Bitcoin will hold value if it remains the most efficient mechanism for transferring ownership
Bitcoin Is Good — We read with interest Paul Krugman's recent article in the New York Times, humorously titled “Bitcoin Is Evil.” Perhaps the most important part of the article is where Dr. Krugman remarks:
Context & Ripple Effects
This piece is Re/code's direct answer to Paul Krugman's New York Times column 'Bitcoin Is Evil,' which landed just a week after Krugman had already questioned whether bitcoin can be a reasonably stable store of value. Rather than contest the ethics, the argument concedes the frame and relocates it: value follows from being the cheapest mechanism for transferring ownership.
That efficiency test was live at the time — December 2013 had already shown how fragile confidence was, with bitcoin losing nearly half its value overnight after BTC China halted deposits and slumping again below $700 within weeks. It also dovetails with [[a:1200874|Sam Altman's December argument that success depends on legitimate transaction volume ramping up]], and with the Economist's warning that bitcoin's own growth was straining it.
First-order effects
- Krugman's critique and Re/code's rebuttal split the debate into two camps — store-of-value skeptics versus transaction-efficiency optimists — forcing each side to argue about actual usage rather than ideology.
- Chinese regulators' deposit restrictions at BTC China became the immediate stress test of the efficiency thesis, since they directly throttled the transaction volume the value case depends on.
Second-order effects
- Exchanges and payment processors become the decisive layer: whoever lowers the cost of moving ownership captures the value argument, pushing competition toward fees, settlement speed, and compliance with regulators like China's.
- Pump-and-dump schemes and fraud headlines from December 2013 raise the cost of proving legitimacy, pressuring the ecosystem toward regulated, auditable channels to keep the efficiency claim credible.
Third-order effects
- If value genuinely tracks transfer efficiency, digital currencies converge on payments-infrastructure economics — thin margins won by routing scale — rather than gold-like scarcity, leaving Krugman's store-of-value objection unresolved until stable legitimate demand exists.
The trend: The bitcoin debate is migrating from moral judgment to mechanism design: value will rest on whether the network stays the cheapest way to transfer ownership, with legitimate transaction volume as the deciding metric.