> And these costs aren’t incidental, something that can be innovated away. As Brunnermeier and Abadi point out, the high costs — making it expensive to create a new Bitcoin, or transfer an existing one — are essential to the project of creating confidence in a decentralized system.<p>No they aren't. See: Proof of stake, Lightning network.<p>> Bitcoin is real without knowing who issued it, so you need the digital equivalent of biting a gold coin to be sure it’s the real deal, and the costs of producing something that satisfies that test have to be high enough to discourage fraud.<p>This is a pretty wildly inaccurate analogy of why the Bitcoin network uses mining.<p>> Bear in mind that conventional money generally does its job quite well. Transaction costs are low.<p>To pay in cash, yes. To pay digitally? You're paying high credit card fees. So, no, not really.<p>> The purchasing power of a dollar a year from now is highly predictable – orders of magnitude more predictable than that of a Bitcoin.<p>Disingenuous argument. If the US dollar were invented 10 years ago, it'd be highly volatile today too. The fact that Bitcoin is volatile today is only relevant if you are going to argue that that volatility is <i>inherent</i> to cryptocurrencies. An argument which may be valid, but that Paul fails to make.<p>> Using a bank account means trusting a bank, but by and large banks justify that trust, far more so than the firms that hold cryptocurrency tokens.<p>Because using a cryptocurrency does not require trusting <i>anyone</i>.<p>> But gold does have real-world uses, both for jewelry and for things like filling teeth, that provide a weak but real tether to the real economy.<p>You mean the way darknet markets provide a weak but real tether to the real economy? You literally <i>just</i> enumerated Bitcoin's tether's to the real economy. Also, the idea that the gold market is in any way meaningfully tethered to its industrial usage is a complete joke.<p>There are really great arguments against Bitcoin and crypto-currencies. All of which Paul Krugman completely fails to make in this piece. The best of which he's positioned to make, too! Bitcoin is a deflationary asset - that's a real problem for anything trying to be a currency. That's a great case against it, and one close to Krugman's heart.<p>This article is seriously disappointing.