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Fiat money has value because it is widely, almost universally, accepted in exchange for things of intrinsic value (food, shelter, toys, tools). I'm not aware o

Fiat money has value because it is widely, almost universally, accepted in exchange for things of intrinsic value (food, shelter, toys, tools). I'm not aware of any non-government-backed fiat currency which has gained widespread use in the history of humanity. And in fact all of the fiat currencies I know of originated as representative money. Bitcoin is not widely accepted in exchange for things of values, and I see no reason to believe that will ever change. Being able to spend it is the "killer app" of cryptocurrencies, and none of them have actually implemented it, despite many, many attempts.

toyg 5y ago
> Fiat money has value because it is widely, almost universally, accepted in exchange for things of intrinsic value No, technically fiat money has value because it is accepted by a government to settle taxes. Which is why it loses value dramatically when a state collapses or otherwise becomes irrelevant to the local economy. Because traditionally the state itself was the issuer of such currency, already we have a massive conflict of interest at the very start: when the state pays out his own debts in its own currency, it's effectively asking his creditors to believe that currency has some value in the real world, while also telling them exactly how much that is supposed be. To "solve" this problem they invented central banks, which are supposed to keep governments away from the process of determining the actual value of a currency, if you believe that they are as independent as they proclaim. In the end, what matters is that enough people believe that certain arrangements are fair, and that the government will still be there tomorrow asking them for taxes. As long as that's true, one might well use the currency as a unit to settle private trades too, but that is a consequence of the original belief. > I'm not aware of any non-government-backed fiat currency which has gained widespread use in the history of humanity The key in this sentence is "widespread", which is something you can redefine pretty arbitrarily and hence move goalposts as required. In practice, other tokens have been used here and there, but in the end, what wins tends to be government-backed tokens for the simple reason that authorities will always enjoy a right to put you in prison if you don't settle your taxes in the currency they desire. If you look at it from a technical perspective, any collapsed state where the local currency has been wiped out and internal trades are settled in USD or EUR (a pretty common occurrence), in practice is already using an non-government-backed token, something on which nobody in the local economy has any control. To these areas, it doesn't really matter that the USD will be accepted by the US Federal Government to settle taxes; they just need a unit, and since this unit is accepted at the fringes of their system, well, might as well use it internally too. > Being able to spend it is the "killer app" of cryptocurrencies No, being able to convert into other tokens at the fringes is the killer app. Which quite a few cryptocurrencies do have, although in an extremely fragile state. The longer they keep them up, though, the easier it gets, as more and more people believe that the underpinning arrangements are fair and exchanges will still be here tomorrow to exfiltrate value to prison-avoiding currencies.
- jasonwatkinspdx 5y ago
  > No, technically fiat money has value because it is accepted by a government to settle taxes. Not true. There are quite a few places in the world where the de facto dominant currency is not the currency the local government requires for taxes, fees, etc. In fact, the origin of using taxes + coinage goes back to a pragmatic way for ancient kings to not have to organize the logistics of feeding and housing a large army. Pay the soldiers in coin. Require citizens to pay a tax in the same coin. Boom, they self organize. Money itself came about far earlier, and was independently invented in multiple places. The example most people look at is temple complexes in the Levant, where debt records came first, and currency second. It was an adaptation of earlier gift economy behavior to enable scaling to groups too large to have intrinsic social trust, and allowing for specialization of labor in building and maintaining the temples. David Graeber's book will educate you about all this.
  - toyg 5y ago
    This is an irrelevant historical tangent. The point is why and how money defines values today. > There are quite a few places in the world where the de facto dominant currency is not the currency the local government requires If you'd read the rest of my comment, you would have seen that I explicitly address this case. Instead you went for a pointless appeal to authority about thousand-year-old situations that don't matter to the current environment.
baby 5y ago
What about derivatives?
logicchains 5y ago
>I'm not aware of any non-government-backed fiat currency which has gained widespread use in the history of humanity. Before the 1900s the vast majority of currencies were valued based on their precious metal content (gold or silver), not government fiat.
- jfrunyon 5y ago
  > me: And in fact all of the fiat currencies I know of originated as representative money. > you: Before the 1900s the vast majority of currencies were valued based on their precious metal content (gold or silver), not government fiat. ORLY? I didn't know that. Oh wait I literally said it in the comment you replied to.
fleddr 5y ago
Fiat money is legal tender, so "acceptance" suggests a choice that isn't there. Regardless, enforced or not, wide acceptance is of course no lie for hard fiat currencies. Fine. Bitcoin in its current form should not be seen as a payment currency, instead as digital gold. A new asset class similar to actual gold/silver, real estate, stocks, etc. Something to put part of your wealth in, hoping it appreciates over time. And as Bitcoin appreciates over time so well so far (12 years of 200% appreciation per year on average), it doesn't really make sense to spend Bitcoin. It is deflationary by design. Bitcoin already is a killer "app" as such. An accessible way for anybody to preserve/grow wealth, a hedge against inflation and the lack of return on a normal savings account. Your take on crypto for payments is needlessly pessimistic. It's inevitable, the winner just isn't clear yet.
- jfrunyon 5y ago
  Fiat money is only legal tender in the country which issues it. You can find plenty of businesses outside the US willing to transact in USD. Legal tender also only applies to paying public debts (i.e. taxes)... not paying a business.

