WASHINGTON, D.C. —
All of the advanced nations in modern times instead have a central bank to be in charge of issuing money. The logic is that rather than tie the value of money to some material, instead put some politically independent, sober-minded economists in charge and assign them some goal. In practice, many countries have made that goal "manage the money supply so that prices rise about 2 percent each year. No more, no less." Because these institutions are imbued with the power of the state, the money they issue has the credibility of the entire government behind it.
As Joe Weisenthal wrote this week for Business Insider, "The U.S. dollar isn't just important because other people think it is. The U.S. dollar is important, because the world's strongest entity, with the full force of the U.S. army, the FBI, the CIA, the NSA, and various local authorities with guns demands that you pay them in U.S. dollars. That's not faith. That's the law."
So why would somebody want to go and invent bitcoins? There is a certain theoretical elegance to the idea of a borderless currency, with its supply limited by the difficulty of working out very tough mathematical problems. But going back to where we started, money is useful inasmuch as it can be used to buy things. And two massive things stand in the way of bitcoin ever being anything more than a monetary curio. Ironically, both are byproducts of the things that bitcoin enthusiasts most like about it.
First, because it has the endorsement of no government, it will never be usable for official transactions. If you are an American, you will eventually have to pay your taxes, which means getting hold of some dollars, and as long as everyone needs to use dollars, that will be the way the currency in which an overwhelming majority of U.S. transactions occur.