I agree that for someone living in US or EU there's no much point using BTC.
What we have seen with crypto currencies are extreme volatility, not useful to base a country’s economy on, and because it is decentralized, no-one can really intervene to control this volatility, by e.g. changing the interest rate, and nothing is priced in crypto currencies, to sort of keep it tied to something.
The only metric for what a coin should cost seems to be the electricity/leasing of computers required to mine one. But even this metric is not good, as it is proportional to the size of the network, which is not a constant, and is likely to grow, as the price goes up.
Being able to buy something I want today, because the price went up from yesterday, or saving today when I would have spent, because the price has dropped today causes a regulating effect.
Right now the usage of it is low, small changes in this equation have an outsized effect.
When/if the supply problem is solved, and a more environnementally friendly consensus mechanism than PoW developed, there won't be many arguments against adopting cryptocurrencies as the default payment method.
About volatility: you're right but the thing is: even if BTC is volatile, over longer period its value rises up. Nobody lost any USD yet if he kept his BTC long enough.
It needs to be stabilized if we're ever going to replace fiat currency.
Andreessen Horowitz invested $15 million in https://en.wikipedia.org/wiki/Dai_(cryptocurrency)
[1] https://www.atlanticcouncil.org/blogs/econographics/the-rise...
[2] https://en.wikipedia.org/wiki/Instant_payment#Examples_of_in...
Strong currencies are not the solution to poor governance. Good governance and democracy makes a country and its currency strong. Not vice versa.
That's a good point. Too many people propose individualist solutions to social problems, and all their "solution" would do is make the social problem worse.
I think that stems often stems from an overzealous faith in free markets, which leads to a distorted idea that individual self interest factored over all of society always results in social benefits, so you only need to consider things from the perspective of an individual (which is also far more familiar to most people). Sometimes individual self interest does lead to social benefits, but often it doesn't.
It's like a genetic/ML algorithm that is optimizing for a cost function. If your cost function is awful your algorithm will be awful but that's not an argument in favor of getting rid of cost functions entirely.
A market is useless if it doesn't actually allocate goods and labor efficiently and in the way people want.
I have yet to see proper governance last long enough to be of any note and worse governance tends to quickly flip to favor the powerful.
Also, IIRC, they both benefited from being trade gateways into the PRC economy, especially when it was more closed than it is now.
Of course Hong Kong is now different, but that's not because the government changed its policies, but there is a different government in power.
Singapore had the benefit of a trade port, but it kept importance as such and expanded into becoming a important financial center as well as punching well over its weight in terms of innovation. They have invested in education and provide a stable environment for business.
Still, Hong Kong being different now is because the powerful (China) changed the government to favor themselves. This is actually an example of government falling to powerful interests in short order.
Singapore has as bad or worse of income inequality as the US, and I wouldn't say the US is well governed. https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...
Still, I don't want to take equality as a primary metric since I think inequality to some degree is natural.
Singapore is however a infamously repressive regime as mentioned by ardy42
Is it so laughable that whichever one achieves the best results for its users will be the one to establish both market and political dominance? Is letting such a competition play out via the value of their respective currencies any better than traditional means of resolving this kind of conflict (i.e. war)?
I'm not saying I have ultimate faith in the market to do the right thing--it frequently doesn't. But it sounds like you're saying that it can't.
Granted, BTC's political system involves allocating power based on who can waste the most energy--so it's a pretty laughable alternative to existing governments--but in principle I don't see why markets can't mediate the rise and fall political systems in a way that roughly mirrors the way that political systems mediate the rise and fall of companies.
There's that saying: - Those who make peaceful revolution impossible make violent revolution inevitable.
It seems to me that collectively changing whose currency we use based on their capacity for sound governance is the kind of peaceful revolution that we ought to strive for.
Is that more true for you using a gun than it is for police using a gun?
With individuals making those decisions, the decisions will be made at much lower cost, and this will result in lower quality of decisions.
Already cryptocurrencies are implementing webs of trust to guard against this kind of thing (CirclesUBI). There are also things like MAD escrow (particl). And there's the old fashioned way, which is to get the community together and set up your own impromptu government.
