Our monetary system (and money history)

posted by justincredible

Fiat currency is fiat currency, because the govt decrees it currency and forces you to use it. No one is forced to buy or use bitcoin, so that's a very bad comparison. 

Aha, so it has value for the same reason that gold, silver, gems, etc have value then...because people like it/want it/its currently rare?

The US Government has the printing press and can push out more money whenever they want.

The coders can do the same, they can increase/decrease the speed at which new bitcoin are made, they just haven't done so yet. They have stuck with the "plan" so far.

Basically if you take the printing press for the USD and just put it at a constant rate of printing...you have Bitcoin...

posted by jmog

Your own link said that the coders give it value by keeping it "rare" and scheduled releases. How is that less "fiat" than what the US Government does with the USD? 

Are the coders, so far, sticking to a set schedule and not changing it? Sure. Will they forever? who knows.

What makes it that different, fiat value wise (meaning someone is just saying it has value so it has value) if its a government or a group of coders? Either way some "entity" is just saying "this is valuable".

The market, literally, is saying it's valuable by buying it.

Regardless, it looks like we're at an impasse and just have to agree to disagree. 

I cant afford a bitcoin so I don't think it has a future :) 
I hope it's not the future at least or I won't be able to afford money. 

posted by kizer permanente

I cant afford a bitcoin so I don't think it has a future :) 
I hope it's not the future at least or I won't be able to afford money. 

You don't have to purchase an entire bitcoin. You could purchase 0.000001 btc, if you wanted to.

posted by jmog

Aha, so it has value for the same reason that gold, silver, gems, etc have value then...because people like it/want it/its currently rare?

The US Government has the printing press and can push out more money whenever they want.

The coders can do the same, they can increase/decrease the speed at which new bitcoin are made, they just haven't done so yet. They have stuck with the "plan" so far.

Basically if you take the printing press for the USD and just put it at a constant rate of printing...you have Bitcoin...

It's not like there are 5 people coding on bitcoin. It would take market consensus to change the direction. Not government diktat.

posted by Verbal Kint

Why does it really matter what the form of currency is since the amount of a person's wealth is physical currency is estimated to be 8%?

I am much less than that, I bet I have less than $1000 of actual cash to my person.

Your total would also include your on-demand deposits and any CD's or Bonds with settlement in USD.  It would exclude other assets, including stocks, because you could sell that for whatever. 

So if you have $1000 cash at home, and $5k in the bank and another $10k in CD's, then you actually have $16k.

Here's another kick in the nuts for you: your house and stocks would still have value if the USD crashed overnight.  But then where would potential buyers come up with the money to pay you when their liquidity went to zero?

posted by justincredible

The market, literally, is saying it's valuable by buying it.

As a commodity, not as currency.  Purely speculative gamble that bitcoin WILL be worth something.  The demand is primarily investors and not consumers/purchasers.

The better comparison might be stock in Uber.  The company has no value.  It makes no money.  But the STOCK has value because investors believe it will one day make a profit.  When the investors/speculators bail, then crypto becomes worthless.

Or go a step further and it's the tech bubble of the late 90's.  Most of those companies are long gone.  Yeah, there were a few survivors and perhaps that will be the case with crypto.  I just can't see the current crop surviving because it has no fundamental economic bindings.  I think they all get crushed when the big banks come out with their own crypto.

posted by jmog

I used to play Everquest MMO. There was an exchange rate for their in game money (tunar/krono depending on version of game) to USD. The exchange rate was no different than USD to Euro, or USD to Bitcoin. 

 

The problem is when the game became far less popular (few people play it now) the rate basically went away. Meaning what used to be roughly $100 USD for 1 million tunar/krono, now 1 million tunar/krono probably wouldn't get you 1 USD.

 

Soon as bitcoin becomes less popular, like EQ/tunar, the rate will skyrocket making it worthless just like Venezuelan money.

 

Its not a guarantee that it will become worthless, but the chance is there and it is a decent chance.

 

With that being said, I wish I had bought bitcoin over a decade ago...

Everquest is an underrated game 

posted by justincredible

I wonder if this thread will bring BoatShoes out of the woodwork to talk about MMT?

posted by gut

Every time I mention treasuries I wait....

First thing I thought of as soon as I saw this thread.
 

posted by jmog

The coders can do the same, they can increase/decrease the speed at which new bitcoin are made, they just haven't done so yet. They have stuck with the "plan" so far.

