It’s healthy for writers to review their past predictions from time to time. Given that Coinbase became the first big cryptocurrency firm to go public on a U.S. exchange last week, at a valuation north of $85 billion, this seems a good moment to revisit my longtime skepticism of bitcoin, the ur-cryptocurrency.

For eight years, I’ve been hearing that bitcoin was going to be a revolutionary force, bypassing government rules and corporate surveillance with a decentralized peer-to-peer architecture and providing an inflation-proof alternative to unstable government fiat currencies. For just as long, I’ve been pushing back, pointing out that, as a currency, bitcoin has a lot of limitations — and that, since many of its aficionados seem to be betting on its future as a currency, its prospects as an investment are also probably limited.

The price of bitcoin has risen over this period from the low hundreds to the mid-five-figures. So maybe it’s time for a rethink. Thing is, I’m still struggling to figure out what bitcoin is good for.

Bitcoin has been around for more than a decade, yet it remains an inconvenient way to pay for things, inferior to dollars or credit cards in almost every way. Most merchants don’t take it, so in the United States, it’s mostly used by devoted hobbyists, though firms such as Tesla are trying to make it a bit more mainstream.

Those issues are somewhat related to a larger problem: For technical reasons, transactions are slow to clear, and that decentralized network uses a lot of processing power, making it challenging to scale beyond a devoted fanbase. Some of these problems can be worked around by creating another layer on top of the bitcoin network — but at that point, it’s unclear why anyone would prefer a third party denominating transactions in bitcoin rather than a stable, spend-anywhere currency such as the U.S. dollar.

One could argue, of course, that one shouldn’t think of bitcoin as a currency at all, but as an asset. Certainly it’s hard to argue with the way its price has appreciated. And yet, my inner skeptic keeps asking: What is bitcoin actually good for?

There are various answers to that question. For example, bitcoin’s finite design (the number of bitcoins can never exceed 21 million) makes it an excellent hedge against inflation. But there are lots of other excellent, finite hedges against inflation, such as land and gold; why turn to a novel electronic currency of unclear long-term value?

Bitcoin boosters scoff that the long-term value is quite clear. After all, the skeptics have been at it for a while, and just look at how much bitcoin is worth! But as the stock prospectuses always note, past performance is no guarantee of future results. After decades of remarkable growth, Tokyo real estate was so valuable that at one point in the 1980s, the Imperial Palace was theoretically worth more than all the real estate in California. Eventually, however, prices require some sort of pragmatic anchor, or else they collapse; after Tokyo real estate prices finally crashed, it took decades for prices to even approach their previous peak.

Most of the value of a bitcoin has accumulated in the past 12 months, as the price of a bitcoin increased almost tenfold since April 2020. Yet underlying that value — bitcoin’s real-world, non-speculative, non-hobbyist uses — are things such as transferring money out of countries with currency controls or dealing in certain illicit goods or offering an alternative to currency in countries experiencing hyperinflation. In these contexts, it looks less like a currency than a substitute for expensive jewelry — something small, reasonably durable and highly valuable, which is thus relatively easy to move across borders undetected or to store and liquidate in case society collapses. But at least jewelry is pretty to look at in the meantime.

The more I think about it, the more I wonder if that isn’t the right analogy. Maybe techno-utopians just like looking at bitcoin the same way brides like being able to see two months of their spouse’s work flashing on their hand. And what’s wrong with that?

To some extent, all value is a collective hallucination. Those rings are beautiful, but they are not objectively several thousand times more beautiful than stainless steel and cheap crystal. If the market wants to slap a similarly elevated price on elegant technical solutions to gnarly game-theory problems and call it a cryptocurrency, who am I to gainsay it? Why shouldn’t it be a small but significant alternative investment option, just like silver and gold?

Yet I’d still ask just how large that market can grow. Most people can appreciate the gleam of gold; possibly fewer can appreciate the austere intellectual charms of bitcoin’s payment architecture. That could leave bitcoin ownership confined to a few countries and a relative handful of tech-savvy aficionados. And if the aficionados have actually been betting on some wider appeal, then eventually we might see that price come crashing back to earth, and the skeptics vindicated, at long last.

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