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35 Cato J. 347 (2015)
The Bitcoin Revolution

handle is hein.journals/catoj35 and id is 372 raw text is: THE BITCOIN REVOLUTION Bennett T. McCallum The likelihood of the Bitcoin system replacing the Federal Reserve as the main provider of money in the United States and the desirability of such a transformation are the topics of this article.' With respect to the first of these topics, one needs to consider how far the so-called Bitcoin Revolution has progressed by estimating the average volume of transactions conducted per time period by means of Bitcoin payments, and then compare recent values of that magni- tude with the total volume per period of dollar payments in the United States.2 Francois Velde of the Federal Reserve Bank of Chicago has estimated that, as of late 2013, the average volume of bitcoin trans- actions per minute totaled less than four-tenths of 1 percent of average dollar transactions per minute-actually, not total dollar transactions but only the subset conducted by means of Visa credit card payments (Velde 2013). In the months since the publication of Velde's article the volume of bitcoin payments has been grow- ing rapidly, but their quantitative extent is still negligible from a macroeconomic perspective. In fact, this 0.004 magnitude is quite Cato Jounal, Vol. 35, No. 2 (Spring/Summer 2015). Copyright © Cato Institute. All rights reserved. Bennett T. McCallum is H.J. Heinz Professor of Economics at Carnegie Mellon University. He thanks Pierre Liang, Marvin Goodfriend, and Christopher Camp for helpful comments and suggestions. 1I have not attempted to explain the workings of the Bitcoin system in this article because it would require space and because I could not do this better than Velde (2013). 21n what follows, I will use Bitcoin as the name of the system, bitcoin as an adjective or a singular noun, and bitcoins to refer to specified quantities.

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