The Value of Bitcoin in the Year 2141 (and Beyond

The emergence of bitcoin poses an important question for monetary theorists: can bitcoin compete with or even replace existing fiat monies? To answer this question, one must be able to determine what gives intrinsically useless monies their value, what determines the coexistence of alternative monies, and under what conditions economic agents would prefer to hold one money relative to another. We attempt to answer these questions in light of the emergence of bitcoin. In particular, we outline a theoretical model in which an intrinsically useless money is essential.