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It's sad that this aspect of the conversation so often gets replaced by everything else. This is (IMO) the most important point about digital currency - the pro

It's sad that this aspect of the conversation so often gets replaced by everything else. This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion. We're still not there, but that should be the north star for crypto (again, in my opinion).

sorbits 6y ago
Normally the government leverages its power to keep its currency stable. If a country fails at that, the residents tend to switch to another country’s currency, for example USD is widely accepted in countries with unstable currencies, and this makes sense, since a lot of commodity prices are set in USD. What we have seen with crypto currencies are extreme volatility, not useful to base a country’s economy on, and because it is decentralized, no-one can really intervene to control this volatility, by e.g. changing the interest rate, and nothing is priced in crypto currencies, to sort of keep it tied to something. The only metric for what a coin should cost seems to be the electricity/leasing of computers required to mine one. But even this metric is not good, as it is proportional to the size of the network, which is not a constant, and is likely to grow, as the price goes up.
- lazide 6y ago
  Devils advocate - it is possible the large swings are also because it does not have the counterbalancing effect of a large economy on it, and as it gets used more often that will change. Being able to buy something I want today, because the price went up from yesterday, or saving today when I would have spent, because the price has dropped today causes a regulating effect. Right now the usage of it is low, small changes in this equation have an outsized effect.
- deleted 6y ago
  [deleted]
- leppr 6y ago
  I agree assets with fixed inflation, be them cryptocurrencies or precious metals, make poor currencies, but some cryptocurrency projects are actually working on algorithmically price-stable currencies (ie. a cryptocurrency with a dynamic supply, not pegged to another fiat currency). When/if the supply problem is solved, and a more environnementally friendly consensus mechanism than PoW developed, there won't be many arguments against adopting cryptocurrencies as the default payment method. [1]: https://debaseonomics.io/ https://debaseonomics.io/, https://reflexer.finance/ https://reflexer.finance/
  - MrMan 6y ago
    But that is still the future.
- vbezhenar 6y ago
  For some countries official rate is terrible and buying USD unofficially is dangerous (it's prohibited and you can end up with fake dollars). BTC might be somewhat safer, as can keep anonymity and there's no fake BTC. About volatility: you're right but the thing is: even if BTC is volatile, over longer period its value rises up. Nobody lost any USD yet if he kept his BTC long enough.
ccheney 6y ago
You're right, we're still not there yet. I love the idea of cryptocurrency but it's being treated more like a speculative investment vehicle than a currency for goods & services. Sure, you can buy some stuff with it but its volatility is generated through all of the speculators. It needs to be stabilized if we're ever going to replace fiat currency.
- l_pan_ 6y ago
  It has already been https://www.investopedia.com/terms/s/stablecoin.asp https://www.investopedia.com/terms/s/stablecoin.asp Andreessen Horowitz invested $15 million in https://en.wikipedia.org/wiki/Dai_(cryptocurrency) https://en.wikipedia.org/wiki/Dai_(cryptocurrency)
  - toomuchtodo 6y ago
    What happens to stablecoins when central banks hand out digital wallets [1] to everyone alongside instant payments [2]? [1] https://www.atlanticcouncil.org/blogs/econographics/the-rise-of-central-bank-digital-currencies/ https://www.atlanticcouncil.org/blogs/econographics/the-rise... [2] https://en.wikipedia.org/wiki/Instant_payment#Examples_of_instant_payment_services https://en.wikipedia.org/wiki/Instant_payment#Examples_of_in...
    - GoblinSlayer 6y ago
      Fiat systems impose the risk of opacity, regulatory heuristics and reversible transactions.
      - deleted 6y ago
        [deleted]
halukakin 6y ago
Say everyone in an unstable economy were paid in usd. If that country has foreign deficit, if that country has high government debt. What happens? How can the government keep paying its own employees? How does it pay retiree checks? How does it subsidize farming when needed? As long as a country cannot print usd itself, this is a fast shortcut to unemployment, hunger, etc... Strong currencies are not the solution to poor governance. Good governance and democracy makes a country and its currency strong. Not vice versa.
- l_pan_ 6y ago
  Well said. I believe this is why the US and many others abandoned the gold standard.
- ardy42 6y ago
