When the late Iain Banks, one of science fiction’s most imaginative writers, has his character sitting in a futuristic bar in an intergalactic space station in Consider Phlebas, published in 1987, what currency does he dream up for his protagonist to pay for a space cocktail? The Aoish credit.
The Aoish were a banker species, and the credits were their greatest invention. They were just about the only universally acceptable medium … [T]he Aoish guaranteed the conversion and never defaulted, and although the rate of exchange could sometimes vary … [the] value of the currency remained predictable enough for it to be a safe, secure hedge against uncertain times.
Before the arrival Bitcoin, even science fiction writers couldn’t imagine a currency that wasn’t underwritten by someone – even a super reliable, intergalactic “banker species” who probably speak some futuristic version of German.
What makes things worse is that Bitcoin isn’t tangible. As opposed to gold. Or as Paul Krugman puts it:
Gold, after all, has at least some real uses, e.g., to fill cavities; but now we’re burning up resources to create “virtual gold” that consists of nothing but strings of digits.
Ignoring the fact that gold hasn’t been in mainstream use to fill cavities since before Ronald Reagan became president, at least it’s tangible. Come the apocalypse, you can make jewelry out of it to peddle at a the local farmer’s market.
A functional currency must be able to do two things; store value and be a medium of exchange. Bitcoin is already a medium of exchange but in order for it to store value it needs to be more stable than it is today. But it doesn’t need to be backed by a government or be tangible. The post-apocalyptic dentist is just as much of a fantasy as the Aiosh credit.
What Bitcoin needs to become a functional currency are the same elements that underpin both the US Dollar and gold: Trust and liquidity. Both can come with time. With time comes maturity and with maturity will come stability. And by then, Bitcoin will indeed be a viable currency.