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> You could certainly try to trade your Bitcoin-substitutes at par with real Bitcoin I wouldn't be able to pull it off, but banks do this all the time with cas
by wisty 14y ago
> You could certainly try to trade your Bitcoin-substitutes at par with real Bitcoin
I wouldn't be able to pull it off, but banks do this all the time with cash-substitutes. A small number of people do insist on real cash, but there's a huge amount of credit and debt built on top of a small amount of actual currency.
The banks loan your money out, and charge interest to the borrowers. In return they keep your money safe, and pay you enough interest to encourage you to not switch banks, or demand "real" money.
And governments can go into debt on gold, or US dollars (even if they don't have them, and can't get them in the near future). You can get a complete collapse if the government finds itself bankrupt. In that case, you'll have a bank run, or the IMF will step in, or lenders will take a haircut. It's nothing revolutionary (well, it can start revolutions, but that's not really new).
They can do exactly the same thing with bitcoins.
- SilasX 14y agoThe difference is that with USD and other currencies, there's a central bank to print more money to make up for redemptions (real or potential) when people come to convert their electronic dollars for paper ones. There is no such mechanism with Bitcoin.
- wisty 14y agoThere's plenty of countries which borrow lots of USD, and can't print them. It's not really that different.
- SilasX 14y agoWhat matters in giving the derivative currency units par value to "the real thing" is the lender's ability to maintain liquidity by having a (central) lender of last resort, not the (in)ability of secondary borrowers to print them. There really is a difference between what would happen if people started demanding real paper USD as payment (i.e., just print more for the right banks) vs. what would happen if people started demanding real BTC as payment.