A little while ago, I wrote an article for Phlexible Philosophy about money. The gist of the article was that money is a tool and if it doesn’t do its jobs as well as it could, maybe we should find a new tool. I briefly mentioned cryptocurrency in the article but didn’t really explore it. More recently, I saw an ad for a store that said that they now accept cryptocurrency. I know some businesses have been accepting cryptocurrency for some time now, but this time it really struck me just how bad a job crypto does as money.
Money has four basic functions. It is a medium of exchange, a measure of value, a standard of payments, and a store of value. Crypto can work for the first one. Although almost anything can. I can trade anything for anything if someone agrees to the deal. The other three are harder, though, because to be a measure or a standard or a store requires stability. Cryptocurrency is much too volatile to do the jobs that money does for us.
I’ll grant that it’s not the “crypto” part of it that makes cryptocurrency bad money. There’s no reason why encrypted, digital money can’t exist and be successful. The problem is the anarchist/libertarian ideals that the different cryptocurrencies seem to cling to. Money can’t be outsider. It needs to be embedded in a culture. As long as crypto is a darling of speculators (which is just financial-speak for gamblers), it will never be stable enough to measure, standardize, or store anything.
This isn’t to say that crypto doesn’t have its uses. Plenty of people want mediums of exchange that are difficult to measure, standardize, and store (or find may be more accurate). That’s why there is so much money laundering in the world. Crypto can be better than cash if your business is illegal and sometimes if it is just unsavory. The rest of us should probably stick to old-fashioned money until we find a better alternative.