Computer science has created the economic world that von Hayek (1976) envisioned, with de-nationalized and independent money creation. At the same time, crypto-currencies operate in a fundamentally different way. They require no trust in a central bank, other national authorities, or in private financial institutions. Trust derives from mathematical algorithms, and the blockchain technology ensures consensus on each electronic transaction in a purely peer-to-peer network. Private digital currencies revive the ideas of the “Chicago Plan” and pose novel challenges for policy makers.

Moreover, like all new technologies, money by cryptographic convention comes with risks. In markets for traditional nominal claims, much is known about their risks: not so in the markets for cryptos. There, market participants face huge challenges due to the uncertainty about the statistical features of crypto prices. The joint presence of several hundred crypto-currencies intensifies the problem: Due to the low cost of launching, a multitude of different blockchain-based currencies has been introduced, with varying degrees of technological innovation and financial success. Digital payments have become a central feature of everyday life. To most businesses and households, this means fast transfer of funds unlimited by geographical distance. Orthogonal to such gradual improvements, however, the evolution of virtual currencies has created new and decentralized organized media of exchange. Like modern fiat money, crypto-currencies provide no claim to any physical asset, but circulate on the basis of trust and credibility; this notwithstanding, they have reached significant market value and transaction volumes. Total market capitalization of virtual currencies now exceeds $270 billion, https://coinm arket cap. com.