It was already tried. It was called Bitcoin. It failed spectacularly. At least this looks like it could work.
I trust my government more than I trust these companies so I will keep using fiat, but this may be an option for other people.
I trust my government more than I trust these companies so I will keep using fiat, but this may be an option for other people.
Bitcoin as a penny-stock investment opportunity still seems successful, but as a viable currency it seems to have failed. And now cue the people saying that bitcoin was never actually intended to be used like a digital coin...
It’s hard to tell if this is a joke, trolling, manifestation of dystopia/idiocracy.
All that’s really needed now is an underlying story of how the cafe couldn’t figure out how to accept payment, but due to being “bitcoin only” they received wild media attention and became an influencer, got SV capital investment, pivoted to a freemium model just giving away their bitcoin only coffee for free, gained market share over Starbucks thanks to SV Venture capital subsidizing our coffees and then they go public and the VCs/bitcoin coffee founders make billions unloading onto the public.
I’m so sold I was going to register both bitcoincoffee.com and bitcoincafe.com, looks like some savvy founders already beat me to the punch.
EDIT: That's the bigger failure
SCNR
[1]: https://twitter.com/TheCryptoconomy/status/11319624478232780...
Are they doing it from a pure ideological perspective?
Cryptocurrencies is a better type of money for a few reasons:
* More acceptable than other digital money (banks and payment processors might say no)
* More easily divisible than for example gold coins and gold bars
* It's sound money whereas fiat is not (nobody can arbitrarily increase the supply)
* Much more portable. You can send any amount to anyone in the world, as long as they have internet.
To be clear, cryptocurrencies are like cash but in digital form. It's a great medium exchange, but it suffers from low adoption meaning it's a bad store of value (but so is fiat) and a bad unit of account (but so is gold).
> For one, a currency can’t be reliant on an internet connection for validity. My 1$ bill in my wallet absolutely does not rely on that
So you don't consider digital fiat currencies then?
Me not having internet for a period of time doesn't invalidate my cryptocurrency holdings. I just need internet to spend it (a fair constraint for digital money).
> A gold coin essentially answers the usual doubts in fiat currency.
Except for the fact that you can't send gold coins digitally.
Also, it's much more difficult to check for gold coins. And difficult to transport. It's easy with cryptocurrencies.
So it unites the drawbacks of both fiat and gold without any of the advantages.
>* It's sound money whereas fiat is not (nobody can arbitrarily increase the supply)
Yeah they can, it's called a hard fork in cryptocurrency.
In fiat it's called "printing play money", but the goal is essentially the same.
>Except for the fact that you can't send gold coins digitally.
Actually you can, though in this case you exchange ownership contracts of the gold, which you can swap for the gold you own at your bank.
Plus I don't need to wait an hour to do that, I can do it even offline if I wish, where all parties can verify the transfer without a computer at all.
>Also, it's much more difficult to check for gold coins. And difficult to transport. It's easy with cryptocurrencies.
Until the tax office knocks at your door and wants to know where all that money went. Then the ease of transport is suddenly a problem.
>It's a great medium exchange,
In my experience, no. It's not a medium of exchange at the moment any more than beer tops and a ballpoint pen are. Bitcoin and Friends are at the moment a speculative asset that people hoard in case it gets more valuable or use as an unregulated stock exchange.
The average customer can't even get refunds if they get scammed, how am I supposed to take it seriously as a digital currency?
Well, if you conveniently ignore the advantages...
> Yeah they can, it's called a hard fork in cryptocurrency.
That's similar to me printing "Doge dollars" and claiming it increases the supply of US dollar.
> Actually you can, though in this case you exchange ownership contracts of the gold, which you can swap for the gold you own at your bank.
Yes... If we ignore the fact that you're not actually sending gold.
> Until the tax office knocks at your door and wants to know where all that money went. Then the ease of transport is suddenly a problem.
That's not an argument. Taxes are applied in the same way as cash is taxed, with benefit of you having a ledger you can reference.
> It's not a medium of exchange at the moment any more than beer tops and a ballpoint pen are.
Except them being instantly verifiable, have a constrained supply, are easier to transfer, are divisible, are fungible & uniform... Just the properties that money actually needs and make for a good medium of exchange.
> The average customer can't even get refunds if they get scammed, how am I supposed to take it seriously as a digital currency?
I guess the same way you take physical cash seriously?
