Not this money:
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that’s based on the number of fatalities required to get it from the quarry island to the inhabited island, isn’t it?
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Thanks, I’ll stick to latinum.
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It’s IOUs all the way down.
It’s just gold! Worthless gold!
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Clearly at some basic level, this is true.
However, that believe is --for most people-- based on various pieces of evidence. In the case of the dollar, said evidence includes the backing of and confidence in the United States Government. Other than some cult-like devotion to Satoshi, there’s no such underpinnings for Bitcoin (or indeed most cryptocurrencies). Its just a bunch of random folks saying “hey, this is worth something!”
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Dollar bills have the distinct advantage that the US government promises that you will be able to pay your taxes using dollar bills, which if you’re a US taxpayer is nice to know. Taxes go up and down but a $100 bill will always be good to pay $100 worth of taxes.
Cryptocurrencies don’t come with a similar guarantee; they’re literally not “worth” anything except what you can get bigger suckers than yourself to give you for them. If Elon Musk disses Bitcoin on Twitter and scares some of the bigger suckers away, and consequently the “value” of your Bitcoin tanks, too bad.
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I don’t disagree, but this seems like a good place to bring this up:
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Here’s what makes money “real” for me: a government somewhere needs to accept it as payment for taxes. If there’s literally no government that accepts it then it’s not a currency, it’s a commodity (and an imaginary one at that.)
And yes, money can certainly cease to be real once people stop believing in it, as has happened many times in history. The example of Brazil abandoning their old currency and making a whole new one in the 90’s to combat hyperinflation is one interesting example. But as long as you can pay your taxes with it then it has a real, tangible value that’s recognized by the society you’re living in.
Edit: Kevin Drum explained it better than I did:
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like diamonds.
Money is just an intermediary for bartering after all. It needs just one property: it must be scarce/hard to get by/counterfeit.
In the ideal case you don’t get speculation, which leads to the grossly inflated prices you see now with crypto. Without speculation money is nothing other than an (preferably hard to counterfeit) token that you have provided a service or good. That token can be anything as long as it’s hard to counterfeit and both sides of the transaction agree.
edit:
Of course having a stable power guarantee the value of a currency helps its stability. So crypto will probably always be less stable. But that makes it an unstable currency, not an imaginary currency.
I know lots of people compare crypto to the dutch tulip bubble. But tulip bulbs have one property which makes them less useful as a currency: they are not especially hard to counterfeit/reproduce.
This is incorrect. The prized tulip bulbs were delicate and took years to cultivate.
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I think that another thing that makes a currency a currency is that fixed prices are set for goods and services in units of currency. These prices may change regularly due to inflation or deflation (and by my definition, currencies undergoing hyperinflation are no longer functioning as currencies), but fixed prices exist. By contrast, no fixed prices exist for goods and services in cryptocurrency; the prices are always whatever the normal price would be converted into crypto at the going market rate.
Also, currency does not require a phone or computer or an internet connection to conduct transactions, and, of course, currencies do not have unavoidable transaction fees built into them. If cryptocurrency speculation ever settles down and they become stable in value, they would still only be like credit using cards in a foreign country: an intermediary between hard currencies used for the sake of convenience or anonymity, rather than a currency in their own right.
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aha! yes the money’s real, but the ownership is imaginary.
since with currency, it’s the other way around i guess normally you need one or the other. ( like back when bank deposits weren’t guaranteed, then your money in the bank was imaginary even though you thought it was real, and all sorts of trouble ensued )
i think the deal with bitcoin is that both sides are imaginary by design
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Well, some of the most valuable tulips did not necessarily reproduce well, or identically.
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Apart from its volatility, a problem with Bitcoin in particular is that the system doesn’t scale. If it ever became only very, very remotely close to actually popular it would collapse under its own weight. For example, Bitcoin only supports a maximum of 7 transactions per second, worldwide, by design (credit card clearing companies like Mastercard can do tens of thousands, no sweat), and that is very difficult to change (it’s been tried). Transaction fees are prohibitively high, and it can take ages for transactions to become official on the blockchain, which sucks if all you want to do is buy a cup of coffee. Bitcoin is already creaking at the joints with just the speculators shunting chunks of it back and forth in order to pretend that there’s an actual market and pump up the price – incidentally a technique that will get you in trouble if you do it on the stock exchange. There is no way Bitcoin could support the day-to-day load of currency transactions generated by the population of a single town, let alone a reasonably-sized country or the world.
People who call Bitcoin a “currency” are either ignorant about how it actually works, or die-hard Bitcoin fans who have fallen for the scam hook. line, and sinker, or both. In fact Bitcoin is not a “currency” at all, but a highly speculative commodity with no value except what suckers are prepared to pay for it, and there are only so many suckers with money around.
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Checks out:
In fact, there are three freely convertible currencies in the universe, but the Altairian Dollar has recently collapsed, the Flainian Pobble Bead is only exchangeable for other Flainian Pobble Beads, and the Triganic Pu doesn’t really count as money. It’s exchange rate of six Ningis to one Pu is simple, but since a Ningi is a triangular rubber coin six-thousand, eight-hundred miles long each side, no one has ever collected enough to own one Pu. Niginis are not negotiable currency because the Galactic Banks refuse to deal in fiddling small change. From this Basic premise it’s very simple to prove that the Galactic Banks are also the products of a deranged imagination.
– Douglas Adams, The Restaurant at the End of the Universe
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I’m no crypto advocate, but what you describe is true of all money (including money backed by gold, just in case we have any eighteenth-century economists here on the BBS). It’s a shared agreement to finely measure and quantify the ratio between the value we place on any products and services, whether potatoes, labour, cars or Pokémon cards.
“But what’s worth more than gold?"
"Practically everything. You, for example. Gold is heavy. Your weight in gold is not very much gold at all. Aren’t you worth more than that?”
-Terry Pratchett, Making Money
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Sure. At first. The craze ended as soon as people got the hang of how to reproduce them. Had they been easy to clone from the start the whole speculation bubble probably wouldn’t have happened.
Which was what I had hoped it would have become. But alas, it turned out quite different.
