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Their armies and alliances. Would be interesting if altcoin networks engaged in attacks on each other, haha.

thaumasiotes 13y ago
Your argument (or the sense I can make of it) works on the assumption that in the absence of an army any country will be automatically conquered and the money repudiated. That assumption is undermined by the growth of trade, but is not totally unwarranted. What's backing the Somali shilling? It's not even approved by any governing power in Somalia.
- adrianwaj 13y ago
  If I buy Somali shillings (S), and I make a forex transaction, then the other party has my $ and I have their S. However, I can really only spend those S in Somalia, but, I still don't want to buy more S than what it costs for some other country (including my own) to invade it and make those S worthless by replacing or nullifying that currency in that country. (in fact with cryptocurrency, such an exercise is not unfeasible) So the bigger the army or more alliances it has, the more expensive it is to invade, and the more S I can buy, knowing it is protected, and, the more it can appreciate in relation to other currencies. Likewise a country's army should grow in relation to its economy so it becomes slightly uneconomical to invade (unless the country is a belligerent one.) It's not a pretty thought exercise, but theoretically, large holders of a cryptocurrency can devalue it by flooding the market with them. That makes them targets for people or groups that might want to do that, and targets for other groups who want to protect them for those groups. (however in that respect, flooding may be counterproductive if it helps with the spread and awareness of a currency, in fact if I wanted to ensure the success of a crypto - I'd do that - get them to as many people as efficiently as possible... reverse-hoarding, rather than think solely about appreciation for my own benefit) It's not just about stealing crypto, it's about debasing one, so people choose another altcoin that is more reliable or appreciative (well that's the intention anyway.) A good film plot. Likewise if I am a large Bitcoin holder, and also a large Litecoin holder, I might want to dump, or constantly flood Litecoin, so that Bitcoin looks like a better currency for hoarding, or accepting. Also, if one crypto network can attack another one, then it'd look bad if it did (really bad), but at least I know it can win such battles. As a thought exercise, this may be one reason why Litecoin may end up China centric - it has an army to back it up (if the online battle was from another country-centric crypto) - and lots of Chinese holders that want to see it appreciate and used.
  - thaumasiotes 13y ago
    I don't understand your first paragraph. Could you provide a more specific or particularized answer to "what's backing the Somali shilling"? As a side point, the shilling appreciating in relation to other currencies would have to be driven by those other currencies depreciating against the world, or by printing press productivity falling dramatically; there is no authority behind the shilling, and they are printed by anyone who wants to print their own, so their value in trade is generally the cost of printing them (quite low).
    - adrianwaj 13y ago
      I have no idea about Somalia and their money-printing operations. I also have no desire to purchase anything from that country, or visit it. I certainly wouldn't want to buy their currency as an investment if it can be printed by anyone, or some army can come in and make those notes illegal, or the country has no economic development to make the demand for those notes increase over time. So what's backing that currency is a number of things, with "backing" being a synonym for "making it valuable or useful in the long term to buy things from and in Somalia." Having a country be physically protected from invasion being a large factor in that equation. Also, not only an army, but more importantly a naval force that can protect trade routes from pirates (doesn't Somalia have its own fleet of pirate ships?? lol.) The other thing to evaluate in a currency is the amount of it held by foreign countries. If all of a sudden China were to dump its US dollars, I'm sure the value would go down (but what would they buy instead?) Yet at the same time, China has an interest seeing the US survive and/or thrive to a certain extent so those dollars remain valuable and/or useful. In fact, it seems the Chinese are going crazy about Bitcoins and Litecoins and it makes more sense for many to hold them than US dollars.. possibly because it allows them to make their funds available offshore and also pay bills locally. As a side note, I've heard the Chinese have official printing plates for US dollars... another indicator about how important ubiquity is, in contrast to artificial scarcity to back a currency. If there's a lesson to be learnt about bitcoin, I think it's that artifical scarcity can also alienate a lot of people (even if it motivates bitcoin holders) and drive up the value of other crypto currencies, and if it was distributed more evenly from the outset, if today's reality would be any different. So my prediction is that there'll be a number of competing and complimentaty crypto currencies emerging supported by groups that were early adopters (or buyers) of them. If I were a fortune 100 company, it might make more sense to buy up say Litecoins on the cheap now, and then take payments in them later. (a bit off-topic, but useful to think about).. why give a free-ride to bitcoin holders? (unless the top execs are holding them.. or more likely, they'll be buying Litecoins now, esp Chinese ones)

