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How does shared social belief in it as a store of value differentiate it from fiat currency?

hurlaway25 5y ago
Fiat can be arbitrarily devalued to finance whatever schemes the government decides is worth financing. In other words, fiat doesn’t really encourage saving.
for_shostack 5y ago
Because of its scarcity. It costs 0$ (or so nearly as to not matter) to create 1$. This is not true for stores of value like gold and BTC
fossuser 5y ago
That part is something they have in common. The differentiation is about monetary policy, BTC's policy is in code via incentives and PoW. It's decentralized and not controlled by a government. The currency is scarce and the maximum amount is predetermined. It's deflationary. I'm not an 'inflation is bad' person. I'm not a hardcore anti-government crypto-anarchist. I think government monetary policy has a place and the QE policy after 2008 clearly worked based on the rapid recovery and loan repayment. I think when you have growth you need more currency to support that growth and newly created wealth. Some inflation in monetary policy is desirable and creates incentives you want (investment) vs. hoarding cash. I am not an economics expert and people are often way too confident in this kind of stuff when they shouldn't be. The reason BTC is more like gold than like fiat currency is because of the things in that article, but a quick summary: - It's hard to actually trade with for goods (nobody is bringing little gold flakes into the 7/11 for a chocolate bar). - It's scarce and takes a lot of energy to 'mine'. The supply of gold on earth is limited by nature. The supply of BTC is limited by code and math. - People use it as a place to store value beyond its inherent value. Gold is shiny and has some utility as a metal, but its market value is mostly entirely unrelated to that. - In some ways BTC is better than gold as a value store. It's easier to store and easier to transport.

Fiat can be arbitrarily devalued to finance whatever schemes the government decides is worth financing. In other words, fiat doesn’t really encourage saving.

for_shostack 5y ago

Because of its scarcity. It costs 0$ (or so nearly as to not matter) to create 1$. This is not true for stores of value like gold and BTC

fossuser 5y ago

That part is something they have in common. The differentiation is about monetary policy, BTC's policy is in code via incentives and PoW. It's decentralized and not controlled by a government. The currency is scarce and the maximum amount is predetermined. It's deflationary. I'm not an 'inflation is bad' person. I'm not a hardcore anti-government crypto-anarchist. I think government monetary policy has a place and the QE policy after 2008 clearly worked based on the rapid recovery and loan repayment. I think when you have growth you need more currency to support that growth and newly created wealth. Some inflation in monetary policy is desirable and creates incentives you want (investment) vs. hoarding cash. I am not an economics expert and people are often way too confident in this kind of stuff when they shouldn't be. The reason BTC is more like gold than like fiat currency is because of the things in that article, but a quick summary: - It's hard to actually trade with for goods (nobody is bringing little gold flakes into the 7/11 for a chocolate bar). - It's scarce and takes a lot of energy to 'mine'. The supply of gold on earth is limited by nature. The supply of BTC is limited by code and math. - People use it as a place to store value beyond its inherent value. Gold is shiny and has some utility as a metal, but its market value is mostly entirely unrelated to that. - In some ways BTC is better than gold as a value store. It's easier to store and easier to transport.