I'm not saying that markets function well without readily available trust. But to say that they cease to exist in those contexts is surely taking it too far.
The value of these markets is itself decided through a free market.
Given a sufficient level of digitization, it's not hard to imagine how many kind of real world markets could be backed by Bitcoin-like systems.
Other forms of property ownership are much more fragile, and require a much more sophisticated legal system.
Imo, there's nothing better to secure your assets better than some form of monopoly on the law, or a monopoly on violence, or even better a combination of the two. This is also why billionaire classes simply consider crypto a wealth store asset and not a secure store of assets.
But leaders pay a political price for instituting draconian enforcement measures, while their country pays an economic price, which makes them less likely. It's one thing to send armed agents to storm the homes of executives of a large private bank to shake down the bank. It's another to do it against end-users at a scale where it becomes effective.
You may be right about the most secure form of property. Many don't have access to jurisdictions that can offer people in their income class that kind of security of property. For them, I think in some situations cryptocurrency can be a very secure form of property comparatively speaking. Cryptocurrency can be thought of as a poor man's offshore bank account, literally speaking.
I don't think the political price is as high as you think, and armed agents don't have to storm the homes of end-users at scale. All they have to do is storm enough homes discourage people by making it clear the risk is real, and everyone internalizes the rules.
If cryptocurrency is contraband, it's the worse kind of contraband because it advertises that you use it to the authorities through easily monitored channels (since you have to connect to identifiable internet services to use it).
I suspect the scale of enforcement needed to discourage widespread usage would be very large, and incur political and economic costs that are prohibitive. That's corroborated by the fact that the USD circulates widely in countries suffering high inflation, despite it being in the best interest of the elite of these countries for people to only use the national currency.
>>If cryptocurrency is contraband, it's the worse kind of contraband because it advertises that you use it to the authorities through easily monitored channels (since you have to connect to identifiable internet services to use it).
Only if public access to strong encryption is prohibited, and there are economic costs associated with a country doing that.
Actually I didn't mean monopoly on the law and monopoly of violence that way. I meant that billionaires invest a lot of cash into politics and personal security (legal and otherwise) for good reason. It would be very hard for a politician to go head to head against a billionaire donor, since he would just donate to the other guy the next time. Similarly, they get to influence a lot of things including who might head the city's police force or what policies to implement on a regional or national level. It's the same thing everywhere, whether you're in the Indian or Pakistani badlands, the heart of the EU or smack in the middle of NYC or SF.
I agree with crypto being the poor man's offshore, but a poor man wouldn't need an offshore. Not to mention, the barrier to open an offshore account is much less than the cost of BTC right now.
Yes true.
>>I agree with crypto being the poor man's offshore, but a poor man wouldn't need an offshore. Not to mention, the barrier to open an offshore account is much less than the cost of BTC right now.
Offshore bank accounts are very costly and difficult to get. They are also not that secure, considering how many have given up on financial privacy in the face of the warrantless-financial-mass-surveillance aka AML push by the dominant political powers, and leaks like the Panama Papers.
With a regular currency, the government can print more money and at least have a chance for things going back to normal once the currency has a chance to go back up in value. But with a currency that's not controlled, you won't get payed in worthless money (inflation), you just won't get payed at all! And instead of getting back your lost value if the currency rises in power, you'll have to hope the contract will be honored at a later date, or massively overload the legal system.
Bad actors are ostracized while good actors build followings, leading to reputation acting as an effective mechanism to find good actors to trade with, and incentivize people to become good actors.
In any case, when people are free to choose between government-recognized currency and non-governmental digital currency, they will choose the one that best suits each circumstance, leading to greater overall utility.
Cryptocurrency offers a much more accessible alternative to global payment systems to the people living in these countries.
Bitcoin solves none of these problems. Sure, it allows you to at least assume this risk, which your country otherwise doesn't, so it's not nothing. But it's at best a band-aid.
It also doesn't protect you in any way from your employer not paying your salary on time, from being wrongfully terminated, from not being able to get a loan, from business partners not paying their debts because they can't sell their own products etc. These are usually the problems that a non-functioning state and non-functioning economy face.
