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A bit of both, really. Users of fiat money have to trust the government's effective use of force in supporting the transactional utility of the currency. Exam

• comex 9y ago
  Force helps, but all that’s really necessary for a fiat currency to have worth is for users to trust that it will remain reasonably scarce. Example: Bitcoin. In the case of traditional government-issued currencies, you’re trusting in humans rather than an algorithm, and that trust can be broken (which is what happens in a hyperinflation scenario), but it still exists in normal scenarios. (And even Bitcoin’s value is in part based on trust in government - specifically, that various governments won’t ban it. A ban might not be 100% effective but would clearly decrease its utility and thus its value; recent events wrt China are a small-scale demonstration.)
  • gaius 9y ago
    all that’s really necessary for a fiat currency to have worth is for users to trust that it will remain reasonably scarce ... and that other people will accept it in exchange for goods and services. Scarcity alone is no guarantee of that. For the vast, vast majority of people Bitcoin is literally worthless - the only thing you can do with it is attempt to convert it into real currency so you can actually use it for something. And they would rather you did that rather than trying to fob them off with a bunch of numbers.