August 26, 2011

The bitcoin, a virtual medium of exchange, could be a real alternative to government-issued money — but only if it survives hoarding by speculators, says Technology Review.

The system will have to overcome a major, and surprising, problem: people have come to see it primarily as a way to make money. In other words, instead of being used as a currency, bitcoins are today mostly seen as (and traded as) an investment. The result: hoarding.

That means there will be fewer bitcoins in circulation (and more in people’s virtual wallets), making them less useful as an actual medium of exchange and making it less likely that businesses and consumers will ever see Bitcoin as legitimate.