In certain political corners, the Great Recession is seen, rightly or wrongly, to have tarnished the reputation of the U.S. Federal Reserve system. Some libertarians have argued against the purpose, and even existence, of the central bank, which they think helped cause the 2008 crisis. Furthermore, their anger is compounded by then-Fed Chair Ben Bernanke’s bailout of financial institutions with distressed assets — even though he was acting to rescue the U.S. economy.
Against that backdrop, it is no surprise that digital currencies such as bitcoin have gained traction. Bitcoin seems to seems to offer an innovative option to citizens disenchanted with the existing monetary system. The relatively new digital currency provides not only decentralization, but also a limited money supply — all working within an anonymous peer-to-peer, ledger-based transaction system. Yet, underneath the claims of cryptocurrency advocates lie numerous problems and obstacles that would prevent bitcoin from becoming a truly efficient, independent and widely accepted currency.
The author of this paper, William Wu, is a Knowledge@Wharton Student Fellow who conducted his research on bitcoin during a summer fellowship in 2017. He is a recent college graduate and is now working towards obtaining his real estate license.