Cryptocurrencies can be used in person too.
With respect to eCommerce, EBay worked extremely well simply because of reviews. Not because of laws. And yes, people came to trust eBay, which was due to its faithful fulfilment of its obligations as a platform steward, not due to regulatory requirements imposed on it.
What you mean to say: people will reinvent laws and governance.
Governments run themselves but until recently, economies didn't. Now that there are two memes (besides violence) that are each independently capable of mediating coersion on a global scale, we can play them against each other and select for the one we like best.
not unrelated is the disk storage the block chain will eventually require, now ZFS and storage density arms races make sense
A low positive inflation effectively makes all prices that are denominated in a fixed amount of the currency slowly lower. This helps the economy - ie, people and companies acting in the economy - deal with changes more easily, since their contracted prices are going down. It also avoids the problem with deflation: Keeping money to spend in the future makes more sense to an individual, thus money velocity goes down, thus less things happen (and all actors earn less.)
That's also why increasing the money supply for crises is good: It allows the same activity to go on, even if each unit of currency moves less. People can get paid the same even if everybody save up money. If there's a fixed amount of currency, they can't, since the currency that would be used to pay them is now bound up in their savings.
This helps the people who have capital and is paid for by the people who only have wages. I am a person that only has a wage, so I choose bitcoin.
We don’t even need to make up hypothetical examples. We have a live one in Greece. The Greek citizens went through this exact ordeal for the exact reason you stated. They couldn’t print EUR and the ECB wouldn’t extent monetary support to Greek government.
https://www.ft.com/content/33b0a48c-ff7e-11de-8f53-00144feab...
You can't have a stable monetary union without a fiscal capacity. The inevitable debt crisis in the Euro-zone are stopped by the ECB buying debt in the secondary markets.
The hypocrisy of the system is obvious to however takes the time to see how it works.
Then that country would be paying the unseen tax of inflation as the US banking system prints more and more USD. Said country would basically be a US colony.
What about countries that don't use the dollar as currency directly, but keep a fixed exchange rate to the dollar - they would be paying the unseen tax of inflation too, right? With a fixed exchange rate if the dollar value falls, so will the value of their currency. So that would mean Hong Kong, Cuba, Jordan and the Netherlands are all "basically US colonies" too. (China may be kind of surprised about that first one.)
Does this work for other currencies, or just $USD? Are Martinique, Andorra, Montenegro and Kosovo "basically EU colonies"? - they all use the Euro as currency, but are not part of either the EU or the EEA.
We don't actually have to hypothesize about what would happen if an unstable economy switched everything over to dollars (or Euros), either directly or by exchange rate peg, because it has already happened, many times.
Most of the valuable property in major metros is owned directly by US-based or EU-based emigrees , who paid top dollar for property that has a ROC duration in excess of 20 years.
Most of the metro areas on these countries are rapidly turning hollow projects which cheap rents or undeveloped land. It is quickly becoming like paris.
Flat rental 2000 EUR. Buy price: 2M EUR.
When someone that is not a local is taking all your valuable land... Thats the textbook definition of colony
When President Arnulfo Arias tried exercising his nation's right to issue sovereign currency, he was deposed in a US-backed coup on October 2, 1941.
Bitcoin, on the other hand, can be controlled by any miner or group of miners having over 50% of the network's hash rate[1]. We don't know the identities of the miners and we have seen them engage in political actions that change the behavior of the currency[2].
Feel free to call shadowstats crazy, but nothing in it is false. It's just another perspective. http://www.shadowstats.com/alternate_data/inflation-charts
You dont need data to know that the sky is blue.
That being said parent did not help himself throwing statements out there without a foundation.
Here is what i believe he should have said:
CPI for goods fails in the following:
Accounting for changes in sizes and quality of certain products (i.e. instead of raising prices vendor will lower quality or amount of product )
Accounting for healthcare costs is fundamentally flawed. This only factors out of pocket costs when the majority of americans are effectively paying 80% of healthcare premiums via reduced grosd wages in the form of "employer contributions"
Accounting for substitutions of products in the cpi itself which are not reliable substitutes, or the exclusion of certain items (housing) which are clearly inflationary.
