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It's a chicken and egg problem. You need to create a circular economy where people pay and get paid in cryptocurrency, like you have within a nation state with

It's a chicken and egg problem. You need to create a circular economy where people pay and get paid in cryptocurrency, like you have within a nation state with their home currency. The creation of that circular economy without a monopoly on violence that forces everyone to converge on a single one is something that will happen in fits and starts. And of course, you still need policy change to treat the cryptocurrency as legal tender so people don't have to stress about capital gains implications with each and every transaction they do, and get fucked if they ever lose their accounting history and get audited. It will be interesting to see how things develop in El Salvador now that they have legally enabled this circular economy to develop with bitcoin, and spending is not a taxable event.

verdverm 5y ago
There is another problem, which is the unit of account. What currency are prices posted in? It's going to be very hard to displace fait on this front. I don't think cryptos can become this until they are as stable as existing currency. They aren't even used as currency or behave like one. More like gold or stocks and present.
- rattlesnakedave 5y ago
  I don’t think this matters. Wallets can convert between the two trivially. Acceptance as a method of payment is what matters. What matters more is acceptance as a method of savings.
  - verdverm 5y ago
    It matters for mass adoption. Why would I want to be paid, or pay in, something other than the primary currency that matches all of the prices? It's not a technical problem, it's about human behavior
- k__ 5y ago
  Yes. I'm excited for the next steps of stable coins. People always ask "What if Tether isn't 100% backed by Dollar?!" The more interesting question is "What if the Dollar is shit?!"
  - anonporridge 5y ago
    "But Tether's not backed by anything and they can arbitrarily print more of it!!!!" "...do...do you not know how the actual dollar works..."
    - el-salvador 5y ago
      It's easier to find the audited FED's balance sheet than Thether's. https://www.federalreserve.gov/aboutthefed/audited-annual-financial-statements.htm https://www.federalreserve.gov/aboutthefed/audited-annual-fi...
    - dmitriid 5y ago
      Actual dollar is backed up by: - state monopoly on violence and - one of the world's largest economies Tether is backed up by?
- anonporridge 5y ago
  I think this is a problem until it isn't. The first country that starts pricing its oil exports in bitcoin will a) cause the price to initially skyrocket, and b) create a stabilizing force on the price that percolates to all other goods and services. And the interesting thing, is that because bitcoin is energy money, there is a very direct and explicit correlation to the amount of bitcoin you can earn from using your energy to mine, which can then allow an exporter to trivially calculate the price they are willing to sell their energy for (slightly more than they can net from mining). The dollar is the stable global reserve currency largely because the US has used its military might to violently coerce oil exporters to price their oil in dollars. Once that happens peacefully with bitcoin, the US dollar will regress back to a local currency used to control its own population and bitcoin will be the fair, global reserve asset used for international trade.
  - verdverm 5y ago
    How does China largely banning crypto, promoting its own currency (particularly in trying to get it used as the oil pricing from Saudi Arabia), and being one of the biggest importers... play into this hypothetical future?
    - anonporridge 5y ago
      a) China's new digital yuan isn't a novel competitor to bitcoin. It's just the same old fiat in a new, more authoritarian enabling form. b) China, while increasingly powerful, is not the whole world. If the rest of the world decides that bitcoin is the only viable fair global reserve currency that doesn't disproportionately benefit some global empire, then they'll eventually be forced to come along for the ride, and will be hurt from their decision to take themselves out of the game in the early days.
      - verdverm 5y ago
        Bitcoin is too volatile, when will it become stable enough to be used for pricing IRL goods?
- everfree 5y ago
  I believe cryptocurrency networks can still be useful even if "most" transactions are priced in fiat and settled in stablecoins.
  - verdverm 5y ago
    No disagreement there, this is what I expect. The question is what are cryptocurrencies (or blockchains secured by them) actually useful for? Where are the tradeoffs and when is a non-blockchain solution superior? (any system with user created content will need a delete function, which immutable ledgers are opposite of) When is a permissioned system better than a permissionless? (and the opposite)
el-salvador 5y ago
I've tested the lightning in El Salvador to lightning payments and they work in 4/5 seconds in the merchants that accept them. There's also the local wallet QR codes which I haven't had the opportunity to try yet The volatility is what I like the least. Like one day realizing that the Wendy's hamburger I had for dinner was well timed, because a few hours later Bitcoin's value dropped. In El Salvador we've had an stable currency for decades, the USD since 2001 and a stable Colón since the 1990s. Exchange rates is something that most millennial and gen z's have never had to worry about in El Salvador. As our wages, many of our imports and exports are prices in USD. Compare this to other countries like Argentina, Venezuela, Turkey or Lebanon where the exchange rate is daily news. Or like Nicaragua and Costa Rica where prices and payments can be made in both USD and their local unpegged currencies. There are only a few currencies whose value ocassionaly increase compared to the dollar. Sometimes it's the Swiss Frank, the Guatemalan Quetzal or Euro. From this ones, the Quetzal exchange rate is perhaps the only one that could affect El Salvador the most as fruits and vegetables are sometimes priced/paid by importers in Guatemalan Quetzales.
- anonporridge 5y ago
  All true, however, by using the dollar as your primary currency, you are effectively a vassal state of the United States, your currency getting regularly devalued without getting any direct benefit of that devaluation like American citizens get, and also no representation in the government that controls that implicit tax that is currency debasement. I'm not Salvadorian, so it's obviously not my place to say what you should do. But I don't see being a second class nation state, in implicit subjugation to the currently dominant global superpower to be a terribly stable state to be in for the long view of human civilization. But then again, that's one of the more insidious effects of bad currency. It forces people into short term thinking because the value of their savings bleeds away so quickly in time. Those people who don't subscribe to storing their money in weak currencies tend to take a longer term perspective on life.
  - lkrubner 5y ago
    Your comment is less a criticism of monetary policy and more a review of the reality of life in a small, weak nation. No monetary decision can change the more fundamental reality of belonging to a small, weak nation. Reality must be confronted as reality. When the nations of Europe decided they wanted to establish a rival to the USA, they realized they could only do it by joining together, which was one of the driving forces that lead to the establishment of the EU. Likewise, Britain can claim that there is a political act that will give it independence from Europe, but fate has decreed that Britain is some islands off the coast of Europe, and no act of Parliament will ever change that. Now, and a thousand years from now, Britain's fate will be more closely tied to the fate of Europe than it will be tied to, say for instance, Malaysia. Reality is reality and cannot be changed by political decrees. A nation's location on the Earth remains, forever, a large part of its fate, which no political decree can change. The nations of Central America have the same options as were available to the nations of Europe. All of Central America and the northern parts of South America were unified under a single government back in 1820. They decided to break apart into many small, weak nations, due to the selfish interests of the different types of agricultural interests being pursued in each area. But they could borrow ideas from the EU. They could reunify. If the whole region was under a single government, they would have much more room to push back against the dominance of the USA. But by itself, El Salvador is always going to have its life shaped by the USA. There is no monetary policy that will change that.

verdverm 5y ago

There is another problem, which is the unit of account. What currency are prices posted in? It's going to be very hard to displace fait on this front. I don't think cryptos can become this until they are as stable as existing currency. They aren't even used as currency or behave like one. More like gold or stocks and present.

rattlesnakedave 5y ago
I don’t think this matters. Wallets can convert between the two trivially. Acceptance as a method of payment is what matters. What matters more is acceptance as a method of savings.
- verdverm 5y ago
  It matters for mass adoption. Why would I want to be paid, or pay in, something other than the primary currency that matches all of the prices? It's not a technical problem, it's about human behavior
k__ 5y ago
Yes. I'm excited for the next steps of stable coins. People always ask "What if Tether isn't 100% backed by Dollar?!" The more interesting question is "What if the Dollar is shit?!"
- anonporridge 5y ago
  "But Tether's not backed by anything and they can arbitrarily print more of it!!!!" "...do...do you not know how the actual dollar works..."
  - el-salvador 5y ago
    It's easier to find the audited FED's balance sheet than Thether's. https://www.federalreserve.gov/aboutthefed/audited-annual-financial-statements.htm https://www.federalreserve.gov/aboutthefed/audited-annual-fi...
  - dmitriid 5y ago
    Actual dollar is backed up by: - state monopoly on violence and - one of the world's largest economies Tether is backed up by?
anonporridge 5y ago
I think this is a problem until it isn't. The first country that starts pricing its oil exports in bitcoin will a) cause the price to initially skyrocket, and b) create a stabilizing force on the price that percolates to all other goods and services. And the interesting thing, is that because bitcoin is energy money, there is a very direct and explicit correlation to the amount of bitcoin you can earn from using your energy to mine, which can then allow an exporter to trivially calculate the price they are willing to sell their energy for (slightly more than they can net from mining). The dollar is the stable global reserve currency largely because the US has used its military might to violently coerce oil exporters to price their oil in dollars. Once that happens peacefully with bitcoin, the US dollar will regress back to a local currency used to control its own population and bitcoin will be the fair, global reserve asset used for international trade.
- verdverm 5y ago
  How does China largely banning crypto, promoting its own currency (particularly in trying to get it used as the oil pricing from Saudi Arabia), and being one of the biggest importers... play into this hypothetical future?
  - anonporridge 5y ago
    a) China's new digital yuan isn't a novel competitor to bitcoin. It's just the same old fiat in a new, more authoritarian enabling form. b) China, while increasingly powerful, is not the whole world. If the rest of the world decides that bitcoin is the only viable fair global reserve currency that doesn't disproportionately benefit some global empire, then they'll eventually be forced to come along for the ride, and will be hurt from their decision to take themselves out of the game in the early days.
    - verdverm 5y ago
      Bitcoin is too volatile, when will it become stable enough to be used for pricing IRL goods?
everfree 5y ago
I believe cryptocurrency networks can still be useful even if "most" transactions are priced in fiat and settled in stablecoins.
- verdverm 5y ago
  No disagreement there, this is what I expect. The question is what are cryptocurrencies (or blockchains secured by them) actually useful for? Where are the tradeoffs and when is a non-blockchain solution superior? (any system with user created content will need a delete function, which immutable ledgers are opposite of) When is a permissioned system better than a permissionless? (and the opposite)

