According to an article published by Böhme, Christian, Edelman, and Moore in the Journal of Economic Perspectives about Bitcoin, what was the design principle under which Bitcoin was developed?
The central design principle Bitcoin is based on is the concept of scarcity. Many economists state, and I agree, that virtual currencies, which Bitcoin facilitates, should be considered as any other form of money since that is not the form that determines money – that is its functions that do. And virtual currencies perform all functions that any other forms of money perform; they serve “as a means of exchange, as a store of value, and as a unit of account” (Böhme et al., Bitcoin: Working Paper 1). Similarly, just like any other form of money, virtual currencies should be considered in terms of scarcity.
Scarcity is what (at least partly) provides money with its value. First of all, it prevents the emergence of counterfeits since it does not let creating money ad-lib (Böhme et al., Bitcoin: Working Paper 1). Second of all, if thinking more broadly, it also sets strict boundaries for the increase in the monetary base and maintains and guarantees the price stability (Böhme et al., “Bitcoin: Economics, Technology, and Governance” 215). The authors prove the scarcity of money while talking about different sources of it.
For example, precious metals are scarce since a limited amount of those exists in nature. The scarcity of paper money is caused and ensured by unequal access to technology, and the scarcity of book money, in its turn, is regulated by legal rules. Admittedly, the scarcity of money is not absolute. As proof, an amount of precious metals is limited, but no one knows how much of those exactly exist in nature. Besides, people have always tried to overcome scarcity, with alchemy, for example.
Nevertheless, scarcity still does its job, which lies at the very core of the Bitcoin system. Due to its verification systems and underlying math, Bitcoin ensures that its currency is scarce and that significantly increases its use and popularity.
What is the full title of the article?
The full title of the article by Böhme et al. is “Bitcoin: Economics, Technology, and Governance” (213). It was published in the spring of 2015, in the Journal of Economic Perspectives, a publicly accessible resource, which provides articles that establish a connection link between academic economic press and that of common interest (AEA par. 1).
What were your steps (with proper citations) to answer the questions above?
To answer the questions above, first of all, I needed to find an article by Böhme et al. (“Bitcoin: Economics, Technology, and Governance” 213). It is easy since the journal it is published in is freely available on the Internet. After reading the part of the article that tells about the design principle, under which Bitcoin is developed, it has turned out that additional information is needed, so I have decided to search for more. That is when I have found the draft of this article, written by the same authors a year earlier (Böhme et al., Bitcoin: Working Paper 1). It contained more details that were omitted when the original article was published. That clarified the issue for me. Finally, I have also used the AEA site to provide some information about the Journal of Economic Perspectives where the original article was published in 2015 (par. 1).
Works Cited
AEA. Journal of Economic Perspectives n.d. Web.
Böhme, Rainer, Nicolas Christin, Benjamin Edelman, and Tyler Moore. “Bitcoin: Economics, Technology, and Governance.” Journal of Economic Perspectives 29.2 (2015): 213-238. Print.
Böhme, Rainer, Nicolas Christin, Benjamin Edelman, and Tyler Moore. Bitcoin: Working Paper 2014. Web.