There is also a lot of criticism made for the boskin commision changes https://en.m.wikipedia.org/wiki/Boskin_Commission to cpi which messed with base prices and thus with true measurement of cpi.
Data always trumps common sense, that's why we have science :) - if science had a motto that would be it! Sometimes we need more data, but common sense is often trivially wrong.
I would argue we do in fact need data to show the sky is blue. The data shows us the sky is not in fact "blue" but rather a blend of various peaks and valleys of radiation. [2] It's not so much blue as a bunch of colors at once that happen to be blue-dominant. Further it’s actually the “inverse of blue” in that blue is allowed to pass but all the other colors are absorbed.
> Accounting for substitutions of products in the cpi itself which are not reliable substitutes, or the exclusion of certain items (housing) which are clearly inflationary.
Housing on a $/sqft basis has tracked inflation since the 1970s across the US. What's changed is zoning policy, but zoning policy isn't a function of money supply. [1]
A reduction in welfare is not necessarily inflation or monetary policy, it can just as easily be social policy. You can't pin all society's ills on the evil Fed and their consistent and predictable 2% rate of inflation.
> Accounting for healthcare costs is fundamentally flawed.
Healthcare costs exceed inflation. That's not a function of monetary policy, it's a function of a fundamentally flawed healthcare system in the US that needs to be fixed. That's not the Fed's job, that's social policy.
> There is also a lot of criticism made for the boskin commision changes https://en.m.wikipedia.org/wiki/Boskin_Commission to cpi which messed with base prices and thus with true measurement of cpi.
Peoples needs, wants and expectations change over time. In the same way the S&P 500 and Dow Jones cycle through companies that are no longer relevant, doing so with the CPI basket is the only rational thing to do. For instance, Caviar and Lobster used to be crap food for poor people -- they're crazy expensive now. Is that inflation? Of course not. Totally fair to eject them from the basket.
[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...
[2] https://www.antenna-theory.com/tutorial/whyistheskyblue/purp...
It may not be optimal for certain reasons to use USD, and they'd lose some advantages, but there are others to be gained that might make it worth it.
To the extent there are no real capital controls on USD anywhere - and - the US Fed is separate from the government, then nobody is going to be a 'colony' of the US by using USD.
Yes they are.
It's really upside down that you'd point out that 'governments can just print money to pay people!' as somehow being an advantage of good governance.
Well, partly, but it depends on a high degree of integrity, if absent, will entail total dissolution.
In absence of a government with integrity, then a 'strong currency' such as one that the government has no control over, say a Caribbean Island that uses USD for example, is preferable to anything else.
"Good governance and democracy makes a country and its currency strong. Not vice versa. "
First - democracy has nothing to do with it.
Second - 'good governance' is the opposite of printing money to pay bills.
In an unstable economy, USDs or Euros are preferable to worthless paper or Bitcons.
1. Countries that have natural resources can raise capital when they need to, either by selling/taxing rights to those resources or by selling nationalized resources. Ecuador for example uses the dollar and also produces about a half of a million barrels of oil per day.
2. For many developing countries, the whole point of using the dollar is that it precludes monetary over-engineering or corrupt practices that give rise to inflation. This makes the economy safer for the have-nots, who have fixed local-denominated savings and/or earn a fixed local-denominated wage.
3. Simply using the dollar makes it easier to facilitate trade, tourism, and remittances. Panama does a lot of shipping and transit. Ecuador is a tourist destination. Remittances are the major source of foreign income to El Salvador.
Those countries that accept dollars and also maintain a dollar-pegged local currency are able to conduct monetary policy while also establishing a measure of confidence in the stability of their currency.
What you are missing in your detail is that ecuador actually got itself into a very serious currency bind precovid, and it seems to be staying that way.
So this would validate parent comment and actually negate your assertion that parent was incorrect.
