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How do you define good money and bad money? I feel like Bitcoin used to be a currency, but it has evolved into an investment game.
by fhood 9y ago
How do you define good money and bad money? I feel like Bitcoin used to be a currency, but it has evolved into an investment game.
- dnautics 9y agoGood money and bad money are well defined concepts in the context of greshams law
- unknown_apostle 9y agoWhenever a person owns two kinds of things which are money-like (fungible, liquid, universal) they will prefer to pay using the bad money. Bad means things like "diluted gold content", reckless behaviour of the emitting central bank, etc. In the case of a widely adopted blockchain like bitcoin, "bad" could mean something like "technically inferior". Or in terms of tail risk: "hacked" or "major bug discovered" or "encryption broken". These tail risks caused by blockchain's complexity would be a sudden event. Unlike e.g. USD or EUR becoming bad money, which is something that unfolds slowly and publicly over many years.