De facto dollarization could come in a crisis if the Argentine public, by individual choice, swapped pesos for dollars in an act of decentralized currency substitution. If there is no crisis large enough to wipe out base money from circulation, such individual action is unlikely, and the peso will circulate and some central bank profits will result. De jure dollarization would mean that the Argentine public works through the political process to effect a smooth and coordinated currency substitution toward the dollar. A collective choice to dollarize might be seen as a preemptive move to rule out the possibility of a future chaotic decentralized switch. Given the network externality properties of money, which we discuss next, dollarization via collective political action might be the only way for such a change to occur in normal times.
Money is a type of technology.
In this sense, it has many properties in common with software. Excluding commodity money, most money has a trivial intrinsic value, but has value for the transaction services it facilitates. But more important, money as technology exhibits network externalities . Specifically, if my benefit from using a technology depends on the number of other users who have adopted it, then one firm can soon dominate the market. Once everyone else has chosen a certain technology as a de facto standard, then I have little incentive to choose a less popular, albeit better, technology.