Money also needs to have stable value within some margin and small but steady inflation. If the value rises then it is a bad idea to spend it because it becomes an investment. If the value fluctuates nothing can have a nominal price. A MacBook costs $1400, but in a day it could be anything between 0.2 and 1 bitcoin. Like in the cafe story in one of the GP comments, this makes it impossible to use for any transaction.
Barring that, I'd be actively using BTC (or other cryptocurrencies) in the same mode as many people use Venmo.
egold got shut down for facilitating money laundering. I think IIRC goldmoney retired from being a currency and became a non-exchangeable gold vault. Governments really didn't like them.
Can I pay my rent in bitcoin? No
Can I buy my groceries in bitcoin? No
Can I expect bitcoin to hold any semblance of a stable value, like an actual 1st-world currency or standard, quality investment product no?
So if it's not useful as a currency and not useful as a store of value, what is Bitcoin? I really want to trust in the brave new world, but I just can't.
I'd be pretty surprised in you could even get that cup of coffee for yen.
Why is this good? This seems like a missing feature
Instead it's about no single entity can suddenly decide "let's issue trillions of dollars to repay our debt!", which erodes any savings you have and can in the worst case collapse the economy (see hyperinflation).
What I guess you're after is having the ability to respond to the economic climate by stimulating the economy? Then let me introduce you to the concept of sound money and what Austrian economists have to say about it.[1]
The basic point is it's impossible for a single actor to predict the market behavior, it's why a planned economy doesn't work, because the market consists of actors who only act in their own best interest and don't have perfect knowledge.
[1]: https://mises.org/library/principle-sound-money
Edit: It is indeed possible to change the currency policy... If the community agrees, which is a very tall order.
How do civilians escape a depression with no money in an Austrian economy?
It is exactly that. There is no example of pure austrian economics just as there has never been a 'true' communist state since human nature will never allow the extremes they need to work.
> How do civilians escape a depression with no money in an Austrian economy?
The entire point of 'sound money' is not actually to help the general population survive or prosper, it is specifically to limit the power of government. From the link above "It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments."
Of course you might have a depression, but that should be cleared up quickly since the free market allows the fit businesses to buy up weak competitors (since there is no anti-trust in austrian land). If you are unemployed during this time you can always find some labor job to do so will never be truly unemployed (since there is no minimum wage or restrictions to work).
Isn't the point of limiting the power of government to actually help the general population to survive and prosper though?
It might be a lovely side benefit, but no, I don't think it is the point or outright goal in austrian economics and libertarianism. The freedom itself is the goal, which does carry the potential to succeed and prosper but also the potential of complete and utter failure and misery with it. You are allowed to be a failure completely if you so choose here. I might be wrong on the philosophy here though as I have only really skimmed the surface of mises, hayek, rothbard, etc, but that is my understanding.
These are true.
>It's sound money whereas fiat is not (nobody can arbitrarily increase the supply)
You'll have to explain why the inability to increase the money supply is a benefit? Sure, money printing can be abused, but a growing money supply is also beneficial in a growing economy (output + population). Second, how do the current holders selling the currency to people without any Bitcoin not count as "increasing supply". If they don't sell, supply is zero, after all. What is the value of Bitcoin as a currency in that case? Nothing.
>Much more portable. You can send any amount to anyone in the world, as long as they have internet.
That provisio at the end is a big one, considering internet is susceptible to going down via both natural disasters and government whims.
https://economics.stackexchange.com/questions/166/from-an-ec...
You also can’t spend your bitcoins while you’re offline.
> You also can’t spend your bitcoins while you’re offline.
Is that supposed to invalidate my points? Especially since I placed emphasis on them being a digital currency and I even said so in my comment?
I wouldn't say it's failed, but I don't see it succeeding, either. Is Bitcoin more or less mainstream than it was 2 years ago? Are transactions faster? Is it used at more retailers?
I don't see any of that. It seems like it's only a tool for speculation.
People spend a ton of energy (that could otherwise to actual useful things) on shifting around bits that they then claim are very valuable.
You could make a similar claim about fiat money except that actually makes commerce easier. Bitcoin is not a good way to transfer value since like you said it's too volatile for a currency.
So it's built on nothing, it does nothing and underpins nothing, it wastes huge amounts of otherwise useful energy and that makes it a good investment?
Maybe I'm just too dumb to see the genius of it.
Yet many do use it as a currency, volatility isn't a showstopper. Just look at the use in darknet markets, most serious VPNs and VPS services offer it and you can buy all sorts of stuff on for example Webhallen or Inet (two of the biggest Swedish online computer stores).
