![]() ![]() One of the things that is holding back the net from realising its full economic potential is the high cost of conventional online payment systems, which mostly involve credit cards and high processing charges. ![]() What excites the latter is bitcoin's formidable utility as a medium for online trading. And because the process by which bitcoins are "mined" involves computers carrying out complex cryptographical computations, it is often called a cryptocurrency.īitcoin divides the world into two camps: one (the majority) thinks that it must be some kind of scam the other (comprised mostly of geeks and venture capitalists) thinks that it's the most interesting thing since, well, sliced bread. Because bitcoins can be transferred directly from one person to another, they are sometimes described as digital cash. Suffice it to say that it's a virtual payment system that has no central repository and no single administrator, characteristics that have led the US Treasury to call it "a decentralised virtual currency". Life is too short to explain it in detail, but Wikipedia does a pretty good job. Many of these "currencies" had money-like properties, but we did not think of them as money.Īnd then bitcoin arrived and suddenly everyone got very excited, or indignant, or both. Others include air miles, iTunes gift vouchers, discount coupons, two-for-one deals, and the numerous (and weirdly named) tokens used by online computer gaming users, Second Lifers and the like. Supermarket trading stamps were an early example. For most of recorded history, money took almost as many forms as there were societies, or at any rate rulers, and it's only in relatively recent times that we have converged on a relatively small number of currencies together with a very small number of super-currencies, chief among them the mighty US dollar and its enfeebled fiscal cousins, the pound sterling and the euro.Įven as this process of monetary consolidation continued, however, strange new kinds of currencies were bubbling up. But so did cigarettes in prisoner-of-war camps and, in days gone by, the shell of Cypraea moneta, aka the cowrie. As it happens, my £20 note fulfils all three functions quite well. What are these functions? A medium of exchange, a unit of account and a store of value. What gives it its magical properties is, Professor Castronova explains, "a social process that enshrines a good as a unique artefact called money once enshrined, that artefact serves money's three functions, well or poorly". But actually my £20 note is just that: a note. If I wave it in front of a shopkeeper, it produces magical effects: in return for it, he gives me a newspaper and other pieces of paper and some bits of metal. Printed on it are some images, lots of hieroglyphics and the words "Twenty Pounds". I have a piece of paper before me as I write. W e think of money as being a factual, straightforward thing. ![]()
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