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Fiat system will end without help of Bitcoin. Bitcoin is here as a place where to run when things start falling apart (without it, some other regime's currency

Fiat system will end without help of Bitcoin. Bitcoin is here as a place where to run when things start falling apart (without it, some other regime's currency would prevail). Gold is not a solution since it needs to be stored and moved by someone. We tried that in growing ecenomy of 19th century and it lead to a banking cartel and legalized fractional reserve lending. I think gold will collapse with fiat currencies for the exact same reasons: counter-party risk. No one wants to trade in gold/silver coins because they can't be moved and protected like bitcoin.

ceejayoz 13y ago
Bitcoin's ease of movement comes with significant disadvantages, too. If I want to steal a ton of gold from a bank, it's going to take a pretty good plan. Stealing some Bitcoins just takes a zero-day.
- oleganza 13y ago
  It's a question of comparing cost of protecting 1 ton of gold (vault, armed guards, managers, video surveillance and finger print scanners) with a cost of protecting 200K bitcoins. No matter how many bitcoins do you have, you can lock them up with M-of-N transaction where N separately generated keys belong to your partners and friends. And the encrypted wallet can be backed up on any number of computers for a very low cost.
eru 13y ago
Why should the fiat system end? The US dollar's reign might end, but there are plenty of more reasonable fiat currencies. (Schweizer Franken, or the Singaporean Dollar for example.)
- oleganza 13y ago
  Each fiat currency is destined to crash due to constant debasement (there haven't been yet a king or a republic that did not debase its currency). But each crashed fiat currency is quickly replaced by another one, so in theory fiat system may see no end. Unless people start using Bitcoin universally and won't need any fiat currency at all. Which I expect is going to happen over the next decade.
  - eru 13y ago
    What's the problem with gradual debasement? Every once in a while you chop of a bunch of zeroes (like they did in Turkey a few years ago). They didn't have any crashes.
    - oleganza 13y ago
      Debasement is a silent shift of wealth (aka "purchasing power") from one group of people to another. The more savings you have, the more you are punished compared to those who have less. Since in monetary economy biggest decisive power is in hands of those with savings (aka cash, aka most marketable resource), power is shifted from those who earned and economized their money to those who have political power to print and distribute money to themselves and their allies. You may think that "regular wage earners" who have no savings are not affected at all, but that's a double mistake: 1. Folks without savings are highly depended on those who have (aka capital, aka infrastructure, aka ecosystem). They depend on their boss having enough money to sustain ups and downs and not go bankrupt. They depend on productivity of the producers around them who make food and goods - those have to save to invest in the future development to increase quality and lower prices. The less wealthy people you have around you, the less comfort and service you get (obviously). In the middle of Sahara any bum is much less safe or wealthy than on Manhattan. 2. Folks without savings can't even start having savings when they are heavily taxed by debasement. Thus existing class of powerless people stays powerless and those who have depreciating savings join that class over time. Which is understandable: continued debasement simply moves all the capital to the very few close to the printing press leaving everyone else in the powerless "workers" category. Extra twist is that folks without savings are bribed to support the system by offering low-cost artificial credits (created from printed money, not from someone's savings) and it only adds insult to injury: at the cost of destroyed local productivity, risk of hyperinflation, 3rd world hate towards them, people not only cannot save money, but have to pay some interest rate to get at least some stuff to preserve whatever money they got right now. If you look at the whole picture consisting of net receivers and net losers in this great wealth transfer, it's very-very sad.
      - eru 13y ago

ceejayoz 13y ago

Bitcoin's ease of movement comes with significant disadvantages, too. If I want to steal a ton of gold from a bank, it's going to take a pretty good plan. Stealing some Bitcoins just takes a zero-day.

oleganza 13y ago
It's a question of comparing cost of protecting 1 ton of gold (vault, armed guards, managers, video surveillance and finger print scanners) with a cost of protecting 200K bitcoins. No matter how many bitcoins do you have, you can lock them up with M-of-N transaction where N separately generated keys belong to your partners and friends. And the encrypted wallet can be backed up on any number of computers for a very low cost.

eru 13y ago

Why should the fiat system end? The US dollar's reign might end, but there are plenty of more reasonable fiat currencies. (Schweizer Franken, or the Singaporean Dollar for example.)

oleganza 13y ago
Each fiat currency is destined to crash due to constant debasement (there haven't been yet a king or a republic that did not debase its currency). But each crashed fiat currency is quickly replaced by another one, so in theory fiat system may see no end. Unless people start using Bitcoin universally and won't need any fiat currency at all. Which I expect is going to happen over the next decade.
- eru 13y ago
  What's the problem with gradual debasement? Every once in a while you chop of a bunch of zeroes (like they did in Turkey a few years ago). They didn't have any crashes.
  - oleganza 13y ago
    Debasement is a silent shift of wealth (aka "purchasing power") from one group of people to another. The more savings you have, the more you are punished compared to those who have less. Since in monetary economy biggest decisive power is in hands of those with savings (aka cash, aka most marketable resource), power is shifted from those who earned and economized their money to those who have political power to print and distribute money to themselves and their allies. You may think that "regular wage earners" who have no savings are not affected at all, but that's a double mistake: 1. Folks without savings are highly depended on those who have (aka capital, aka infrastructure, aka ecosystem). They depend on their boss having enough money to sustain ups and downs and not go bankrupt. They depend on productivity of the producers around them who make food and goods - those have to save to invest in the future development to increase quality and lower prices. The less wealthy people you have around you, the less comfort and service you get (obviously). In the middle of Sahara any bum is much less safe or wealthy than on Manhattan. 2. Folks without savings can't even start having savings when they are heavily taxed by debasement. Thus existing class of powerless people stays powerless and those who have depreciating savings join that class over time. Which is understandable: continued debasement simply moves all the capital to the very few close to the printing press leaving everyone else in the powerless "workers" category. Extra twist is that folks without savings are bribed to support the system by offering low-cost artificial credits (created from printed money, not from someone's savings) and it only adds insult to injury: at the cost of destroyed local productivity, risk of hyperinflation, 3rd world hate towards them, people not only cannot save money, but have to pay some interest rate to get at least some stuff to preserve whatever money they got right now. If you look at the whole picture consisting of net receivers and net losers in this great wealth transfer, it's very-very sad.
    - eru 13y ago