> So it's built on nothing, it does nothing and underpins nothing
And this is wrong. It's secured by cryptography and game theory.
The big thing it does is fairly simple: It enables digital payments without a trusted third party. It's relevant for businesses who cannot accept credit cards and there are thousands of stories where startups gets their accounts frozen, for arbitrary reasons, which may tank their business.
I wrote about this and more here: https://whycryptocurrencies.com/
> it wastes huge amounts of otherwise useful energy
Actually most of the energy comes from renewable sources, which would be wasted otherwise. The Bitcoin mining industry is so competitive, it wouldn't be profitable otherwise.
I don't want to wave away the concerns as nothing, because it is a valid concern, but there are tons of other things we waste much more energy on.
Regarding this:
>Actually most of the energy comes from renewable sources, which would be wasted otherwise. The Bitcoin mining industry is so competitive, it wouldn't be profitable otherwise.
Geothermal energy isn't renewable unless it's used sparingly. Hydro-power requires huge sacrifices of land, usually fertile valleys, in the reservoir lakes. Windmills are loud, huge and ugly. Power lines require sacrifices of land. And everything needs to be produced, with the environmental impact that brings.
I'm not saying renewables are bad, they're not, but they are not so pristine that using them for bitcoins isn't a sad thing.
It's not only black-market commerce though. Porn, legal marijuana, gambling, auctions are for example considered off limits by most payment processors and in some cases even banks. PayPal even froze Minecraft's account (but it was quickly reinstated due to it's popularity, many others have not been so lucky).
Excellent point about renewable energy.
And they can be used for more sensible things than mining crypto.
But that's an argument, which never can be won in discussions with crypto enthusiasts.
An enthusiasm, which, to me, has almost cultish qualities.
That argument is just silly. I don't think that miners give a flying fuck where the energy is coming from as long as it's cheap.
A lot of work was spent moving it only to never use it. Value is a strange thing, I guess. One would think they could skip that massively expensive and somewhat dangerous unnecessary part and just count large numbers instead, or something.
With gold bars at the very least you have in your hands a concentrated lump of actual material that will survive a power outage or a lost password or something.
But of course that whole process is as absurd as you point out today because gold holds residual value from when it actually was a convenient universally recognized store of value.
Just an armchair hypothesis, but perhaps given it's lack of underlying utility (vs gold for example) Bitcoins "value" is mostly just a measurement of the level of distrust in fiat currencies and the institutions and governments that back them.
There are a subset of people who by nature will never trust fiat currencies, or govts and institutions that back them, and the "floor" of Bitcoin is defined by their participation, as well as those with a vested interest (i.e. a large early stake) in Bitcoin. As the distrusting population expands and contracts, Bitcoin will vary in value.
I do wonder whether rising energy costs will take a bite out of the value proposition for it, though.
You're very welcome to add me to the dumb club too.
In addition I'm a smidgeon confused about how the bitcoin exchange rate is determined. It seems to be whatever exchanges say it is. There must be some metrics to determine that, but overall the market seems so illiquid and some of those exchanges seem a bit like easily hacked two bit shysters with some PHP scripts and a snazzy whitepaper.
But again, that's maybe just us in the dumb club.
This is all read and theoretical - I certainly don't have any practical experience with either combatting or committing money laundering.
Anyway fine art and wines are infamous as pretextual transfer vehicles because the values are often so subjective - bitcoin swinginess serves the same purpose, especially if the hypothetical enterprises control enough to manipulate the market. Big assumptions of course that such a thing exists but it highlights who it could be useful to (intelligence agencies and organized crime - which are arguably largely the same thing to the host country - both break the law in pursuit of their agenda).
Anyway that form of laundering involves buy something at a lower/normal price and selling high. The selling high can be from having a contact buy it for higher with your dirty money. Of course open sales would be preferrable - not only because deals only between connections are obvious but some bonus profit. If someone not involved outbids or provides enough of a margin to be worth backing off all the better - you can move the dirty money another day.
If one needs to funnel clean into dirty do it in reverse order essentially.
What I'm arguing, though, is that the market making "algorithm" is highly intransparent.
But we probably have to agree to disagree here.
Your confusion seems to be that the exchanges are coming up with the prices, which is not at all how it works. Again, the price is set exactly the same way as it is on the NYSE, by matching bids and asks.
BTC failed to be a currency that could be used for practical purposes. There's really nowhere to spend BTC today that matters.
If Amazon, Costco and AirBnB etc. allowed BTC, well, others might join, and we'd possibly see real circulation. For whatever reason, it was never meant to be.