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I think the value of a currency comes from the creditworthiness of the country issuing it. If someone nuked the USA and burn down the entire USA army and econo

I think the value of a currency comes from the creditworthiness of the country issuing it. If someone nuked the USA and burn down the entire USA army and economy, the dollar wouldn't have much value. The USA army protects the states. Switzerland, as per parent's post, has defense agreements with other countries. The likelihood of Switzerland being attacked or destroyed is also very low. What would the international community think of a country attacking Switzerland? If I started my own country in the middle of the ocean and started issuing my own currency it would be worthless. Maybe if I do some trade deals and a defense agreement with some other country it would start having some value. The difference with BTC is that there is no-one defending BTC with weapons. It can all be banned tomorrow if global governments think it would be good to do so. Similarly, I can spin my own fork of BTC and achieve similar technology advance as BTC.

michaelscott 5y ago
> If I started my own country in the middle of the ocean and started issuing my own currency it would be worthless. Not necessarily, if you were using it within your own country, the use case for most currencies. A fiat currency is little more than a promissory note or IOU (think about how I could go to a bank and exchange my dollar for a dollar's worth of gold during the gold-backed fiat period). In fact, less than 200 years ago many banks were able to issue their own currencies as promissory notes in many US states and were valid, but only with those banks. The idea of an all-powerful national currency that bans all others is relatively new from a global perspective and even today, there are parts of the world where small communities have and still do issue their own local currencies in order to facilitate local trade.
md_ 5y ago
I agree with your last part, but not the reasoning, exactly. :) If you started your own currency it would be worthless because of the lack of demand for it. Right now Bitcoin has a market cap of about 800bn USD, which (coincidentally) is about the same value as the CHF M1. (M2 is a little over a trillion USD.) These are crude indicators that there's substantial aggregate demand for both assets. What's interesting is how Bitcoin got to that point. Quite a few years ago, it wasn't worth much at all, and you could only use it to pay people who were ideologically motivated to accept it—your crazy coworker who'd let you pay him back for beers in BTC, for example. Then you add in the people who will use it for practical reasons (they're criminals, they are underbanked, they want payments under the table), the people who will use it for reasons of mass delusion (they think they'll get rich), and suddenly you have substantial aggregate demand—enough that you can reasonably assume a BTC will be worth something in the future (though highly unstable demand still). This seems to be (to my knowledge) an uncharted path to creating a "recognized" currency. But as to your point about fiat: if the US government were nuked, you'd have massive economic disruption for other reasons. But this isn't per se why the USD is valuable (anymore?).

michaelscott 5y ago

> If I started my own country in the middle of the ocean and started issuing my own currency it would be worthless. Not necessarily, if you were using it within your own country, the use case for most currencies. A fiat currency is little more than a promissory note or IOU (think about how I could go to a bank and exchange my dollar for a dollar's worth of gold during the gold-backed fiat period). In fact, less than 200 years ago many banks were able to issue their own currencies as promissory notes in many US states and were valid, but only with those banks. The idea of an all-powerful national currency that bans all others is relatively new from a global perspective and even today, there are parts of the world where small communities have and still do issue their own local currencies in order to facilitate local trade.

md_ 5y ago

I agree with your last part, but not the reasoning, exactly. :) If you started your own currency it would be worthless because of the lack of demand for it. Right now Bitcoin has a market cap of about 800bn USD, which (coincidentally) is about the same value as the CHF M1. (M2 is a little over a trillion USD.) These are crude indicators that there's substantial aggregate demand for both assets. What's interesting is how Bitcoin got to that point. Quite a few years ago, it wasn't worth much at all, and you could only use it to pay people who were ideologically motivated to accept it—your crazy coworker who'd let you pay him back for beers in BTC, for example. Then you add in the people who will use it for practical reasons (they're criminals, they are underbanked, they want payments under the table), the people who will use it for reasons of mass delusion (they think they'll get rich), and suddenly you have substantial aggregate demand—enough that you can reasonably assume a BTC will be worth something in the future (though highly unstable demand still). This seems to be (to my knowledge) an uncharted path to creating a "recognized" currency. But as to your point about fiat: if the US government were nuked, you'd have massive economic disruption for other reasons. But this isn't per se why the USD is valuable (anymore?).