That being said, this is half the story. And its the other part that matters. This is the first time ecuador gets in trouble post USD adoption. Where it goes from here will directly prove or disprove the very thesis, that parent comment assumed was a foregone conclusion.
Thus , your refutation may be correct after all, except for what i believe are different reasons.
Ecuador had protests over removal of fuel subsidies to satisfy IMF debt conditions in Oct 2019. Hard to see how that's a "currency bind" in any sense.
> This is the first time ecuador gets in trouble post USD adoption.
Uh...what? You're just making stuff up.
Ecuador defaulted on two bond issues in 2008.
Ecuador had to borrow billions from China in 2015 when petroleum prices collapsed. This affected the country for two or three years. Public sector workers had to wait months for their salaries at times. In an alternate reality where Ecuador uses its own currency, the government would have printed its way through that problem and the resulting devaluation would have hurt everyone with savings or wages.
I dont argue for printed currency. We are actually in agreement there. I'm responding to parent halukakin who said
"Strong currencies are not the solution to poor governance. Good governance and democracy makes a country and its currency strong. Not vice versa. "
I contend that ecuador could prove that statement wrong. The 2008 crisis caught everyone off guard. Once Ecuador comes out of this crisis, we will really see if this experience will be enough to institute good governance reforms which were elusive during the constant ups downs of local currency inflation.
This is especially true for refugees. They run the very real risk of being killed for any money they are carrying but if one has one's keys memorized then no one knows you have funds and you are somewhat safer.
Over 1/3 of the world's population lives in countries with declining or unstable democracies, crypto currencies provide a small cushion from that in some situations.
1. Inflation, which means that everyone is getting the money they are owed, but can't do as much with them
2. Defaults/bankruptcy/breach of contract - people and businesses just run out of money and stop paying their debts
If your country can print money, you will be in situation 1. If your country can't print money (e.g. because it is using BTC or USD or Euros or whatever currency they can't control), then you'll be in situation 2.
I for one prefer situation 1, because there is a chance of recovery from there, and normal life can go on somewhat naturally.
The issue with this argument is that good government is a very hard problem that in many cases has no clear immediate solutions. While things like crypto many not be a solution they are a vood stopgap solution for the problems created by bad governments - at least until we can get thw good governance problem solved
In these countries, those in power rob the public blind. They steal the country's wealth and do anything they can to hold on to and expand their power. Giving the state more power just means giving the elite more power to rob.
The point is that when a state is inept and driving the country into bankruptcy, the grey/black market can be a lifeline keeping people alive.
You don't want to chain the population to the efficacy of state, by closing off avenues to non-state payment-systems and currencies.
The internet, and the currencies built on it, can provide alternate, superior governance systems for financial and economic collaboration that can operate in parallel with state-administered ones.
It's less regulated so it's more likely people will make poor trades - maybe it's not in their interest as you are implying, but they do it anyway.
Countries can make owning foreign currency illegal. BTC is easier to hide than Euros (cash or electronic). You can trade BTC back to cash without a paper trail by writing down a private key.
In terms of why someone would sell BTC for a failing currency? Maybe they are also a local and have expenses to pay. Otherwise, it's likely the seller is selling for USD or something and there's an intermediate conversion so someone else who needs it ends up with the local currency. It's pretty common to get out of the currency as much as possible (assets, other currencies, BTC) then only dip back in for as little as possible to pay local expenses.
Most exchanges require several forms of ID and verification to buy or sell cryptocurrency. I had to use a smartphone to take a picture of myself with my photo ID before I could even use most exchanges. Someone who doesn't have photo ID, computer or a working smartphone are out of luck in that scenario.
Bitcoin might make sense for remittance, with the intention that it is then liquidated after being received.
You’re talking about a supranational currency, and I have sincere doubts that grifters of all sorts would not try to take over and manipulate such a currency, as they have for bitcoin.
The governance is more important than the tech IMO.
This was never the promise of blockchains or decentralized currencies because those things cannot fulfill the promise.
There's a much more pragmatic answer and that's to use Euros, USDs, Pounds or RMBs for a decade or so until the government has legitimacy.
'Cash' is useful in these economies.
