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Comment by jw1224 | Hacker News Reader

Fiat currency, in essence, is equally valueless. It only has inherent value because enough people agree that it does.

Bitcoin is no different (and in fact has several advantages over fiat, giving it further value).

Well, not quite. It has inherent value since fiat is guaranteed to be backed by the full faith and credit of the backing nation. That is, by holding fiat, you trust that the country issuing that fiat doesn't default (and will hence guarantee that value). I don't see a similar parallel with crypto, though I'd love to be corrected.

> you trust that the country issuing that fiat doesn't default

Doesn't default on what? A dollar isn't a claim on a percentage of the productive output of the USA, it's just a dollar. If dollars aren't worth anything, it's not worth anything.

Dollars do have inherent value, because I need them to keep the government from throwing me in prison for tax evasion. That is a very useful property.

That's not inherent value, that's a social contract.

This is such a stupid argument that keeps being repeated on HN.

People are not obliged to be paid in dollars. This means people could decide to be paid exclusively in some cryptocurrency.

So government collects taxes in dollars... what are they going to buy with that?

If the argument keeps being repeated it must have inherent value.

Crypto is backed by the strength of the network and the algorithms that run the network.

As far as real-world value, all that's needed is for the value to be "bootstrapped" if you will. When ethereum was first released all it took was for someone to say "I'll buy your 1 Eth for X dollars" and boom the value of Eth is bootstrapped because we can attach the value of an Eth coin to a real world item.

After that bootstrapping, the value of today's Eth is governed by supply/demand and the value it had yesterday.

Since I can't exchange a dollar for a piece of faith and credit, it's not really backed in the traditional sense of being a backed asset.

Neither is it backed by the US military or the ability to pay taxes.

The fact that the dollar is in widespread use in a country that has a track record of stability, a well-managed economy, trusted institutions and a strong military all mean that if you want to put your faith into an arbitrary and made up asset, the US dollar is an excellent choice; but its value is a collective illusion nontheless.

Not sure why you’re getting downvoted. This is an accurate and realistic observation.

Also, you can pay taxes with fiat currency.

You must pay taxes with fiat currency.

Taxes and especially paying loans back starting from banks, businesses to mortgages.

And use it to participate in the economy to obtain little things such as housing and food. Not to mention a computer and an internet connection.

Intrinsic value in this context would mean something's value outside of its exchange value. Both fiat and Bitcoin have arguably very little to no intrinsic value within that definition.

I was talking about its utility, not value. The whole point of a currency is being useful, not in being valuable.

When currency inflation gets out of control, there is often not much the issuing country can do to stop it.

Central banks can always stop inflation. How do you suggest they wouldn't be able to stop it?

> Central banks can always stop inflation

The central banks of Austria, Bolivia, Brazil, China, France, Germany, Greece, Hungary, Peru, Poland, Venezuela, and Zimbabwe have all failed to stop hyperinflation.

You're conflating the ability to do something with actually doing that something. Also, what's your point with regards to inflation and fiat currency? That seems tangential to the parent comment.

The conflation is appropriate as the original clam is that fiat currency is backed by trust that the nation won't default. If the nation defaults in both cases, they are equivalent.

> The central banks of Austria, Bolivia, Brazil, China, France, Germany, Greece, Hungary, Peru, Poland, Venezuela, and Zimbabwe have all failed to stop hyperinflation.

Which of those were central banks of nations where debts including both private and public debt were denominated principally in fiat whose monetary policy was controlled by the central bank?

Some of them were pre-fiat (gold standard), and some were dealing with situations were obligations were largely in externally-controlled fiat (e.g., USD.)

Hyperinflation is caused by very limited supply. If there is not enough food around people will give everything for it. It doesn't matter what the currency is and how much you print or not.

Are you sure? What did they try to stop it that didn't work?

What could the central bank of zimbabwe have done to stop inflation? I agree that central banks can almost always stop inflation...as long as they are controlling a reserve currency that actually has international value. Otherwise there is actually very little a central bank can do when your currency isn't used for imports, exports, international trade etc and foreign dollars/euros/RNB are needed to do almost any economical meaningful transaction.

They could have stopped flooding the country with Zimbabwean dollars and hyperinflation would have stopped immediately. Of course, the central bank of Zimbabwe was never independent from the government, but that doesn't change the fact that whoever was in charge of the monetary policy could have stopped hyperinflation at any time, had they wanted to.

You know, I wish that there were a requirement for people to read just one book on economics before blathering about cryptocurrencies.

The idea that the US government's power to tax all of American commerce is "valueless" shows that you simply haven't thought for even a few seconds about anything in the field.

> You know, I wish that there were a requirement for people to read just one book on economics before blathering about cryptocurrencies

Well you’ll be pleased to hear I’ve read plenty of books on economics, and hey — I even hold a qualification in it!

Just like the “value” inherent in fiat currencies, we grant “power” to the government because enough people agree to do so. This is real value, but nonetheless arbitrarily granted. Hence why I qualified my statement by saying “in essence” — just a bit of vital nuance you happened to miss.

Thanks for the chuckle though, I did laugh at the notion that after 9 years in crypto, I “haven’t thought for even a few seconds” about it :)

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