How Do Cryptocurrencies Attributes Compare with Earlier Money ?

We saw that one of the relevant characteristics of money is divisibility. Here, Bitcoin compares very favorably with stateissued currencies, which typically operate using themetric system and are divisible up to a hundredth of a unit.

In contrast, Bitcoin allows precision to the eighthdecimal place, with its smallest unit named “satoshi” after the inventor of the system. This provides for more divis-ibility and a higher precision not only than state-issued
currencies but also than measuring barley or metal by weight. This enhanceddivisiblity maybe particularly use-fulfor micropayments.Another characteristic is durability, that is, how longa currency can last. Again, the advantage here goes toBitcoin. Bitcoins do not wear out or deteriorate. Of course, one can lose bitcoins. The media has reported anumber of stories of people throwing away hard drives, or deleting wallets, and thus losing private keys that give them access to their bitcoins. The bitcoins, however, are still on the blockchain, and they will be there for as long as the Bitcoin network operates. From the point of view of the network, it is impossible to distinguish between a bitcoin that has been lost and a bitcoin the owner of which has not yet decided to spend it. In contrast, you can lose a bill (or even a coin) permanently by destroying them or damaging them to the point that they are no Ionger recognizable. The bitcoins, being digital, are also easy to carry. Thereis of course the need for the software and hardware that manages them, for example, a digital wallet on your smart phone. Is this easier or more difficult than carrying cash or a credit card? That may depend on the person.
Storing bitcoins does not need to involve physical safesand security, but one needs encrypted digital storage to keep
bitcoins safe. This is illustrated by implosions of a number of services offering storage of bitcoins. The most spectacular of those was likely Mt. Gox, mentioned ear-lier. Storing bitcoins safely may be easier or cheaper than keeping cash safe at home, but it is likely more complex than using credit cards and bank deposits. Banks or pay-ment services providers tend to be more reliable than storing bitcoins, due to their experience, well-developed systems, and the insurance they offer directly or indirectly Of course, as the Bitcoin system matures one may imagine development of more secure storage options and services. Bitcoin is still a young currency, and one could argue that banks were not particularly safe early in their history due to theft from the outside and fraud from the inside. As for the ease of transfer, it depends both on the available technology (e.g., access to computers or smart-phones) and on the ecosystem (e.g., interface). When relying directly on the basic Bitcoin system, transfers are cumbersome. They
are more difficult than handling cash for person-to-person transactions, or using credit cards for long-distance transactions. You might compare using Bitcoin network directly with weighing metal to settle transactions. This historical system of unminted metal was cumbersome and required additional sophistication,
which created additional transaction costs and was even-tually eliminated by the introduction of coins. Similarly,
the Bitcoin ecosystem is being developed, and a range of digital wallets has appeared, making it easier for Bitcoin
users to transact. Finally, unlike cash, bitcoin cannot be counterfeited, so if you get it in a transaction, you can rest easy that it is genuine. Bitcoins may be stolen, but the transactions are not reversible (unlike credit cards), so this is not a con-cern for the seller . Moreover, no person or institution can manipulate the supply of bitcoins, as it is managed by an algorithm. Thus, on some dimensions it is not clear whether cryptocurrencies have more convenient attributes than the traditional currencies do. Whether it is easier to carry and transfer or safer to store may depend on the preferences of the users. But on other dimensions, they provide a clear improvement, like divisibility, durability, or risk or fraud and counterfeiting. Those attributes could make cryptocurrencies more useful for some uses, like micropayments or remote international payments, than older alternatives are. But the benefit needs to be large enoughfor people to adopt it and use it al
ongside (or instead of) the traditional banking system and credit card system.