Also, it's possible to provide digitized banking for the purposes of transferring money without the notion of introducing new, funny currencies.
Well, except that the conversion into/out of fiat and the access to the network to transact the crypto are all things the government will usually be quite able to interfere with.
The way I understand volatility, it means wild swings in both directions over short periods. Your country’s currency however has been monotonically weakening. And the citizens have been able to react to that steady decline by storing their wealth in different forms, as you said yourself that you’ve been storing it in USD.
For sure even USD denominated assets have periods of volatility as we saw March last year when the entire world sought to refuge in the safety of US treasury bills or currency. Oil too witnessed some crazy gyrations like negative future pride. But they are in reaction to the extraordinary phase the world was going through then, when the world and hence the business practically shut down. Something which hasn’t happened in at least a generation.
Butcoin prices on the other hand regularly swing 10-15 in a day. Definitely not something you’d call stable compared to any of the world’s current currencies. Perhaps these swings will dampen over time?
> I agree that for someone living in US or EU there's no much point using BTC.
This is quite a tenuous argument however.
First, currency is only intended to be stored for as long as necessary to purchase the necessities of life or value preserving investments. Losing 250% of value over 7 years is an inflation rate of 14% annually, a hair over 1% per month. At the end of each month you're left with 99% of the value you started the month with. That's sub-optimal but certainly not a dealbreaker if everything else were stable and functional.
The early 1980s in the US had similar inflation rates [1].
Assuming your country isn't sanctioned you could have dropped that money into all sorts of safe havens.
Further, the issue is of course transaction fees. They're about $20 each right now, and the only place those fees are palatable are rich countries with stable financial systems. In countries without stable financial systems they're prohibitively expensive. You can avoid that with Layer 2, but of course, Layer 2 offers none of the benefits you seek with Bitcoin in the first place. Exchanges are centralized, trustful and censorable.
It genuinely, truly meets the needs of nobody who isn't speculating.
It's basically the "ruined fresco" of payment methods. From a distance it looks right but as you zoom in you realize mistakes were most definitely made. [2]
[1] https://www.usinflationcalculator.com/inflation/historical-i...
[2] https://www.npr.org/sections/thetwo-way/2012/09/20/161466361...
See, it doesn't matter what the technology behind a currency is, it ain't going anywhere on your government's turf without permission. They have the ability, if they choose, to go door to door looking for 'unlawful money launderers' or any other designation they slap on the use of crypto and there's nothing you can do about it.
Unless it acquired significant negative value, no, it didn't.
I'm not sure if you mean it declined to 1/2.5 times it's value (-60%) following the popular-but-annoying usage of “n times less” but converted to percentage (it's an idiom that isn't used with percentages and is mathematically wacky to start with) or if you mean to say it declined by 2.5 times it's post-decline value (-71%), using the ending rather than the starting value to calculate the percentage change.
But people who were in debt are doing great!
Here's the worst I've ever heard of:
https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
Yes, you read that right:
"However, Zimbabwe's peak month of inflation is estimated at 79.6 billion percent month-on-month, 89.7 sextillion percent year-on-year in mid-November 2008."
I recall interviews with government employees, who were quitting in droves. The Government wasn't keeping up with inflation, so at the end of 2 weeks, your check was basically worthless.
The place was falling apart.
People would run to the bank, cash pay checks, and buy STUFF. Anything. Anything physical. TVs, couches, bikes, blenders, ANYTHING. In one interview, a woman's living room was filled with random pieces of furniture, stacked to the ceiling, and a TV.
To trade. For barter.
Because even an hour later, that paycheck was worth so much less.
Madness.
https://www.bloomberg.com/news/articles/2020-07-14/zimbabwe-...
at the moment, but we are seeing institutional failure all around. as trust in the institutions fall, the importance and value of crypto/decentralization increases.
How? 'Slowly and steadily.'
Not the poster though.
BTC is useful for exactly the scenarios it's almost exclusively used in now: speculative transactions (buy low, sell high), or transactions for less than legal stuff and the overwhelming majority of proponents are in these 2 camps. There's a much smaller group of proponents made up of people who don't understand currencies in general (besides the basics, like spending them), or cryptocurrencies in particular.
