Over the course of the past few months, Bitcoin, an open source peer-to-peer on-line currency, has been quickly gaining traction and acceptance, to the point where the "Bitcoin economy" is now valued at several million dollars. A full explanation of the nature and broad implications of the phenomenon is beyond the scope of this essay (to learn more: the short version and the long version), but, while following its development, it occurred to me that the expansion of the Bitcoin economy might offer some potentially fascinating insights into the dynamics of credit union development. The sudden, almost spontaneous growth of a new monetary system and economy is not something one can observe everyday, and the ways in which forms of co-operative credit emerge within it might offer new insights into the models of scholars such as Ferguson & McKillop and Ian MacPherson.
At present, the Bitcoin economy is small enough that, as far as I can tell, credit is virtually non-existent. All transactions are made in "cash," and the "credit money" that does exist within the system was likely obtained from intermediaries in the form of Dollars, Euros, etc., and then converted into Bitcoins (btc). However, as an increasing number of providers of goods and services begin to accept btc, it is conceivable that, once all of their obligations can be met in btc, certain kinds of firms will start operating exclusively in that currency. Once that happens, demand for credit within the system will begin to grow, as btc-exclusive merchants will need short-term loans with which to cover fluctuations in their businesses, as well as longer-term credit to finance growth.
