The predecessors of Bitcoin and what we can learn from them

There is a new paper on this topic, by Thomas Kim:

To examine whether the recent price patterns and transaction costs of Bitcoin represent a general characteristic of decentralized virtual currencies, we analyze virtual currencies in online games that have been voluntarily managed by individuals since 1990s. We find that matured game currencies have price stability similar to that of small size equities or gold, and their transaction costs are sometimes lower than real currencies. Assuming that virtual currencies with a longer history can provide an estimate for Bitcoin’s prospects, we project that Bitcoin will be less influenced by speculative trades and become a low cost alternative to real currencies.

I remain more skeptical, as I do not see where the significant, non-speculative demand for Bitcoin comes from, outside a game setting.  Imagine a future where the Chinese have removed capital controls and the private clearing houses preempt and take on a version of real time clearing, based on a (partially) publicly available ledger.  Can that be more than five years away?  Maybe less?

For the pointer I thank the excellent Kevin Lewis.


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