Bitcoin suffered a recent Ponzi scheme, just one of many scandals that's hurt the value of the virtual currency. Why does Bitcoin seem to attract scams like this? If a recent research paper is right, the problem isn't necessarily the code behind Bitcoin or who's mostly using it now. Instead, it's a lack of a social infrastructure that makes money valuable in the first place.
"'When Perhaps the Real Problem is the Money Itself:' The Practical Materiality of Bitcoin" published in Social Semiotics and lead written by Bill Maurer, a Professor of Anthropology and Law at UC Irvine, whose specialty is money, and has analyzed Bitcoin before, basically argues that (to very roughly summarize). In the paper, Maurer and his student co-authors Taylor Nelms and Lana Swartz note that Bitcoin advocates prefer to talk about the code behind Bitcoin, rather than the overall social structure that makes money valuable in the first place. This is a displacement, and it's a common misunderstanding many people have around money in general:
"We talk about how currencies often do function with that same kind of displacement," Maurer tells me, "leading people to think that money can be or ought to be backed by a 'real' commodity like gold, but that this is a kind of 'metallism' which again is based on overlooking that the source of value even with something like gold is still a social convention, not something given by a commodity's physical qualities or relative scarcity." Or to put it much more simply: money is money because society calls it money. (Or as Danny Devito once put it: "Everyone needs money -- that's why they call it money!")
However, this doesn't necessarily mean Bitcoin is doomed, and Dr. Maurer has a prescription for Bitcoin supporters who want their money to be more valuable:
