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Money is not as complex idea as he suggests. It's just the most agreed upon way of measuring prices and committing trade between individuals in a society. It al

by Geee 5y ago

Money is not as complex idea as he suggests. It's just the most agreed upon way of measuring prices and committing trade between individuals in a society. It allows people to sell, buy and measure prices. Whichever way does this the best, spontaneously becomes "money" through network effects from individual decisions of market participants. It's beneficial for each individual and for the society to use the same way as everyone else, and that's why something becomes "money". Something needs to have certain properties in order to become money, such as scarcity, divisibility, durability, verifiability and transportability. This ensures that the money can be used for trade in different scales, in different places, and in different times. Whichever money does this best, will eventually replace the old money, given a free market.

foobarian 5y ago
I think stability is important too. Currencies do fluctuate but not very much, and volatility usually leads to bad consequences. That's the main problem with Bitcoin - it is too unstable. Using it as a currency is much like using shares of some random company as currency. Imagine getting paid in, say, TSLA stock and using it to buy everyday needs!
- Geee 5y ago
  Value and stability have more to do with adoption phase, i.e. how many people accept it as good money and want to use it. Today, Bitcoin is mostly traded against USD or other currencies, and these traders make up most of the total trading volume. The volatility is the result of this very one-sided activity. If it was used as money, it would be traded against goods and services, real estate, stocks, etc. which would give it lots of uncorrelated trading volume and create stability. Inherently, Bitcoin is very predictable, because we know with certainty how many bitcoins have been issued and how many will be issued in the future. Fiat currencies have an opposite problem. Central banks and governments influence the issuance and value of the currency too much, and this makes the currency inherently unpredictable. It has an effect of destroying confidence in free markets, because everything becomes a bet on monetary policy rather than markets itself. Same problem with TSLA; it is inherently unpredictable (both in issuance and dependency on their business success). In other words, some assets carry an inherent risk in them, and they're not good as money.

by Geee 5y ago

foobarian 5y ago

I think stability is important too. Currencies do fluctuate but not very much, and volatility usually leads to bad consequences. That's the main problem with Bitcoin - it is too unstable. Using it as a currency is much like using shares of some random company as currency. Imagine getting paid in, say, TSLA stock and using it to buy everyday needs!

Geee 5y ago
Value and stability have more to do with adoption phase, i.e. how many people accept it as good money and want to use it. Today, Bitcoin is mostly traded against USD or other currencies, and these traders make up most of the total trading volume. The volatility is the result of this very one-sided activity. If it was used as money, it would be traded against goods and services, real estate, stocks, etc. which would give it lots of uncorrelated trading volume and create stability. Inherently, Bitcoin is very predictable, because we know with certainty how many bitcoins have been issued and how many will be issued in the future. Fiat currencies have an opposite problem. Central banks and governments influence the issuance and value of the currency too much, and this makes the currency inherently unpredictable. It has an effect of destroying confidence in free markets, because everything becomes a bet on monetary policy rather than markets itself. Same problem with TSLA; it is inherently unpredictable (both in issuance and dependency on their business success). In other words, some assets carry an inherent risk in them, and they're not good as money.