Bitcoin evangelists tout digital currencies as revolutionary, a technology that could reshape the global monetary system. Pioneered because of a lack of faith in traditional banking, cryptocurrencies will become the new global currency, gold for a millennial age, some devotees argue.

However, the Nobel Prize–winning economist Paul Krugman says that this feverish enthusiasm is ill-informed and that a full-scale collapse of bitcoin BTCUSD, -0.07% is a real possibility, arguing that cryptocurrencies aren’t solving any problems in the current monetary system, which already boasts seamless and low-cost transactions.

“ ‘Instead of money created by the click of a mouse, we have money that must be mined — created through resource-intensive computations.’ ” — Paul Krugman

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According to data from Blockchain.com, the bitcoin network can currently process between three and four transactions per second, compared with Visa and Mastercard, which can handle more than 5,000 per second.

In his column for the New York Times on Tuesday, Krugman says bitcoin lacks a backstop, or a tether. Fiat currencies, no matter how large the denomination, are a generally accepted means of payment to someone, and gold has traditional uses as jewelry and for filling teeth.

On the other hand, bitcoin usage for real-world purposes is low, and when it is used, it is often for nefarious activity. A January 2018 study concluded that around $72 billion in illegal activity per year involves bitcoin, and in June lawmakers said there had been an increase in criminal activity using virtual currencies.

“ ‘Cryptocurrencies, by contrast, have no backstop, no tether to reality. Their value depends entirely on self-fulfilling expectations — which means that total collapse is a real possibility.’ ” — Paul Krugman

Total collapse or not, bitcoin has had a lively 2018. At one stage the No. 1 digital currency had lost nearly half its value. It has staged a modest turnaround, climbing by as much as 40% in July thus far.

Whether it reaches $1 million or zero, critics like Krugman will always pose the question: If you want to argue that I’m wrong, answer the question of what problem cryptocurrencies solve.

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