el-salvador 5y ago

I've tested the lightning in El Salvador to lightning payments and they work in 4/5 seconds in the merchants that accept them. There's also the local wallet QR codes which I haven't had the opportunity to try yet The volatility is what I like the least. Like one day realizing that the Wendy's hamburger I had for dinner was well timed, because a few hours later Bitcoin's value dropped. In El Salvador we've had an stable currency for decades, the USD since 2001 and a stable Colón since the 1990s. Exchange rates is something that most millennial and gen z's have never had to worry about in El Salvador. As our wages, many of our imports and exports are prices in USD. Compare this to other countries like Argentina, Venezuela, Turkey or Lebanon where the exchange rate is daily news. Or like Nicaragua and Costa Rica where prices and payments can be made in both USD and their local unpegged currencies. There are only a few currencies whose value ocassionaly increase compared to the dollar. Sometimes it's the Swiss Frank, the Guatemalan Quetzal or Euro. From this ones, the Quetzal exchange rate is perhaps the only one that could affect El Salvador the most as fruits and vegetables are sometimes priced/paid by importers in Guatemalan Quetzales.

anonporridge 5y ago
All true, however, by using the dollar as your primary currency, you are effectively a vassal state of the United States, your currency getting regularly devalued without getting any direct benefit of that devaluation like American citizens get, and also no representation in the government that controls that implicit tax that is currency debasement. I'm not Salvadorian, so it's obviously not my place to say what you should do. But I don't see being a second class nation state, in implicit subjugation to the currently dominant global superpower to be a terribly stable state to be in for the long view of human civilization. But then again, that's one of the more insidious effects of bad currency. It forces people into short term thinking because the value of their savings bleeds away so quickly in time. Those people who don't subscribe to storing their money in weak currencies tend to take a longer term perspective on life.
- lkrubner 5y ago
  Your comment is less a criticism of monetary policy and more a review of the reality of life in a small, weak nation. No monetary decision can change the more fundamental reality of belonging to a small, weak nation. Reality must be confronted as reality. When the nations of Europe decided they wanted to establish a rival to the USA, they realized they could only do it by joining together, which was one of the driving forces that lead to the establishment of the EU. Likewise, Britain can claim that there is a political act that will give it independence from Europe, but fate has decreed that Britain is some islands off the coast of Europe, and no act of Parliament will ever change that. Now, and a thousand years from now, Britain's fate will be more closely tied to the fate of Europe than it will be tied to, say for instance, Malaysia. Reality is reality and cannot be changed by political decrees. A nation's location on the Earth remains, forever, a large part of its fate, which no political decree can change. The nations of Central America have the same options as were available to the nations of Europe. All of Central America and the northern parts of South America were unified under a single government back in 1820. They decided to break apart into many small, weak nations, due to the selfish interests of the different types of agricultural interests being pursued in each area. But they could borrow ideas from the EU. They could reunify. If the whole region was under a single government, they would have much more room to push back against the dominance of the USA. But by itself, El Salvador is always going to have its life shaped by the USA. There is no monetary policy that will change that.