According to Eric Posner of Slate, the ever popular e-currency Bitcoin, a "secure, private, decentralized type of money that makes possible anonymous and virtually costless transactions across borders," is bound to fail as it is nothing more than an elaborate Ponzi scheme that contains "the seeds of its own destruction."
Bitcoin may be useful for certain types of transactions, especially illegal ones. But bitcoin?s defenders argue that the experiment has proved that a currency can come into existence and function without any government role, so designed as to make inflation impossible and bank transfer fees unnecessary. These features are supposed to make bitcoins irresistible for consumers. Meanwhile, stripped of the power to manipulate currencies to advance nefarious ends, governments will collapse, and we will live in an anarcho-utopia.
This is wrong, both theory and experience tell us. Bitcoin is not the first unregulated or private currency. Until central banks were invented in the 17th century, the money supply was unregulated even if governments did stamp coins. Other unregulated or private currencies have emerged from time to time?think of cigarettes in prison camps. Gold, silver, bank notes, and all kinds of other things have played similar roles.
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