toyg 5y ago

> Fiat money has value because it is widely, almost universally, accepted in exchange for things of intrinsic value No, technically fiat money has value because it is accepted by a government to settle taxes. Which is why it loses value dramatically when a state collapses or otherwise becomes irrelevant to the local economy. Because traditionally the state itself was the issuer of such currency, already we have a massive conflict of interest at the very start: when the state pays out his own debts in its own currency, it's effectively asking his creditors to believe that currency has some value in the real world, while also telling them exactly how much that is supposed be. To "solve" this problem they invented central banks, which are supposed to keep governments away from the process of determining the actual value of a currency, if you believe that they are as independent as they proclaim. In the end, what matters is that enough people believe that certain arrangements are fair, and that the government will still be there tomorrow asking them for taxes. As long as that's true, one might well use the currency as a unit to settle private trades too, but that is a consequence of the original belief. > I'm not aware of any non-government-backed fiat currency which has gained widespread use in the history of humanity The key in this sentence is "widespread", which is something you can redefine pretty arbitrarily and hence move goalposts as required. In practice, other tokens have been used here and there, but in the end, what wins tends to be government-backed tokens for the simple reason that authorities will always enjoy a right to put you in prison if you don't settle your taxes in the currency they desire. If you look at it from a technical perspective, any collapsed state where the local currency has been wiped out and internal trades are settled in USD or EUR (a pretty common occurrence), in practice is already using an non-government-backed token, something on which nobody in the local economy has any control. To these areas, it doesn't really matter that the USD will be accepted by the US Federal Government to settle taxes; they just need a unit, and since this unit is accepted at the fringes of their system, well, might as well use it internally too. > Being able to spend it is the "killer app" of cryptocurrencies No, being able to convert into other tokens at the fringes is the killer app. Which quite a few cryptocurrencies do have, although in an extremely fragile state. The longer they keep them up, though, the easier it gets, as more and more people believe that the underpinning arrangements are fair and exchanges will still be here tomorrow to exfiltrate value to prison-avoiding currencies.

jasonwatkinspdx 5y ago
> No, technically fiat money has value because it is accepted by a government to settle taxes. Not true. There are quite a few places in the world where the de facto dominant currency is not the currency the local government requires for taxes, fees, etc. In fact, the origin of using taxes + coinage goes back to a pragmatic way for ancient kings to not have to organize the logistics of feeding and housing a large army. Pay the soldiers in coin. Require citizens to pay a tax in the same coin. Boom, they self organize. Money itself came about far earlier, and was independently invented in multiple places. The example most people look at is temple complexes in the Levant, where debt records came first, and currency second. It was an adaptation of earlier gift economy behavior to enable scaling to groups too large to have intrinsic social trust, and allowing for specialization of labor in building and maintaining the temples. David Graeber's book will educate you about all this.
- toyg 5y ago
  This is an irrelevant historical tangent. The point is why and how money defines values today. > There are quite a few places in the world where the de facto dominant currency is not the currency the local government requires If you'd read the rest of my comment, you would have seen that I explicitly address this case. Instead you went for a pointless appeal to authority about thousand-year-old situations that don't matter to the current environment.

baby 5y ago

What about derivatives?

logicchains 5y ago

>I'm not aware of any non-government-backed fiat currency which has gained widespread use in the history of humanity. Before the 1900s the vast majority of currencies were valued based on their precious metal content (gold or silver), not government fiat.

jfrunyon 5y ago
> me: And in fact all of the fiat currencies I know of originated as representative money. > you: Before the 1900s the vast majority of currencies were valued based on their precious metal content (gold or silver), not government fiat. ORLY? I didn't know that. Oh wait I literally said it in the comment you replied to.

fleddr 5y ago

Fiat money is legal tender, so "acceptance" suggests a choice that isn't there. Regardless, enforced or not, wide acceptance is of course no lie for hard fiat currencies. Fine. Bitcoin in its current form should not be seen as a payment currency, instead as digital gold. A new asset class similar to actual gold/silver, real estate, stocks, etc. Something to put part of your wealth in, hoping it appreciates over time. And as Bitcoin appreciates over time so well so far (12 years of 200% appreciation per year on average), it doesn't really make sense to spend Bitcoin. It is deflationary by design. Bitcoin already is a killer "app" as such. An accessible way for anybody to preserve/grow wealth, a hedge against inflation and the lack of return on a normal savings account. Your take on crypto for payments is needlessly pessimistic. It's inevitable, the winner just isn't clear yet.

jfrunyon 5y ago
Fiat money is only legal tender in the country which issues it. You can find plenty of businesses outside the US willing to transact in USD. Legal tender also only applies to paying public debts (i.e. taxes)... not paying a business.