Gavin Andresen - 2012-12-14 01:51:42

Disclaimer: I'm bad at predicting the future.

Will governments create a crypto-currency to try to compete?

The "network effect" is really important for money. Any form of money gains value as more people use it.

It is possible that Bitcoin (or any future crypto-currency) will never be able to gain enough use to overcome big, existing currencies, that already enjoy huge network effects.

But... the potential users for Bitcoin is greater than any national currency because Bitcoin doesn't care about arbitrary political borders. So maybe at some point in the future a distributed, borderless crypto-currency will have a bigger network effect, and will start to replace zlotny or euros or dollars.

At that point, I don't think any one government would be able to compete. Other governments won't voluntarily give up the ability to control their own currency, so even if a government came out with their own crypto-currency how would they overcome the network effect and get people all over the world to use their newfangled solution?

It is possible that there will be some type of worldwide government; a currency from THAT government could, I think, compete with a decentralized crypto-currency.

I have no idea how likely any of this is.

RE: consequences of the dollar not being the world's reserve currency any more: I'd take a look at the history of Britain. The Pound was the world's reserve currency for a long time, before being replaced by the dollar.  England seems to be doing OK, and I'm not aware of any radically huge consequences of the transition from Pounds to dollars.