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Bitcoin and Beyond

From the growing attention to Bitcoin and "decentralized finance" to the latest excitement spurred by non-fungible tokens, the crypto economy is here to stay. But will it develop the social consensus and institutional arrangements needed to go fully mainstream?

CAMBRIDGE – What is money? Some have described it as a shared fiction, or as a form of collective memory. To document and facilitate transactions between parties, we have relied on everything from seashells and rare metals to strips of paper and – more recently – entries in digital ledgers.

These technologies all facilitate the creation, transfer, and destruction of value, and each works only because a group of participants – a “tribe” – has reached a fundamental agreement about what holds monetary value. It is this underlying agreement that enables the use of money to measure credits and debits and record exchanges among market participants. The users of money must be confident that it will remain exchangeable for goods and services; and the larger the group of users, the more useful that money becomes.

A crucial question for any monetary arrangement is who, if anyone, has the power to create money, take it out of circulation, and determine how it can be used. While we often think of money as inherently fungible, modern societies regularly restrict the supply and use of money in order to achieve broader goals, such as keeping prices stable and fighting financial crime.