 2018
ISSN 0890-913X
Volume 33, Number 1

Is Bitcoin Intrinsically Worthless?

William J. Luther , Kenyon College
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/index.php?action=ajax&rs=GDMgetPage&rsargs[]=2018 Journal of Private Enterprise Vol 33 No 1 Spring parte3.pdf&rsargs[]=0
IsBitcoinIntrinsicallyWorthless?TheJournalofPrivateEnterprise33(1),2018,3145WilliamJ.LutherKenyonCollege______________________________________________________AbstractMoniesaretypicallycategorizedascommodityorfiat,dependingonwhetherthemoneyinquestionisintrinsicallyworthless.Inthecaseofbitcoin,itscategoryisnotclear.Iconsiderthesuperficialsubjectivevalueargumentoftenputforwardbynonmonetaryeconomistsandamoresophisticatedpaymentstechnologyargument.Afterdismissingboth,Iarguethattherearetworeasonableviewsonthevalueofbitcoin.Onemightclaimbitcoinlacksintrinsicworth,inwhichcaseitsvaluedependsonforesightandcoordination.Alternatively,onemightclaimthatbitcoinhasintrinsicworth,evenifnooneelseacceptsit,becausesomeusershavepeculiarpreferences.Ineithercase,bitcoinsexistencecallsintoquestionthepracticalrelevanceoftheregressiontheorem.______________________________________________________JELCodes:B53,E40,E41,E42Keywords:bitcoin,cryptocurrency,intrinsicworth,money,payment,paymentsystemI.IntroductionMoniesaretypicallycategorizedascommodityorfiat.Inthecaseofbitcoin,itscategoryisnotsoclear.Somemaintainthatbitcoinisacommoditymoney(e.g.,Graf2013a,2013b;Surda2014).1Othersclaimitisa(private)fiatmoney(e.g.,Velde2013;Sieroń2013).Selgin(2015)goessofarastoconstructanewclassificationschemealtogether,whereinbitcoinisdescribedasasyntheticcommoditymoney.21Surdas(2014,p.22)position,thatbitcoinisacommoditymoney,doesnotfollowifhisassertionthattheutilityofBitcoinisderivedfromareductionoftransactioncostsofexchangeismeanttobeexclusive.Ifbitcoinhasnoutilityapartfromitsroleinreducingtransactioncostsasamediumofexchange,itisnotacommoditymoney.2Selgin(2015)describesitemswithsomenonmonetaryuseandabsolutescarcityascommoditymonies;withnononmonetaryuseandcontingentscarcityasfiatmonies;withnononmonetaryuseandabsolutescarcityassyntheticcommoditymonies;andwithsomenonmonetaryuseandcontingentscarcityasCoasedurablemonies.
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