Opinion
Virtual Frenzies: Bitcoin and the Block Chain
—
As for the block chain, there's plenty of room for experimentation -- with the potentially greatest benefits coming where the current payments system is the least developed.
By Kim Schoenholtz and Stephen Cecchetti
Bitcoin has prompted many people to expect a revolution in the means by which we make and settle everyday payments. Our view is that Bitcoin and other "virtual currency schemes" (VCS) lack critical features of money, so their use is likely to remain very limited.
In contrast, the technology used to record Bitcoin ownership and transactions -- the block chain -- has potentially broad applications in supporting payments in any currency. The block chain can be thought of as an ever-growing public ledger of transactions that is encrypted and distributed over a network of computers. Even as the Bitcoin frenzy subsides, the block chain has attracted attention from bank and nonbank intermediaries looking for ways to economize on payments costs. Only extensive experimentation will determine whether there are large benefits.
Again, however, we are somewhat skeptical. Today's wholesale payments systems are so efficient that it is hard to see how or why one would make the costly and time-consuming effort to replace them. And the apparently high costs of retail transfers at least partly reflect factors that the block chain technology is unlikely to address.
Read full article as published by The Huffington Post
___
Kim Schoenholtz is Professor of Management Practice in the Department of Economics and Director of the Center for Global Economy and Business.
In contrast, the technology used to record Bitcoin ownership and transactions -- the block chain -- has potentially broad applications in supporting payments in any currency. The block chain can be thought of as an ever-growing public ledger of transactions that is encrypted and distributed over a network of computers. Even as the Bitcoin frenzy subsides, the block chain has attracted attention from bank and nonbank intermediaries looking for ways to economize on payments costs. Only extensive experimentation will determine whether there are large benefits.
Again, however, we are somewhat skeptical. Today's wholesale payments systems are so efficient that it is hard to see how or why one would make the costly and time-consuming effort to replace them. And the apparently high costs of retail transfers at least partly reflect factors that the block chain technology is unlikely to address.
Read full article as published by The Huffington Post
___
Kim Schoenholtz is Professor of Management Practice in the Department of Economics and Director of the Center for Global Economy and Business.