In 2012, the European Central Bank had remarked that the theoretical roots of Bitcoin can be found in the Austrian school of economics.
In 2012, the European Central Bank had remarked that the theoretical roots of Bitcoin can be found in the Austrian school of economics. Hayek had written papers on denationalisation of money, arguing how governments should not have a monopoly over issuance of currency. While little has changed since then, Bitcoin is certainly attracting more users now after eight years of its introduction. The currency is at an all-time high—it touched $1,400 on Tuesday—and more monetary systems are evolving around it. With some likening it to the gold standard, Bitcoin has spurred the rise of many cryptocurrencies for the world to trade in.
A company launched a Bitcoin pegged to gold called Hayek in 2015, and recently one has announced a cryptocurrency pegged to oil. Started by a London-based financial firm, R Fintech, one unit of Bilur (as the currency is called, after the Basque word for ‘chain’) is equivalent to 6.5 barrels of Brent crude, making it worth $356. Like Bitcoin, Bilur uses blockchain technology—supercomputers mint encrypted digital coins that are controlled by the community that uses it. That becomes an effective guard against counterfeiting. R Fintech has said it will charge users a fee—some reports say 3% annually.
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Believed to be much more stable than Bitcoin—this and being characterised as a black market currency are Bitcoins shortcomings—it may well act as one of the best derivatives for the oil market, with more people relying on the currency given the underlying value. While Texas-based oil company Hockley has set aside 1 million barrels of crude against the digital coin, it says it will ramp this up as Bilur gains currency.
However, despite Bitcoin’s wide fluctuations—its value fell 75%in 2013—it may not be so easy to replace. The currency has survived many such pegged systems and is still the most liked cryptocurrency in the world. More important, with governments warming up to the idea of Bitcoin, it is likely to see its popularity surge further in the coming years. We may not be close to what Hayek had postulated, but the digital world is certainly getting closer to reverting to some of the old monetary systems.