  > Strong currencies are not the solution to poor governance. Good governance and democracy makes a country and its currency strong. Not vice versa. That's a good point. Too many people propose individualist solutions to social problems, and all their "solution" would do is make the social problem worse. I think that stems often stems from an overzealous faith in free markets, which leads to a distorted idea that individual self interest factored over all of society always results in social benefits, so you only need to consider things from the perspective of an individual (which is also far more familiar to most people). Sometimes individual self interest does lead to social benefits, but often it doesn't.
  - imtringued 6y ago
    Markets only exist within the context of a political system. They are just a tool to reach a certain policy outcome. The idea of using the free market to replace poor governance is laughable. It's the opposite. You have to set the right policies and incentives and only then will the free market show its true beauty. Markets fail or succeed because of improper or proper governance. It's like a genetic/ML algorithm that is optimizing for a cost function. If your cost function is awful your algorithm will be awful but that's not an argument in favor of getting rid of cost functions entirely.
forty 6y ago
Why would someone give btc against a more risky local money? What I wonder is, why is it more convenient for someone who has some unstable money available to trade it for btc rather than euro directly for example? - i assume the end goal is to convert it back to a real money you can use to purchase thing?
- GoblinSlayer 6y ago
  Why would someone give euro against a more risky local money?
  - forty 6y ago
    hence my question, what does btc change?
    - hnick 6y ago
      I can think of a few things. It's less regulated so it's more likely people will make poor trades - maybe it's not in their interest as you are implying, but they do it anyway. Countries can make owning foreign currency illegal. BTC is easier to hide than Euros (cash or electronic). You can trade BTC back to cash without a paper trail by writing down a private key. In terms of why someone would sell BTC for a failing currency? Maybe they are also a local and have expenses to pay. Otherwise, it's likely the seller is selling for USD or something and there's an intermediate conversion so someone else who needs it ends up with the local currency. It's pretty common to get out of the currency as much as possible (assets, other currencies, BTC) then only dip back in for as little as possible to pay local expenses.
- sjy 6y ago
  Governments with unstable currencies sometimes impose restrictions on the ability to buy and sell them, and bitcoin makes it easier to evade these.
- heavyset_go 6y ago
  They wouldn't. A lot of cryptocurrency justifications hinge on made up scenarios. They also ignore the fact that it costs money to even send or spend most cryptocurrency, or the fact that it must be liquidated in 99.9% of spending scenarios, and ignore the challenges in buying or selling cryptocurrency in the first place. Most exchanges require several forms of ID and verification to buy or sell cryptocurrency. I had to use a smartphone to take a picture of myself with my photo ID before I could even use most exchanges. Someone who doesn't have photo ID, computer or a working smartphone are out of luck in that scenario. Bitcoin might make sense for remittance, with the intention that it is then liquidated after being received.
grey-area 6y ago
But none of that requires cryptocurrencies in their current form. You’re talking about a supranational currency, and I have sincere doubts that grifters of all sorts would not try to take over and manipulate such a currency, as they have for bitcoin. The governance is more important than the tech IMO.
- MrMan 6y ago
  The globe has a few supranational currencies already we have some experience in this
Thorentis 6y ago
Why is encouraging people in such countries to use <some cryptocurrency> better than making the US Dollar more accessible to these people? If stability is the goal, I find it hard to accept that DogeCoin is the answer to the developing/third world's economic problems.
- tenaciousDaniel 6y ago
  I don't think DogeCoin is the answer to anything at all, tbh.
  - netflixandkill 6y ago
    It was the answer to "how many people can I get in on this joke?" while playing around with litecoin.
  - irwwwan 6y ago
    Let’s see what can Elon do with his bitcoin.
- herbst 6y ago
  How is usd tho? Sure its more stable than bitcoin, but in the last months and years it relatively lost value to eur/chf when bitcoin only increased. Both solutions have issues however only one made holding money lucrative
jariel 6y ago
" This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion. " This was never the promise of blockchains or decentralized currencies because those things cannot fulfill the promise. There's a much more pragmatic answer and that's to use Euros, USDs, Pounds or RMBs for a decade or so until the government has legitimacy. 'Cash' is useful in these economies. Also, it's possible to provide digitized banking for the purposes of transferring money without the notion of introducing new, funny currencies.
dragonwriter 6y ago
> This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion. Well, except that the conversion into/out of fiat and the access to the network to transact the crypto are all things the government will usually be quite able to interfere with.

