27 Jan 2014 / NY Times – How should we think about a currency like Bitcoin? The first thing to remember is this: Money is a sort of collective fiction. What money we choose to trust says much about how we see the world.
Above the simplest exchanges, most money has limited use. Gold, the most common historical currency, is almost only good for adornment. To its fans, gold’s uselessness is a value in itself; since the stock of gold is not consumed, it’s reasonably stable, while governments can print all the currency they want.
Paper is, of course, a proxy for the government issuing the money. How much we trust the government’s ability to collect taxes, pay debts, and so on is the collective fiction that gives a country’s money value.
Paper or metal, money is worth something only if people continue to believe in it. And right now, an increasing number of people believe in Bitcoins and similar, emerging stateless currencies. From parity with the dollar three years ago, one Bitcoin is now just over $800.
Marc Andreessen, a venture capitalist whose firm has invested just under $50 million in start-ups related to Bitcoin, has written a very helpful introduction to Bitcoin in Dealbook. It is also a spirited defense of Bitcoin. Mind you, a sensible person should read the essay aware that Mr. Andreessen has a significant number of United States dollars bet on Bitcoin’s increasing use….. Read more
