Like most economists, I have always been a Bitcoin skeptic. The question has always been, What purpose does it serve?

The idea that it would be a useful alternative currency is laughable on its face. How can you have a currency that wildly fluctuates year to year and even hour to hour? Imagine if you had a wage or rent contract written in Bitcoin. Both your pay and your rent would have more than tripled over the last year, likely leaving you unemployed and unable to pay your unaffordable rent. Economists often exaggerate the problem of inflation, but having currency that has large and unpredictable increases and decreases in value is a real problem.

So, Bitcoin may not be very useful as a currency, but maybe we can just treat it as an outlet for harmless speculation, like baseball cards or non-fungible tokens. Well, it turns out that Bitcoin is not entirely useless. It is the currency of choice for those engaging in illegal activities like dealing drugs and gunrunning, and, of course, extorting companies with ransomware. (Its value for this purpose took a major hit when the FBI was able to retrieve much of the money paid by Colonial Pipeline to the hackers who infiltrated its system. Apparently, Bitcoin transactions are not as untraceable as advertised.)