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And then there is fiat money, the elephant in the room of valueless things.

JumpCrisscross 13y ago
Bitcoin is a fiat currency - it has no intrinsic value. Government-backed fiat has some intrinsic value - it can cancel tax obligations and thereby has a captive source of demand (taxpayers). But practically speaking, yes, most of any fiat currency's value is in its seignorage, not tax-cancelling intrinsic value.
- interstitial 13y ago
  You don't know what fiat actually means. Fiat means, in a short and sweet manner, the government can force you to use it. No one can make you use bitcoin. If they do it is called 'blackmail'.
  - quesera 13y ago
    > Fiat means, in a short and sweet manner, the government can force you to use it. Fiat, both from the original Latin, and in practice, means "it shall be". In the case of money, it means that the token has no intrinsic value, and is not directly convertible into a backing resource with value. Its only value is that given to it by decree of the issuer. There is no component of government compulsion in the definition. In practice, some fiat monies are the only accepted legal tender currencies for some purposes (e.g. taxes) but it is not a requirement. A successful fiat currency implies that there is acceptance among users in its fiat value, and some of the most historically effective ways to get people to go along with your assertions boil down to making ultimatums backed up with sharp sticks.
nopinsight 13y ago
Both stocks in shell companies and fiat money are protected by international treaties and the military might of supporting governments. Has any government declared official and unequivocal support for Bitcoin yet?
- glimmung 13y ago
  Tell that to the Greeks! How "protected" did their money turn out to be?
  - arethuza 13y ago
    Don't you mean the Cypriots? http://en.wikipedia.org/wiki/2012%E2%80%9313_Cypriot_financial_crisis http://en.wikipedia.org/wiki/2012%E2%80%9313_Cypriot_financi... And weren't a lot of the people who were hit by the levy on deposits actually non-Cypriots using Cypriot banks as tax havens?
    - glimmung 13y ago
      No, I did mean the Greeks - but neither country is a great argument for the "fiat currency good, Bitcoin bad" argument. Re. non-Cypriots, I'm sure that you're right - but the subject was the state's management of its currency, regardless of who owns it. One thing that your example does flush out though is that fiat currency can be crippled by speculation too - and at least Bitcoin does not conflate a currency and a tax regime. I'm not a cheerleader for Bitcoin specifically, I'm just really, really sceptical about the robustness of traditional currency.
  - stephencanon 13y ago
    Given that the Greek government didn't simply close the country, pretty well.
    - glimmung 13y ago
      I'm not quite sure how one "closes" a country, but they have abdicated responsibility for many of the core functions of government, and to the individual citizens who are affected I'm sure the government seems "closed", if not the country [1]. Details and semantics aside, my point was that the security that governments allegedly bring to currency, and which Bitcoin allegedly lacks, is often much less concrete than we would wish. [1] http://www.theguardian.com/commentisfree/2014/feb/24/christine-lagarde-troika-wrong-on-greece http://www.theguardian.com/commentisfree/2014/feb/24/christi...
cromwellian 13y ago
Fiat money is backed by the government, which has a monopoly on force, which is backed by civil society voting it into power. Value is a human invention, there's really no objective value for something other than what other people demand. The only real difference between bitcoin, fiat currency, and other assets, is that some assets have multiple demand uses -- they supply value for things other than as a currency, and US government assets simply have the way of a much larger, mature, 200 year old institution, with hundreds of millions of people backing it. Here's the thing: If you are wronged by a crook on the stock market, or by the US government, there is a non-zero chance you can get justice through the courts. But if Mt Gox or Silk Road 2.0 runs off with your money, who has jurisdiction? Who you gonna sue? The original article makes a lot of mistakes with regards to how bitcoins work, but that's counterbalanced by the hyperinflation/currency debasement hysteria of gold nuts and anarcho-libertarians who think BitCoin is somehow going to end the Fed and restore a pre-1920's Nirvana that never existed.
- zAy0LfpBZLC8mAC 13y ago
  This "fiat currency is backed by the government" is being thrown around a lot, but what does that actually mean? Can you go and redeem your dollars for a piece of the government? Well, obviously not, but what is it that you mean by that? And as for Mt Gox: Well, what if Toyota runs off with your money, who has jurisdiction? Who you gonna sue? May I suggest Japan's courts and Toyota? What does that even have to do with bitcoin? If you do business with someone you don't know, that may be risky, whether you give them dollar bills or bitcoin, and if you do business with someone you can identify in real life, some country will probably have jurisdiction over them and you can sue them there, no matter whether they stole your dollars, your bitcoins, or your car.
  - cromwellian 13y ago
    Bitcoin isn't regulated, there is no oversight or regulation. There is oversight and regulation over the car industry, just like there is over the financial industry. It doesn't stop all fraud or loss, but it does stop some. I can't redeem my fiat currency for gold bars, but I can and must pay taxes for it, and that creates a demand floor. It means there will always be someone willing to trade dollars for something so that they can pay their taxes.
terranstyler 13y ago
OK, I gotta correct myself: Fiat is not valueless (what I wrote) but it has no intrinsic value (what I meant). Just like BTC.