Your argument (or the sense I can make of it) works on the assumption that in the absence of an army any country will be automatically conquered and the money repudiated. That assumption is undermined by the growth of trade, but is not totally unwarranted. What's backing the Somali shilling? It's not even approved by any governing power in Somalia.

adrianwaj 13y ago
If I buy Somali shillings (S), and I make a forex transaction, then the other party has my $ and I have their S. However, I can really only spend those S in Somalia, but, I still don't want to buy more S than what it costs for some other country (including my own) to invade it and make those S worthless by replacing or nullifying that currency in that country. (in fact with cryptocurrency, such an exercise is not unfeasible) So the bigger the army or more alliances it has, the more expensive it is to invade, and the more S I can buy, knowing it is protected, and, the more it can appreciate in relation to other currencies. Likewise a country's army should grow in relation to its economy so it becomes slightly uneconomical to invade (unless the country is a belligerent one.) It's not a pretty thought exercise, but theoretically, large holders of a cryptocurrency can devalue it by flooding the market with them. That makes them targets for people or groups that might want to do that, and targets for other groups who want to protect them for those groups. (however in that respect, flooding may be counterproductive if it helps with the spread and awareness of a currency, in fact if I wanted to ensure the success of a crypto - I'd do that - get them to as many people as efficiently as possible... reverse-hoarding, rather than think solely about appreciation for my own benefit) It's not just about stealing crypto, it's about debasing one, so people choose another altcoin that is more reliable or appreciative (well that's the intention anyway.) A good film plot. Likewise if I am a large Bitcoin holder, and also a large Litecoin holder, I might want to dump, or constantly flood Litecoin, so that Bitcoin looks like a better currency for hoarding, or accepting. Also, if one crypto network can attack another one, then it'd look bad if it did (really bad), but at least I know it can win such battles. As a thought exercise, this may be one reason why Litecoin may end up China centric - it has an army to back it up (if the online battle was from another country-centric crypto) - and lots of Chinese holders that want to see it appreciate and used.
- thaumasiotes 13y ago
  I don't understand your first paragraph. Could you provide a more specific or particularized answer to "what's backing the Somali shilling"? As a side point, the shilling appreciating in relation to other currencies would have to be driven by those other currencies depreciating against the world, or by printing press productivity falling dramatically; there is no authority behind the shilling, and they are printed by anyone who wants to print their own, so their value in trade is generally the cost of printing them (quite low).
  - adrianwaj 13y ago
    I have no idea about Somalia and their money-printing operations. I also have no desire to purchase anything from that country, or visit it. I certainly wouldn't want to buy their currency as an investment if it can be printed by anyone, or some army can come in and make those notes illegal, or the country has no economic development to make the demand for those notes increase over time. So what's backing that currency is a number of things, with "backing" being a synonym for "making it valuable or useful in the long term to buy things from and in Somalia." Having a country be physically protected from invasion being a large factor in that equation. Also, not only an army, but more importantly a naval force that can protect trade routes from pirates (doesn't Somalia have its own fleet of pirate ships?? lol.) The other thing to evaluate in a currency is the amount of it held by foreign countries. If all of a sudden China were to dump its US dollars, I'm sure the value would go down (but what would they buy instead?) Yet at the same time, China has an interest seeing the US survive and/or thrive to a certain extent so those dollars remain valuable and/or useful. In fact, it seems the Chinese are going crazy about Bitcoins and Litecoins and it makes more sense for many to hold them than US dollars.. possibly because it allows them to make their funds available offshore and also pay bills locally. As a side note, I've heard the Chinese have official printing plates for US dollars... another indicator about how important ubiquity is, in contrast to artificial scarcity to back a currency. If there's a lesson to be learnt about bitcoin, I think it's that artifical scarcity can also alienate a lot of people (even if it motivates bitcoin holders) and drive up the value of other crypto currencies, and if it was distributed more evenly from the outset, if today's reality would be any different. So my prediction is that there'll be a number of competing and complimentaty crypto currencies emerging supported by groups that were early adopters (or buyers) of them. If I were a fortune 100 company, it might make more sense to buy up say Litecoins on the cheap now, and then take payments in them later. (a bit off-topic, but useful to think about).. why give a free-ride to bitcoin holders? (unless the top execs are holding them.. or more likely, they'll be buying Litecoins now, esp Chinese ones)