Bitcoin and Currency
My latest piece for the New York Times Learning Network is a lesson about currency based on Bitcoin, the digital commodity that has captured the interest of speculators, bankers, and regulators worldwide.
The rise of Bitcoin creates an interesting opportunity to explore the fundamental properties of currency. Where does currency get its value? Why and when are currencies accepted in exchange for goods and services? Who guarantees the security and stability of a currency?
On top of the basic questions of currency, the mining of Bitcoins (the curious and complicated process for creating new money) is rooted in mathematics and raises its own interesting questions
Most currencies have the property that new money can simply be printed, but where do the new bitcoins come from? They are “mined,” which has become a competitive business opportunity for participants. Paul Krugman describes this process of mining as “a drastic retrogression” that is as fundamentally foolish as relying on gold and silver was a century ago.
You can find the entire lesson here.