Bitcoin is a fiat currency - it has no intrinsic value. Government-backed fiat has some intrinsic value - it can cancel tax obligations and thereby has a captive source of demand (taxpayers). But practically speaking, yes, most of any fiat currency's value is in its seignorage, not tax-cancelling intrinsic value.

interstitial 13y ago
You don't know what fiat actually means. Fiat means, in a short and sweet manner, the government can force you to use it. No one can make you use bitcoin. If they do it is called 'blackmail'.
- quesera 13y ago
  > Fiat means, in a short and sweet manner, the government can force you to use it. Fiat, both from the original Latin, and in practice, means "it shall be". In the case of money, it means that the token has no intrinsic value, and is not directly convertible into a backing resource with value. Its only value is that given to it by decree of the issuer. There is no component of government compulsion in the definition. In practice, some fiat monies are the only accepted legal tender currencies for some purposes (e.g. taxes) but it is not a requirement. A successful fiat currency implies that there is acceptance among users in its fiat value, and some of the most historically effective ways to get people to go along with your assertions boil down to making ultimatums backed up with sharp sticks.

nopinsight 13y ago

Both stocks in shell companies and fiat money are protected by international treaties and the military might of supporting governments. Has any government declared official and unequivocal support for Bitcoin yet?

glimmung 13y ago
Tell that to the Greeks! How "protected" did their money turn out to be?
- arethuza 13y ago
  Don't you mean the Cypriots? http://en.wikipedia.org/wiki/2012%E2%80%9313_Cypriot_financial_crisis http://en.wikipedia.org/wiki/2012%E2%80%9313_Cypriot_financi... And weren't a lot of the people who were hit by the levy on deposits actually non-Cypriots using Cypriot banks as tax havens?
  - glimmung 13y ago
    No, I did mean the Greeks - but neither country is a great argument for the "fiat currency good, Bitcoin bad" argument. Re. non-Cypriots, I'm sure that you're right - but the subject was the state's management of its currency, regardless of who owns it. One thing that your example does flush out though is that fiat currency can be crippled by speculation too - and at least Bitcoin does not conflate a currency and a tax regime. I'm not a cheerleader for Bitcoin specifically, I'm just really, really sceptical about the robustness of traditional currency.
- stephencanon 13y ago
  Given that the Greek government didn't simply close the country, pretty well.
  - glimmung 13y ago
    I'm not quite sure how one "closes" a country, but they have abdicated responsibility for many of the core functions of government, and to the individual citizens who are affected I'm sure the government seems "closed", if not the country [1]. Details and semantics aside, my point was that the security that governments allegedly bring to currency, and which Bitcoin allegedly lacks, is often much less concrete than we would wish. [1] http://www.theguardian.com/commentisfree/2014/feb/24/christine-lagarde-troika-wrong-on-greece http://www.theguardian.com/commentisfree/2014/feb/24/christi...

cromwellian 13y ago

Fiat money is backed by the government, which has a monopoly on force, which is backed by civil society voting it into power. Value is a human invention, there's really no objective value for something other than what other people demand. The only real difference between bitcoin, fiat currency, and other assets, is that some assets have multiple demand uses -- they supply value for things other than as a currency, and US government assets simply have the way of a much larger, mature, 200 year old institution, with hundreds of millions of people backing it. Here's the thing: If you are wronged by a crook on the stock market, or by the US government, there is a non-zero chance you can get justice through the courts. But if Mt Gox or Silk Road 2.0 runs off with your money, who has jurisdiction? Who you gonna sue? The original article makes a lot of mistakes with regards to how bitcoins work, but that's counterbalanced by the hyperinflation/currency debasement hysteria of gold nuts and anarcho-libertarians who think BitCoin is somehow going to end the Fed and restore a pre-1920's Nirvana that never existed.

zAy0LfpBZLC8mAC 13y ago
This "fiat currency is backed by the government" is being thrown around a lot, but what does that actually mean? Can you go and redeem your dollars for a piece of the government? Well, obviously not, but what is it that you mean by that? And as for Mt Gox: Well, what if Toyota runs off with your money, who has jurisdiction? Who you gonna sue? May I suggest Japan's courts and Toyota? What does that even have to do with bitcoin? If you do business with someone you don't know, that may be risky, whether you give them dollar bills or bitcoin, and if you do business with someone you can identify in real life, some country will probably have jurisdiction over them and you can sue them there, no matter whether they stole your dollars, your bitcoins, or your car.
- cromwellian 13y ago
  Bitcoin isn't regulated, there is no oversight or regulation. There is oversight and regulation over the car industry, just like there is over the financial industry. It doesn't stop all fraud or loss, but it does stop some. I can't redeem my fiat currency for gold bars, but I can and must pay taxes for it, and that creates a demand floor. It means there will always be someone willing to trade dollars for something so that they can pay their taxes.

terranstyler 13y ago

OK, I gotta correct myself: Fiat is not valueless (what I wrote) but it has no intrinsic value (what I meant). Just like BTC.