Getting Off the Ground: The Case of Bitcoin

29 Pages Posted: 8 Aug 2017 Last revised: 5 Jan 2018

William J. Luther

Kenyon College; American Institute for Economic Research

Date Written: January 2, 2018

Abstract

By declaring an item legal tender or making it publicly receivable, governments might generate sufficient demand to determine the medium of exchange. How do private actors launch a new currency? There are two views in the literature. The first requires offering an item with use value to some agents distinct from its role as a medium of exchange. The second suggests agents might coordinate on an intrinsically useless item. With these views in mind, I survey the logs from the original bitcoin forum, bitcoin-list. I find that early participants in the bitcoin community understood the importance of coordination and took steps to coordinate users.

Keywords: bitcoin, coordination, cryptocurrency, currency, demand for money, intrinsic worth, launch, money, use-value

JEL Classification: E40, E41, E42

Suggested Citation

Luther, William J., Getting Off the Ground: The Case of Bitcoin (January 2, 2018). AIER Sound Money Project Working Paper No. 2018-03. Available at SSRN: https://ssrn.com/abstract=3014456 or http://dx.doi.org/10.2139/ssrn.3014456

William J. Luther (Contact Author)

Kenyon College ( email )

Gambier, OH 43022
United States

HOME PAGE: http://www.wluther.com

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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