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Bitcoin is fiat money, too

economist.com

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Re: Bitcoin is fiat money, too

#111

Post by betterunix2 »

zzalpha wrote: post #12
lostmsu wrote: post #6

Earlier quoted context omitted.

Sure it doesn't. Except you can use it to transfer value without first consulting your potentially totalitarian government without much effort for the first time in the entire history.

ROFL, "the first time in the entire history". Gold would like to have a word with you... And seashells. And giant stone coins. And on and on and on. In fact, as far as history goes, government backed fiat currency is a very recent invention.

Fiat currency was the first currency, developed in Mesopotamia as an accounting system run by the temple-governments of their city-states. Accounts were recorded in clay ledgers, and withdrawals could be made in the form of clay tokens that could be traded within cities and between cities (i.e. accepted for deposit by the temple of another city-state). A large trading network developed based on that money. The entire system was backed by the authority of the governments to levy taxes (mandatory offerings to the temples), collect debts, and resolve disputes (the same things that back our modern fiat currencies).

Re: Bitcoin is fiat money, too

#112

Post by nradov »

lostmsu wrote: post #6
imustbeevil wrote: post #4

Earlier quoted context omitted.

I don't know if it's a trough or if it's a conclusion. It's been 8 years now and the use cases for Bitcoin / CC haven't changed. You can buy illegal things and an incredibly small number of real things you can also buy with real money. There is nothing you can do with Bitcoin / CC that you can't do with real money. Nothing you can do that you couldn't do 5 years ago. Nothing new on the horizon. The only reason Bitcoi…

Sure it doesn't. Except you can use it to transfer value without first consulting your potentially totalitarian government without much effort for the first time in the entire history.

Nothing new there. The hawala system has been doing the same thing since the 8th century.

Re: Bitcoin is fiat money, too

#113

Post by tbabb »

SubiculumCode wrote: post #86

Bitcoin is a commodity for efficient bartering that has a governance structure to ensure that the commodity doesn't flood the market and crash prices. It will become a currency when it can be directly used to satisfy a tax debt, to avoid the punitive threat of the law.

You are right that bitcoin is a commodity, but I disagree about your condition for currency. It doesn't suddenly become money when some government "recognizes it" in an arbitrary way. People make comparisons to gold, but gold is also a commodity (whether the government accepts it for taxes or not), and we now know that using gold as if it were currency is a very very bad idea[1].

A currency is a unit of measurement, while commodity is something with (perceived) value that can be traded. Those are not the same: The commodity itself has utility; and that utility can be measured in the units of a currency. The currency itself is not valuable; it merely measures the value of something else. For example, a dollar in your wallet might measure the time you spent (a valuable thing) producing its fraction of your paycheck. It's the difference between a kilometer, and something that's a kilometer long; say a length of chain. Many things have length, but they are not standards of measurement.

Bitcoin has "length" (it is valuable, for now), but it is not a very good standard of measurement for wealth. Its demand fluctuates, but its supply is fixed by the algorithm. Therefore its value is demand-driven, and there is no upper or lower bound to what its actual value could be.

Compare to a "real" currency, whose supply is increased or contracted by a central bank to ensure that the value changes slowly and predictably. Given sound decision making, a centrally-managed currency can be a consistent measure of wealth no matter how many or how few people want to use it.

So as we all know, Bitcoin's value fluctuates significantly, and therefore does not measure a consistent amount of wealth. So this makes it a terrible currency. Its volatility also can't be fixed by wider adoption or "recognition" by the government, because a fixed supply is built into its very design. So it will never be a reliable standard of measurement for wealth.

[1] https://en.wikipedia.org/wiki/Nixon_shock

Re: Bitcoin is fiat money, too

#114

Post by betterunix2 »

lostmsu wrote: post #96
blibble wrote: post #16

Earlier quoted context omitted.

must? there's more to the world than the United States I live in the UK, there's no sales tax and the sole trader selling coffee at my local railway station is almost certainly below the VAT registration threshold, so there's no tax on the purchase at all regardless, paying a tax embedded in the price of a good is not the same thing as consulting the government on the purchase

I am impressed how you mentioned UK, and parent mentioned a cup of cofee, but both of you failed to recognize, that I was talking about billions of people, who actually live under totalitarian governments. Where illegal stuff mentioned in some other comments might be buying certain books under threat of death penalty in some extreme, but still dangerously common cases. First world people still can only see first worl…

What stops a totalitarian government from blocking Bitcoin at the national level?

