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35 Cato J. 383 (2015)
The Market for Cryptocurrencies

handle is hein.journals/catoj35 and id is 408 raw text is: THE MARKET FOR CRYPTOCURRENCIES Lawrence H. White Cryptocurrencies like Bitcoin are transferable digital assets, secured by cryptography. To date, all of them have been created by private indi- viduals, organizations, or firms. Unlike bank account balances, they are not anyone's liability. They are not redeemable for any government fiat money such as Federal Reserve Notes or for any commodity money such as silver or gold coins. The cryptocurrency market is thus a market of competing private irredeemable monies (or would-be monies). Friedrich A. Hayek (1978a) and other economists over the last 40 years could only imagine how market competition among issuers of private irredeemable monies would work. Today we have an actual market to study. In what follows I will discuss the main economic features of the market. I also discuss whether the market is purely a bubble. As an introduction to the topic, I offer the following comic verse about the contrast between Bitcoin and the physical gold coins of the past: In the past, money's value was judged with our teeth; We bit coins to confirm they were real. Now a Bitcoin's just data, no gold underneath. That's okay if it buys you a meal.' Cato Journal, Vol. 35, No. 2 (Spring/Summer 2015). Copyright © Cato Institute. All rights reserved. Lawrence H. White is Professor of Economics at George Mason University, a Senior Fellow with the F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics at GMU's Mercatus Center, and a Senior Fellow at the Cato Institute's Center for Financial and Monetary Alternatives. He thanks Patrick Newman for research assistance and participants at Cato's 32nd Annual Monetary Conference for comments. 'The fourth line is mine. It refers to the news that Washington, D.C. now has a food truck that accepts Bitcoin payments. The first three lines are by Gary Crockett (2014). His original fourth line was: Bitten bits don't make much of a meal.

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