sorbits 6y ago

Normally the government leverages its power to keep its currency stable. If a country fails at that, the residents tend to switch to another country’s currency, for example USD is widely accepted in countries with unstable currencies, and this makes sense, since a lot of commodity prices are set in USD. What we have seen with crypto currencies are extreme volatility, not useful to base a country’s economy on, and because it is decentralized, no-one can really intervene to control this volatility, by e.g. changing the interest rate, and nothing is priced in crypto currencies, to sort of keep it tied to something. The only metric for what a coin should cost seems to be the electricity/leasing of computers required to mine one. But even this metric is not good, as it is proportional to the size of the network, which is not a constant, and is likely to grow, as the price goes up.

lazide 6y ago
Devils advocate - it is possible the large swings are also because it does not have the counterbalancing effect of a large economy on it, and as it gets used more often that will change. Being able to buy something I want today, because the price went up from yesterday, or saving today when I would have spent, because the price has dropped today causes a regulating effect. Right now the usage of it is low, small changes in this equation have an outsized effect.
deleted 6y ago
[deleted]
leppr 6y ago
I agree assets with fixed inflation, be them cryptocurrencies or precious metals, make poor currencies, but some cryptocurrency projects are actually working on algorithmically price-stable currencies (ie. a cryptocurrency with a dynamic supply, not pegged to another fiat currency). When/if the supply problem is solved, and a more environnementally friendly consensus mechanism than PoW developed, there won't be many arguments against adopting cryptocurrencies as the default payment method. [1]: https://debaseonomics.io/ https://debaseonomics.io/, https://reflexer.finance/ https://reflexer.finance/
- MrMan 6y ago
  But that is still the future.
vbezhenar 6y ago
For some countries official rate is terrible and buying USD unofficially is dangerous (it's prohibited and you can end up with fake dollars). BTC might be somewhat safer, as can keep anonymity and there's no fake BTC. About volatility: you're right but the thing is: even if BTC is volatile, over longer period its value rises up. Nobody lost any USD yet if he kept his BTC long enough.

ccheney 6y ago

You're right, we're still not there yet. I love the idea of cryptocurrency but it's being treated more like a speculative investment vehicle than a currency for goods & services. Sure, you can buy some stuff with it but its volatility is generated through all of the speculators. It needs to be stabilized if we're ever going to replace fiat currency.

l_pan_ 6y ago
It has already been https://www.investopedia.com/terms/s/stablecoin.asp https://www.investopedia.com/terms/s/stablecoin.asp Andreessen Horowitz invested $15 million in https://en.wikipedia.org/wiki/Dai_(cryptocurrency) https://en.wikipedia.org/wiki/Dai_(cryptocurrency)
- toomuchtodo 6y ago
  What happens to stablecoins when central banks hand out digital wallets [1] to everyone alongside instant payments [2]? [1] https://www.atlanticcouncil.org/blogs/econographics/the-rise-of-central-bank-digital-currencies/ https://www.atlanticcouncil.org/blogs/econographics/the-rise... [2] https://en.wikipedia.org/wiki/Instant_payment#Examples_of_instant_payment_services https://en.wikipedia.org/wiki/Instant_payment#Examples_of_in...
  - GoblinSlayer 6y ago
    Fiat systems impose the risk of opacity, regulatory heuristics and reversible transactions.
    - deleted 6y ago
      [deleted]

halukakin 6y ago

Say everyone in an unstable economy were paid in usd. If that country has foreign deficit, if that country has high government debt. What happens? How can the government keep paying its own employees? How does it pay retiree checks? How does it subsidize farming when needed? As long as a country cannot print usd itself, this is a fast shortcut to unemployment, hunger, etc... Strong currencies are not the solution to poor governance. Good governance and democracy makes a country and its currency strong. Not vice versa.

