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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,
by 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 agoDevils 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 agoI 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 agoBut that is still the future.
- vbezhenar 6y agoFor 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.