Re: Bitcoin is fiat money, too

#115

Post by arkitaip »

TazeTSchnitzel wrote: post #109

Bitcoin and other cryptocurrencies seem to be embraced by libertarians who are very idealistic and have quite a shallow understanding of economics, software, and the world at large. But I repeat myself.

I've found the exact opposite to be true of a majority of cryptocurrency advocates, which makes is all that more disturbing. It's just impossible to say what the real value and future of cryptocurrencies really is.

Re: Bitcoin is fiat money, too

#116

Post by cs702 »

Yes, of course.

So what?

Just because Bitcoin is fiat money doesn't mean it will fail (or succeed), and it doesn't mean that it's "good" or "bad" either.

By many measures, fiat money has been a success so far. For example, the aggregate market cap of fiat money today exceeds Bitcoin's by quite a few orders of magnitude.[1]

Calling Bitcoin "fiat" ≠ arguing against it.

[1] http://money.visualcapitalist.com/all-of-the-worlds-money-an...

Re: Bitcoin is fiat money, too

#117

Post by arkitaip »

xenihn wrote: post #52
velodrome wrote: post #49

How does Bitcoin work offline? Let's say the world goes to hell (assume internet has been taken offline) and we need to trade using a form of trusted currency. Just curious...

How much physical cash would you have access to if banking/financial networks were no longer accessible?

Shit, my bank is down a couple of hours each week for routine maintenance during which I can't even check my balance.

Re: Bitcoin is fiat money, too

#118

Post by tbabb »

betterunix2 wrote: post #99
SubiculumCode wrote: post #84

"Bankers talk about “governance”, ways to ensure private banks and central bankers make sound decisions—so they create just enough money make commerce easier, but not so much that the system collapses through inflation or panics." Many people don't know that central bankers literally, not figuratively, mean CREATE money out of nothing.

Someone has always been able to "create money out of nothing." At some point there was no money; some time later there was. Someone or some group of people had to create the first money. People have actually "initialized" money many times throughout history e.g. when starting a country. As long as you can separate "money" from its representation, there is nothing particularly problematic about some people being able…

Not to mention that the value of a currency, like everything else, is driven by supply and demand; so in the face of fluctuating demand, adjusting the supply is necessary to ensure the currency measures a consistent amount of wealth, and doesn't inflate/crash.

Re: Bitcoin is fiat money, too

#119

Post by zdkl »

stanleydrew wrote: post #64
nnfy wrote: post #60

Earlier quoted context omitted.

I think dogecoin failed to go anywhere at least partly because it was a literal memecoin. Certainly made it hard for me to take it seriously as a semi-layman at the time.

Interestingly that would seem to further the author's point a bit. You didn't think dogecoin was legitimate because it was named after a meme. So that made you less likely to trust the code/governance?

> […] it was named after a meme.

> So that made you less likely to trust the code/governance?

Well... yeah! What's your point? That projects deserve trust based on their branding? I'm not convinced until there's peer approval, especially not if it's piggybacking on something "trendy".

I do agree though it's a shame it got subverted from the ultra low value p2p tipping platform it was becoming. Feels like it's just litecoin left as credible alternative in that area.

Re: Bitcoin is fiat money, too

#120

Post by alexasmyths »

SubiculumCode wrote: post #84

"Bankers talk about “governance”, ways to ensure private banks and central bankers make sound decisions—so they create just enough money make commerce easier, but not so much that the system collapses through inflation or panics." Many people don't know that central bankers literally, not figuratively, mean CREATE money out of nothing.

"mean CREATE money out of nothing."

No, this is not true.

Central banks do 'create' money, but they trade it on the market for real assets.

The Fed creates dollars and exchanges them for an equal amount of US Tbills (bought at market rates). $1 created = $1 in Tbills on their balance sheet.

They're not just creating money and keeping it, or giving it away.

The practice of 'fractional lending' by retail/commercial banks amplifies this, but as far as central banks go - every dollar they 'create' is essentially backed by an asset that they keep on the books for that dollar.

The idea is to manage how much currency is in circulation at any given time, so that inflation (and employment) hover at certain target.

If politicians were 'printing money' to pay national debts, or buy stuff or whatever - that would be straight forward dilution.

What the Fed does is not dilution, and it's not a bad thing, it's a good thing.

Same for ECB.

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