What the Crypto Crowd Doesn’t Understand About Economics

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> National currencies used to be backed by gold; now they're backed by the nation's resolve to support the currency. Cryptocurrencies are not Ponzi schemes; they can stabilize, while Ponzi schemes collapse. Cryptocurrencies however are backed entirely by convention. One could argue that nations are conventions, but they are bound together by a constellation of motives beyond their currency. Cryptocurrencies are isolated conventions. That is their appeal and their vulnerability.

That is why I object to the way it is common in cryptocurrency circles to refer to national currencies as "fiat".

Before cryptocurrency, there was essentially a dichotomy:

(1) Money that either is a commodity (e.g., gold, diamonds) or is backed by a commodity. This kind of money has intrinsic value aside from its use as money--in a post-apocalyptic collapsed civilization for instance you can still use your gold bars to smash in the skulls of people trying to steal your stash of food.

(2) Money that is backed by agreement that it is money, and that has almost no intrinsic value. Generally this only worked on a large scale if someone big, like the government, agrees that it is money and encouraged others to do so such as by making this the only form of money acceptable for paying debts owed to the government (such as taxes) or for the government to use to pay debts.

Until this century it wasn't really practical to have a large scale type #2 money for general use without it being backed by a government and so the term "fiat money" came to mean the whole of type #2.

Bitcoin and similar cryptocurrencies are type #2 but not government backed. By using the term "fiat" to refer to other type #2 money, it gives the impression that Bitcoin is not type #2. This can lead people into thinking Bitcoin is type #1. I've seen people invest in Bitcoin thinking that they are investing in a gold-like money because of this.

The dichotomy needs to become a trichotomy: (1) commodity money, (2) government-backed fiat money, (3) non-government-backed fiat money.

Not sure how it’s different. In both cases, the people who make the currency and their friends get rich, and the average Joe gets nothing.

I used to run a newspaper. The business model question is very hard.

There's basically a choice:

You can write clickbaity ad-revenue-optimised shite, which draws people in, gets them to open the article (and get served the ads). But once they've done that then there's no point in getting them engaged further - from a business point of view there's nothing gained by getting them to read stuff once the ads have been served. So you target the journos for 5 articles a day, minimum, knowing that that's not enough time for them to write decent articles, and get your editors to make the headers clickbaity. Job done. Except ad revenue is declining year-on-year and you're trashing your reputation for journalism.

Or you can do "proper" journalism, which involves paying journalists for good articles, investigative journalism, Pulitzer prize stuff. It costs a fortune. It's not worth doing for ad revenue because the clickbaity stuff actually earns more money. But it does increase your reputation. And if you get your reputation high enough, people will start paying to access the stuff you're writing.

At least that's the theory. No-one (as far as I'm aware) has actually made a profit from either model since about 2000. The Guardian has done very well out of the Wikipedia model, but all the opinions I hear is that that's probably not sustainable, and is anyway very specific to them because they cater to a niche that is very politically aware and fairly well-off. i.e. they have money to spare to support the Grauniad, and identify with its political stance.

So, yes, optimising for ad revenue when you have a paywall is stupid - people who are drawn there by the clickbait header won't pay the paywall. And people who have paid for the paywall will be annoyed if the article is optimised for clickbait (ad-revenue). I hope that makes sense? Let me know if not and I can explain it again.

I'm a geek, I enjoy messing with this stuff. The enjoyment of the technical challenge of "hacking" their paywall was more than worth the time it took. The article was probably not. Not sure I'd do it again.

I know, my first question was a joke; you're causing clickbaity headlines and inline ads by bypassing their paywall. You still haven't explained why it was worth your time to manually edit the frontend in Inspector when the article is such poor quality it's not worth paying for.

Google and Facebook ate the ad market. It doesn't matter if you win Pulitzer prizes or not, you need another source of revenue.

There's plenty of profitable paywall models, Wired, NYT, Economist. You haven't heard about any of the profitable models in the last 20 years?!