Not quite.  Yes, they did cap it, but based on HOW Bitcoin is mined, it necessarily requires more and more effort to create a single new one with each previous one mined.  So, without any kind of enforced cap, its creation still runs on a sort of hyperbola with the axes being the total number currently in the market and the expended computing effort necessary to mine an additional one.  Allegedly (I've never mined), it's getting to the point that, even if you account for some of the more radical predictions on value down the road, it's just not worth the cost to mine them anymore.  Essentially, even with a bullish view, it costs more than a BTC will ever likely be worth to mine a BTC, so the market curbs the number in existence.
 

posted by gut

As a commodity, not as currency.  Purely speculative gamble that bitcoin WILL be worth something.  The demand is primarily investors and not consumers/purchasers.

Generally, this is what I think has been ... and still is ... the biggest drawback to any cryptocurrency.  With the rise in popularity and perceived value, they've largely been treated as investments as opposed to currency, and as such, it's best to treat them that way (or at least to view them that way).

Having said that, there is one difference between cryptocurrency and the stocks you referenced: They're actually THE preferred method of transaction on the dark web because of the anonymity.  And as a result, those who accept them also don't convert them right away either, because sellers on dark web markets are often also buyers on dark web markets (not to mention the fact that it's not the worst way to hide income from the IRS).  It's a microcosm, to be sure, and what is propelling it there isn't really replicable in an open market, because anonymity is less valuable.  But it does seem to have a base there, and I don't anticipate it going away altogether, if for only that reason.

It is also worth mentioning that, at least for BTC, it is the basis of many of the other altcoins.  Their value is bound to BTC as opposed to being bound to USD, so with regard to that specific cryptocurrency, it does share that foundational principle (XMR, for example, isn't valued per USD, but per BTC).

I'm not saying whether or not it will survive.  I think it needs to drop in value in order for that to happen. Its use needs to NOT be as as a growth investment, but as a tool of exchange, and I think it will eventually happen once all the HODL bros stop pumping the hell out of it every few months, which will help with the volatility.

Just had some knucklefuck try to pitch me some "program" on making "huge profits" from trading crypto.

I wasted as much of his time as possible and then proselytized for my view that crypto will never be legitimate money until its utility is transactional first and investment-based second (as any official currency on the FX is).

I think I might have just red-pilled this dude into understanding that it's basically treated like a really volatile version of oil or corn right now, and as such, he's not "trading" crypto; he's buying and selling it.

I swear, the people that buy into these crypto MLMs are some of the lowest-watt bulbs.

posted by O-Trap

I think I might have just red-pilled this dude...
I swear, the people that buy into these crypto MLMs are some of the lowest-watt bulbs.

Hilarious.  And as with any "trading scheme for sale", if it actually worked would you be selling it for a few hundred bucks each?  No, you'd have it under lock and key in a hidden safe room secured by a retina scan :).

Friend's building had a maintenance guy that was heavily into crypto (around peak bitcoin)....Found out later he had been convicted of a couple of scams (after he ripped them off on a project).  So, sure, it has support for transactions from the criminal element, but not nearly enough for liquidity or a base for broader adoption.

posted by gut

Hilarious.  And as with any "trading scheme for sale", if it actually worked would you be selling it for a few hundred bucks each?  No, you'd have it under lock and key in a hidden safe room secured by a retina scan :).

Friend's building had a maintenance guy that was heavily into crypto (around peak bitcoin)....Found out later he had been convicted of a couple of scams (after he ripped them off on a project).  So, sure, it has support for transactions from the criminal element, but not nearly enough for liquidity or a base for broader adoption.

I actually have a friend who entered a contest a few years ago that was sponsored by B of A (I think ... it was one of the big investment banks).  It was for coding ForEx trading bots.  Top prize was some absurd payout, but B of A got to keep sole rights to the bot, and you bet your ass that thing's under lock and key.

Don't get me wrong, I was excited to see BTC jump so high in late 2017, and like Justin, I do still think there is the possibility for it to become an actual competing currency long-term.  Because of that dark web element (not all of which is technically criminal, for the record), there will always be SOME market for it, but it will definitely require a shift in the dominant consciousness when it comes to the privacy of transactions (distrust of banks and their oversight superseding the convenience factor, I'd wager).  Until then, the current system is just too convenient.