# From Bitcoin to Central Bank Digital Currencies: Making Sense of the Digital Money Revolution
## 2 From Bitcoin to Central Bank Digital Currencies (CBDCs)
If such costs are non-negligible, it will further reinforce the idea that Bitcoin is more of a market-based speculative asset than a new kind of money. Not being the liability of anyone means that no one answers for Bitcoin if something goes wrong. Although Bitcoin is accepted as payment by some entities, it does not completely conform to the definition of money. For example, it is not universally accepted in a given economy and there is no absolute liquidity, meaning no guarantee that Bitcoin can be readily exchanged for cash or other goods, assets, and services in the economy. The Bitcoin price dynamics is characterized by short- and long-term hyper volatility, recurrent bubbles, and jumps. This erratic price behavior would force constant repricing of the items on sale (e.g., the labels of all products in supermarket shelves) rendering it impossible to use Bitcoin as a unit of account and an undesirable instrument to denominate and settle debts. Also, the extreme volatility of Bitcoin is inconsistent with a currency acting as a store of value, at least in the short-term [30; 31; 32]. According to [33] (p. 98) \"at most, cryptocurrencies can be viewed as a new kind of tradable speculative asset, which can work as imperfect substitutes for traditional currencies\". Or, in the words of [PERSON] and [PERSON] [34] (p. 148), \"there is a small corner of the internet where transactions are routinely conducted with Bitcoin serving as the medium of exchange. Over that domain, Bitcoin is money\". Tesla's recent fumble with the possibility of purchasing a car using Bitcoin demonstrates well the difficulty in its acceptability as a widespread medium of payment. On 8 February 2021, in a filing with the Securities and Exchange Commission [35], Tesla disclosed that it had acquired $1.5 billion of Bitcoin to provide \"more flexibility to diversify and maximize returns\" and that it would begin accepting Bitcoin as a payment method for the vehicles soon. On 24 March 2021, [PERSON], the CEO of Tesla, announced on Twitter that this was already in place for its cars in the USA. However, Tesla's payment and eventual refund terms indicate that buyers would actually buy the cars at their USD value using Bitcoin and refunds would be made in Bitcoin or USD at Tesla's sole and absolute discretion [36]. \begin{table}
\begin{tabular}{c c c} \hline \hline
**Feature** & **Bitcoin** & **Fiat Money** \\ \hline \multirow{2}{*}{Issuance} & Decentralized, regulated by underlying algorithm & Centralized, regulated by central bank mandates \\ \hline Supply & Capped at 21 million units & No hard cap \\ \hline \multirow{2}{*}{Liability} & Not the liability of anyone & Liability of the central bank or \\  & & commercial banks \\ \hline Liquidity & Not guaranteed & Absolute \\ \hline \multirow{2}{*}{Stability} & Volatile & Stable, except in face of \\  & & hyperinflation \\ \hline Acceptability as medium & Limited & Universal in a given economy \\   of payment & Pseudonymous, no link & Anonymous if cash is used, Know \\ \hline \multirow{2}{*}{Privacy of user identity} & between addresses and & Your Customer (KYC) enforced \\  & natural persons & for accounts in commercial banks \\ \hline \multirow{2}{*}{Confidentiality of \multirow{2}{*}{transactions}} & \multirow{2}{*}{Ledger is public} & Restricted to parties, visible to \\  & & financial institutions, accessible to \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \multicolumn{4}{c}{} \\ \end{tabular}
\end{table} 
Table 1: Broad comparison between Bitcoin and traditional fiat money; source: author. On 12 May, again using Twitter, [PERSON] announced that Tesla had \"suspended vehicle purchases using Bitcoin\" out of concern about \"the rapidly increasing use of fossil fuels for Bitcoin mining\" [37].