l_pan_ 6y ago
Well said. I believe this is why the US and many others abandoned the gold standard.
ardy42 6y ago
> Strong currencies are not the solution to poor governance. Good governance and democracy makes a country and its currency strong. Not vice versa. That's a good point. Too many people propose individualist solutions to social problems, and all their "solution" would do is make the social problem worse. I think that stems often stems from an overzealous faith in free markets, which leads to a distorted idea that individual self interest factored over all of society always results in social benefits, so you only need to consider things from the perspective of an individual (which is also far more familiar to most people). Sometimes individual self interest does lead to social benefits, but often it doesn't.
- imtringued 6y ago
  Markets only exist within the context of a political system. They are just a tool to reach a certain policy outcome. The idea of using the free market to replace poor governance is laughable. It's the opposite. You have to set the right policies and incentives and only then will the free market show its true beauty. Markets fail or succeed because of improper or proper governance. It's like a genetic/ML algorithm that is optimizing for a cost function. If your cost function is awful your algorithm will be awful but that's not an argument in favor of getting rid of cost functions entirely.

forty 6y ago

Why would someone give btc against a more risky local money? What I wonder is, why is it more convenient for someone who has some unstable money available to trade it for btc rather than euro directly for example? - i assume the end goal is to convert it back to a real money you can use to purchase thing?

GoblinSlayer 6y ago
Why would someone give euro against a more risky local money?
- forty 6y ago
  hence my question, what does btc change?
  - hnick 6y ago
    I can think of a few things. It's less regulated so it's more likely people will make poor trades - maybe it's not in their interest as you are implying, but they do it anyway. Countries can make owning foreign currency illegal. BTC is easier to hide than Euros (cash or electronic). You can trade BTC back to cash without a paper trail by writing down a private key. In terms of why someone would sell BTC for a failing currency? Maybe they are also a local and have expenses to pay. Otherwise, it's likely the seller is selling for USD or something and there's an intermediate conversion so someone else who needs it ends up with the local currency. It's pretty common to get out of the currency as much as possible (assets, other currencies, BTC) then only dip back in for as little as possible to pay local expenses.
sjy 6y ago
Governments with unstable currencies sometimes impose restrictions on the ability to buy and sell them, and bitcoin makes it easier to evade these.
heavyset_go 6y ago
They wouldn't. A lot of cryptocurrency justifications hinge on made up scenarios. They also ignore the fact that it costs money to even send or spend most cryptocurrency, or the fact that it must be liquidated in 99.9% of spending scenarios, and ignore the challenges in buying or selling cryptocurrency in the first place. Most exchanges require several forms of ID and verification to buy or sell cryptocurrency. I had to use a smartphone to take a picture of myself with my photo ID before I could even use most exchanges. Someone who doesn't have photo ID, computer or a working smartphone are out of luck in that scenario. Bitcoin might make sense for remittance, with the intention that it is then liquidated after being received.

grey-area 6y ago

But none of that requires cryptocurrencies in their current form. You’re talking about a supranational currency, and I have sincere doubts that grifters of all sorts would not try to take over and manipulate such a currency, as they have for bitcoin. The governance is more important than the tech IMO.

MrMan 6y ago
The globe has a few supranational currencies already we have some experience in this

Thorentis 6y ago

Why is encouraging people in such countries to use <some cryptocurrency> better than making the US Dollar more accessible to these people? If stability is the goal, I find it hard to accept that DogeCoin is the answer to the developing/third world's economic problems.

tenaciousDaniel 6y ago
I don't think DogeCoin is the answer to anything at all, tbh.
- netflixandkill 6y ago
  It was the answer to "how many people can I get in on this joke?" while playing around with litecoin.
- irwwwan 6y ago
  Let’s see what can Elon do with his bitcoin.
herbst 6y ago
How is usd tho? Sure its more stable than bitcoin, but in the last months and years it relatively lost value to eur/chf when bitcoin only increased. Both solutions have issues however only one made holding money lucrative

jariel 6y ago

" This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion. " This was never the promise of blockchains or decentralized currencies because those things cannot fulfill the promise. There's a much more pragmatic answer and that's to use Euros, USDs, Pounds or RMBs for a decade or so until the government has legitimacy. 'Cash' is useful in these economies. Also, it's possible to provide digitized banking for the purposes of transferring money without the notion of introducing new, funny currencies.

dragonwriter 6y ago

> This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion. Well, except that the conversion into/out of fiat and the access to the network to transact the crypto are all things the government will usually be quite able to interfere with.