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The mathematician’s defense of Bitcoin: It’s just another option

The mathematician’s defense of Bitcoin: It’s just another option

The mathematician’s defense of Bitcoin: It’s just another option




Our Making Sen$e broadcast on the rise of Bitcoin didn’t have time to explore every angle. In this transcript of our conversation with Bitcoin Education Project’s Charles Hoskinson, he explains why Bitcoin is just another, albeit special, payment option.


Paul Solman: A fascinating thread of critical comments in response to ourBitcoin story last week prompts this and a series of follow-up posts, including several interviews that didn’t make it into the broadcast.

We begin with the esteemed long-time finance expert on this page, Zvi Bodie, Norman and Adele Barron Professor of Management at Boston University, affectionately known around here as Bodie-Sattva for his profound pronouncements on everything from I-bonds to how to find a financial adviser.

Zvi has a finance professor’s problems with Bitcoin, which echo those of some of our commenters. I asked him to share them briefly with our readers.

Zvi Bodie: I think that there is something unique about Bitcoin that NYU economic historian Richard Sylla did not mention, at least not in the broadcast story. Paper money has value if a functioning government will honor it in payment for taxes. Thus U.S. dollars serve as currency, but Confederate dollars do not.

Credit cards are also accepted as money, but only when a third party verifies them and guarantees ultimate payment.

Then there is gold, whose physical properties give it value independent from its use in settling transactions.

But bitcoins seem to have no independent source of value other than that a group of digital experts have agreed to accept them. So far, it may be working. But the exchange rate between dollars and bitcoins has already proved far from stable, suggesting that there is only one reliable moral to the story: Caveat investor.


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This entry was posted on October 10, 2013 by and tagged .

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