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Fiat is Effective: fiat for the crypto crowd [pdf]

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Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#11

Post by pjc50 »

jph wrote: post #4

Summary of key points: • The case against fiat is an ethical case, much more than an effectiveness case. Crytpo advocates often misunderstand this. * The primary reason fiat succeeds is it offers price stability. But stability is often purchased at the expense of workers and the unemployed. * The management of fiat provides state actors with incredibly powerful, ultimately discretionary, tools which significantly aff…

"Fiat money and associated banking systems are the technology that enables the finance of war on scales that would have been unimaginable a few centuries ago"

This quote appears in the summary but isn't really supported by argument within the article, and is quite a big claim!

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#12

Post by nadam »

Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today.

Re effectiveness: Bitcoin itself is not really fast, scalable and transaction fees are not that small anymore, but something like Dash for example can be much more effective than Fiat even at a large scale. (I mean small latency, small transaction fees, high throughput.) Should scalability become a really big issue, I am sure it will be solved by some projects. (There are already projects working on extreme high throughput like EOS.)

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#13

Post by once_inc »

pjc50 wrote: post #7
once_inc wrote: post #6

The author uses a slide to say: > fiat currencies issued by strong stable states capable of taxing their citizens, with banking systems effective at encouraging widespread borrowing, with large, diversified domestic economies (and so the capacity to do with fewer imports if necessary) that borrow in their own currency, and do not have sizable debts in foreign currency aren't weak. This speaks to me as if the author h…

> That is the fundamental problem that cryptocurrencies were created to solve; trustless money. What's the actual problem here? "Trustless money" is a philosophical objection. Cryptocurrency tends to move the trust locus to your software and hardware stack, along with a choice of crypto-to-real-money gateways, none of which seem particularly trustworthy.

Cryptocurrencies indeed move the trust from a centralized accountant to a distributed system guarded by both code and math. Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms.

Any transaction between fiat and crypto requires a modicum of trust, in the same sense that buying something with a credit card requires some trust. Once you are inside the crypto bubble, that trust is no longer required.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#14

Post by once_inc »

nadam wrote: post #12

Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. Re effectiveness: Bitcoin itself is not really fast, scalable and transaction fees are not that small anymore, but something like Dash for example can be much more effective than Fiat even at a large scale. (I mean small la…

The lightning network is one of the proposed solutions for scaling bitcoin further.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#16

Post by littlestymaar »

pjc50 wrote: post #11
jph wrote: post #4

Summary of key points: • The case against fiat is an ethical case, much more than an effectiveness case. Crytpo advocates often misunderstand this. * The primary reason fiat succeeds is it offers price stability. But stability is often purchased at the expense of workers and the unemployed. * The management of fiat provides state actors with incredibly powerful, ultimately discretionary, tools which significantly aff…

"Fiat money and associated banking systems are the technology that enables the finance of war on scales that would have been unimaginable a few centuries ago" This quote appears in the summary but isn't really supported by argument within the article, and is quite a big claim!

See how every big countries got rid of the gold standard during World War 1.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#17

Post by littlestymaar »

nadam wrote: post #12

Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. Re effectiveness: Bitcoin itself is not really fast, scalable and transaction fees are not that small anymore, but something like Dash for example can be much more effective than Fiat even at a large scale. (I mean small la…

> Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today.

This sentence sounds like preaching. Do you have any evidence of this ?

IMO this is really unlikely because you can't dynamically adapt the supply of money. See my other comment in this thread[1].

[1] https://news.ycombinator.com/item?id=15481953

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#19

Post by urza »

So the argument basically comes down to that crypto is too volatile and not usable as unit of account?

1. Crypto is still in its initial stage, where capital is flowing into it. Once it is there, it will be less volatile. You can already see this in Bitcoin[1], where relative volatility is dropping every year.

2. There are projects coming that will enable decentralized trustless peg of fiat currencies into blockchians[2][3]. So you will have usd/eur in blockchians. Similar like Thether, but without central issuer. This will be very convenient for pricing (unit of account), but with all the benefits of blockchains.

And as author admits fiat is terrible as "store of value" - so with this combination - fiat pegs in blockchain for accounting and native crypto as store of value (keep bitcoin for your grandchildern instead of dolar that looses 95% value over century), it might be the best combination of both worlds.

1: http://woobull.com/bitcoin-volatility-will-match-major-fiat-...

2: http://cryptopeg.org/

3: http://www.getbasecoin.com/basecoin_whitepaper_0_99.pdf

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#20

Post by zodiac »

littlestymaar wrote: post #8
once_inc wrote: post #6

The author uses a slide to say: > fiat currencies issued by strong stable states capable of taxing their citizens, with banking systems effective at encouraging widespread borrowing, with large, diversified domestic economies (and so the capacity to do with fewer imports if necessary) that borrow in their own currency, and do not have sizable debts in foreign currency aren't weak. This speaks to me as if the author h…

> I agree with the author on the part of currency needing to be stable, and cryptocurrencies in their current state are not stable. […] It takes time, effort, and entropy to gain the momentum needed to be stable, crypto is still in its early-adoption-phase. The problem is : if you want a stable currency you need a money supply that grow as much as `inflation + growth + the slowdown of the money flow`, if you don't ha…

There are project like MakerDAO that indeed use smart contracts (plus fiat price oracles and some other things) to implement monetary policy without any "pilot".
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