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Cross section of a banknote with a cotton paper core surrounded by two layers of polymer [ Source ]   Central bankers are at their most comfortable when engaging in technical debates over the finer points of monetary policy. But over the next few years they may be forced out of their comfort zone into a thorny philosophical debate over anonymity and financial censorship. They are poorly equipped for such a debate. When central bankers monopolized the issuance of banknotes in the 1800s and early 1900s, little did they know that a hundred years later anonymity would become an important public good . And because banknotes are the only generally-accepted way for law-abiding citizens to make uncensored anonymous payments, central bankers effectively became—by accident rather than design—the sole purveyors of these vital services.* Banknotes are anonymous because it is very difficult to link banknotes to identities, say by monitoring usage of notes via a note's serial number. As for ...

Art by Daniel Krawisz The narrative that drives any speculative market needs constant fuel in order to attract new buyers. Bitcoin is no exception, which is why recent events in Zimbabwe have been recruited—albeit sloppily—by the bitcoin press to provide more fuel. The facts of the matter are this: if you head over to Golix , Zimbabwe's only bitcoin exchange, you'll see that bitcoin last traded at $13,800 whereas its price on an American exchange like GDAX is $8260. That's a difference of around $5000. Strange, right? The bitcoin press, and I'll pick on Zerohedge here, has interpreted this divergence to mean that bitcoin usage is skyrocketing in Zimbabwe. Zimbabweans are seemingly so desperate to get their hands on some bitcoin that they are willing to pay $5000 more per coin than they would pay if they bought on an international exchange like GDAX.    Recall that one of bitcoin's earliest and most potent use cases was to provide unbanked Africans with an effici...

Bitcoin boasts many technical achievements, but none is more interesting to me than they way it was successfully bootstrapped. How did a small group of cypherpunks —activists interested in widespread use of cryptography and digital currency—manage to get an intrinsically valueless token to have a consistently positive price? Hal Finney, a cryptographer and early adopter of bitcoin, put it this way in 2009: "One immediate problem with any new currency is how to value it. Even ignoring the practical problem that virtually no one will accept it at first, there is still a difficulty in coming up with a reasonable argument in favor of a particular non-zero value for the coins." The bootstrapping of bitcoin seems to have been achieved with some care. William Luther has gone through old bitcoin message boards to show how early adopters, including Finney and bitcon-creator Satoshi Nakamoto, coordinated to 'enter the network' at the same time, thus generating a positive valu...