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Comment by joosters | Hacker News Reader

The counterfeit rate of UK pound coins is 2.5%, yet you can easily exchange ten of them for a £10 note. If what you state was true, people would not be willing to give as much as £1 per coin.

http://www.royalmint.com/discover/uk-coins/counterfeit-one-p...

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That's very interesting and surprising (I would have guessed much less than 2.5%), but I don't see how it refutes my point that any currency's value is related to how easily it can be counterfeited. There's probably a threshold or two involved, where the convenience of having simple exchange rates between forms of the same currency compensates for losses to counterfeiting as long as the counterfeit rate is low enough.

I don't think you're actually arguing that I could build a currency that scales beyond a tribal scope out of something that's trivial to copy, but that's the point I'm trying to make. If it's too easy to cheat, people will stop trusting the currency and will use something else; therefore the technology behind the currency does affect its value.

Yeah, I do get your point, I think though that the value of currency is more to do with trusting the backers/issuers of the money, rather than any direct relation to counterfeiting. If counterfeiting becomes too rife, then that will start to damage the trust of the money issuers. The relationship is complicated though.

The UK £1 counterfeit rate is almost unbelievably high, but the key point is that individuals aren't really affected by it. The coins are all 'good enough' that you are unlikely to ever have any rejected by a shop, so the end result is no-one cares about it. (Incidentally, it's actually harmful to check your own cash for counterfeits, since spending counterfeit money is a crime, but ignorance is an accepted defence.)

(I don't know where the buck stops. Do banks check for counterfeit coins and reject them from shop's cash deposits? I'm absolutely not trying to say that counterfeiting coins is a victimless crime, just wondering whether everyone shares the cost or whether it eventually catches up with one unlucky party)

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