Steve has missed the main point.
The value of a currency is determined by the effort required to obtain it.
Fiat is Effective: fiat for the crypto crowd [pdf]
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Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#42Even the most stable currencies of developed world can be influenced by a black swan. For example, see Swiss Franc or British Pound. If some cryptocurrency is adopted for mainstream use (big if), it won't have this risk, inherent to a centrally controlled currency.
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Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#43Nice summary. The author has correctly observed that so much of the finance industry is really about clearing and settlement, and that what circulates are claims on money. This is present in the crypto world too. When you wire money to an exchange and use it to buy cryptocurrency, it doesn't immediately turn into a crypto transaction - you get a claim on that cryptocurrency. Sometimes exchanges are unable to meet tho…
Zimbabwe had little to do with supply of currency, and more to do with supply of stuff.
They forgot that our economies rely upon the magic of the pin factory. Unsurprisingly if you take land from a specialist farmer and give it to a load of people who have no such specialism, then you get a collapse in production.
The result of that is obvious unless you ramp up taxes to colossal levels to kill the excess money circulation.
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#44Steve has missed the main point. The value of a currency is determined by the effort required to obtain it.
That's not its value, just an upper bound on its value.
If you disagree, boy do I have some currency to sell you. I worked very hard on it, I swear! :)
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#45> Fiat currencies are not “backed by nothing”. They are backed
by the labor and assets of all the humans who have obligations
to pay in fiat
So when we "print" more money, we print more labour?
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#46Earlier quoted context omitted.
> 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. This used to be true in the beginning of Bitcoin (when CPU mining on your desktop was OK) but it's not true anymore. The integrity of the ledger is guaranteed by the miners, and now the m…
Tampering with the ledger is sufficiently difficult that it's not a real risk in cryptocurrency. There are plenty of other real risks that are far more relevant.
If a cartel controls more than 50% of the mining power, it's not difficult : they make authority on the ledger. (IIRC you don't even need 50% of the mining power to control the ledger in practice but it's not as straightforward).
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#47> Fiat currencies are not “backed by nothing”. They are backed by the labor and assets of all the humans who have obligations to pay in fiat So when we "print" more money, we print more labour?
No, but if there is an increase in productivity and you don’t print money there will be deflation.
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#48Bitcoin is now at the peak of the hype cycle. A lot of the 23 year old traders don't know anything but a bull market. When it inevitably goes through a bear market, like every other asset, when there is $50 billion of sellers higher ready to sell on every uptick, what brings bitcoin back? Stocks very rarely come back from 70-80% declines, unless the stock is Amazon or similar. All the hodlers are going to turn into baghodlers if they don't sell pretty soon.
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#49> Fiat currencies are not “backed by nothing”. They are backed by the labor and assets of all the humans who have obligations to pay in fiat So when we "print" more money, we print more labour?
No, but if there is an increase in productivity and you don’t print money there will be deflation.
Is deflation an awful situation ?
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#50So 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 blockchian…
Volitilty will be inherent with bitcoin, and any blockchain database where the supply has been distributed for low computational/energy/capital input to the small pool of users who aquire majority stake in the total supply, thus devaluing any long term inherent store of value.
additionally, bitcoin and the exchanges can rapidly plummit to zero if and when there's a run to get out as the value requires demand from another just buyer. no buyers, and the price freefalls.