The USD is, along with every other major, government-backed currency, already an almost 100% digital currency. I don’t see any advantage there. In fact, BTC has the disadvantage of no major government backing it.
If nobody is required to accept it, and I can’t do anything with it otherwise, what good is it?
Please explain.
Bitcoins are, of course, nothing. But it's a nothing that is pretty guaranteed to stay, to be in rigidly limited supply, and that is easily exchangeable. People give it a value that depends on their expectations of other people's willingness to buy them. Would you buy 10 bitcoins from me at $1000 each? I bet you would without hesitation. We're talking of giving a $1k value to something that is useless and completely immaterial, yet you just know it's an excellent deal.
This means that if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. Fiat money does not offer such assurance, it can lose most of its value almost overnight if government turns on printing presses or fucks up in some other way (see Turkish lira or Venezuelan bolivar).
Cryptocurrencies mimick the same properties of gold. Their "base value" comes from the speed/ease of transactions and other useful features (eg cannot be confiscated). Their supply is algorithmically limited and well-known in advance.
I would argue that, beyond industrial demand and use in jewelry, the thing driving the price is primarily speculation.
> ...if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now.
What you’re saying is that the car to gold ratio should be constant if your understanding is correct, right? I don’t have data for cars, but I do for houses, and your conclusion is false: https://www.jmbullion.com/investing-guide/pricing-payments/u...
Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse.
Oh, and if you think BTC can’t be confiscated, I have news for you: https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-h...
No. I am aware that the value of gold fluctuates, but it is safer than many national currencies, stocks of failing companies or overvalued real-estate. The amount of gold in the world is known and stable and there's no way to massively "print" gold to crash its value. This stable supply is mimicked by algorithms built into cryptocurrencies. As long as there is demand for a something, and there is limited supply of it, it will be worth >0. Cryptocurrencies satisfy both requirements: they are limited in supply and have demand because of their usefulness (fast & cheap transactions).
> Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse.
No need for hypotheticals. The government of Cyprus confiscated 47.5% of all holdings above 100 000 EUR in 2013 during its banking crisis. https://eu.usatoday.com/story/money/business/2013/07/29/bank... Cyprus is full member of the EU and Eurozone, so these risks are not limited to corrupt and failing third-world countries.
> Oh, and if you think BTC can’t be confiscated, I have news for you:
Most cryptocurrencies cannot be confiscated by network nodes like traditional banking institutions can freeze or rewrite payments and accounts (see Cyprus above). Only the one who has private keys controls the assets. This is a major feature.
What happened immediately after that?
Had the 300k been held in cryptocurrencies, the government would've been powerless to seize a part of it.
You could have also taken the prudent measure of not having that much money in a single bank account.
No, it cannot. No government can issue an order to seize 47.5% of everything over 10 BTC (ca 100k EUR) from a list of accounts. Third parties cannot freeze cryptocurrency accounts or rewrite their balances. That's the major innovation of distributed ledgers (blockchain).
This is a fundamental difference compared to traditional banking where account balances are just fields in a writable database.
At best, they can seize private keys that control accounts, but to achieve that, they must confiscate personal devices (phones, tablets, computers) and examine each of them with forensic tools. This is not viable on a large scale, especially when considering that private keys are easy to hide with plausible deniability (using encryption, steganography, memorization, etc).
News stories about "confiscated" cryptocurrency are nothing more than private keys found on seized computers. No-one can take control over any account by any other means.
I see. I suppose if the US government orders, say, Coinbase, to turn over control of someone’s account, they won’t do it? You have an example of that happening, right?
Each cryptocurrency user generates a private key that becomes a wallet and is used to sign transactions. These signed transactions are then broadcast to the internet for balance keeping nodes to keep track of. They do it in a globally distributed manner (no central entity) and earn rewards for their work (like collecting a tiny fraction of the transaction as a fee).
The private key is never disclosed to anyone.
Sure. So I suppose you invest in groceries: I mean, everybody needs food, right? Sure money.
https://www.youtube.com/watch?v=_pDTiFkXgEE
So, can I sell you those 10 bitcoins?
As for buying BTC, you’re clearly not paying attention to my comments here. ;) The only reason I would want 10 BTC is to immediately sell them to some sucker for more than I paid for them.
So, yes, I would buy 10 BTC from you at a very steep discount, but not at the market price.
In military, even a pack of cigarettes functions well as a currency. It does not need to be government-backed. It needs some kind of useful property to ensure demand.
EDIT: But sure, if government-backed means they force people to accept the currency, then it will have value. I don't see this as a good selling point though. Not trying to be sarcastic.
"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."
If you could think of a way to show BTC has value, I’d accept that as a selling point of BTC.
Of course it did not!
Money or money supply should not be determined by government, it should be a result of market mechanisms!
Every year the US government collects about 25% of all economic activity as taxes payable only in USD. Every person and business in the country must sell on average 25% of their productive output for USD, and you can buy all those things with USD.
If you disagree, I have some $IBs to sell you, and an insured account to store them!
I think the de facto meaning of backed, despite what people say about gold/silver/etc is actually this:
American dollars have value because the US Government taxes things, like land, and if you do not pay those taxes they will send you mean letters (trust me) before resorting to other means (trust Al Capone). You pay these taxes in US dollars. You just having dollars does not make them valuable. And dollars are not valuable because they are backed by gold or silver or sea shells. What makes dollars valuable is that the government wants them back.
From something I wrote a while ago about why being "backed" is important: https://medium.com/@simon.sarris/the-guns-of-bitcoin-1f77930...
"It’s a gambling device… there’s been a lot of frauds connected with it. There’s been disappearances, so there’s a lot lost on it. Bitcoin hasn’t produced anything."
But it's a good gambling device and people like to gamble. I both think it's kind of nuts and hold a few bitcoins.
There's no "should". Moral theories about the propriety of the value of currencies are not material. Bitcoin has value because people are willing to trade valuable stuff for it
What can you buy with BTC besides drugs and the occasional coffee at a Silicon Valley coffee shop? How does that compare to what you can buy with USD? Call me when you can buy a house with BTC reliably.
If you're saying "BTC is less useful than some other currencies", then I don't disagree, but then you should have said that in the first place, rather than motte-and-baileying.