I'm sure some form of electronic tender would fill this role you're describing but it's not BTC and probably none of the major cryptocurrencies on the market now.
* (putting aside the network capacity, number of transactions/sec, the cost of producing a BTC and of a transaction, etc. which make it completely unsuitable for the purpose of using the currency instead of just storing and trading it, which is probably the only significant purpose of BTC today)
BTC is fundamentally deflationary in nature - let’s ignore the price volatility and the like for now, I’ll cover that later.
It has also so far proven incredibly resistant to attack, both inside and outside the community and despite easy billion dollar payouts if an attack would be successful.
There are also efforts making good progress (lightning network among others), addressing structural issues, and large scale semi regulated brokers with good track records (coinbase, kraken).
The price volatility is speculative, and while some is get rich quick (well, a lot), some is also what happens in a deflationary spiral.
If we speculate that Bitcoin will end up being a ‘not able to be broken by a greedy gov’t like all the other currencies’ means of exchange, the current price is cheap. Every large institution will need some to clear central bank type transactions (the part that may be what ends up on the blockchain), and 14 million ish isn’t enough at current prices.
If we speculate that will never happen; the current price is ridiculous and it’s all just a giant Ponzi scheme.
Frankly, neither of these options it is fair to rule out, and the volatility is because of uncertainty and the wide variability in value for Bitcoin between these options.
We’re entering a stage where global attitudes are shifting to one of distrust, especially between countries and citizens and their gov’ts, and some means of exchange that doesn’t require a distrusted entity to play nice has value, even if it isn’t 50k per.
I agree but in the grand scheme of currencies and payment infrastructures they barely got out the door.
I believe today and for the foreseeable future BTC will be adequate almost exclusively for speculative traders and people who need legal deniability. Most people throw around narrow interpretations for why BTC would be good and they're all good explanations if you look just at selected arguments. Take the "BTC is great as a currency in countries with steady high inflation" stance which might hold if you consider only a really narrow set of set of BTC criteria.
I'm not ruling out anything for some future really. As a personal opinion I believe there's room for e-coins (I'll stay away from the "crypto" nomenclature as they may not rely on a blockchain or crypto per se) but BTC in particular has no real room in a CB for more than a fad (also speculative). Think at the central mandate of a CB: price stability and inflation. Controlling these is quintessentially antithetical to BTC as a main currency, or as a currency. BTC as a decentralized currency takes central banking out of the equation. Or conversely central banks take decentralized currencies out of the equation.
So even if you think of it pragmatically, no government or central bank (since they should be as independent from each other as it gets) would allow replacing the country's currency with BTC both for "selfish" reasons - they'd lose control. But maybe even more importantly for national security reasons. No country wants a coin which can be sent spinning just because some CEO (or worse, your enemy) decided to pull a shady maneuver for personal gain.
The kind of control currencies need to be fit for the purpose of a general, national currency for your citizens simply precludes using BTC at that scale. Should BTC ever become as "big" as a real national currency I'm certain it would show many of the same cracks. Except the small players (average Joe) would have nobody to turn to when things go sour. No central authority, no central responsibility. You see this whenever there's a new hack or financial maneuver that parts people from their hard earned cryptomoney how they suddenly lose that blind faith in "the coin that governments can't control" and start asking for regulation. You can only regulate when you have control.
Second part - I think you’re also misunderstanding? Central banks hold gold and other countries currencies for international clearing, export/import, and national security reasons. A central bank is not holding them for price stability and inflation control. Only a small handful of central banks (the fed) meaningfully target those goals, and if they do it is for their own fiat currency.
If you think a central bank is going to hesitate to hold a useful asset for international exchange purposes if a ‘ceo or worse your enemy’ could send it spinning, you’re not paying attention? China’s central bank holds at least $1 trillion US dollars for instance [https://en.m.wikipedia.org/wiki/Foreign-exchange_reserves_of...], along with Euros and every other currency useful for it’s goals. There is a huge variety of foreign reserves currencies in wide use [https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A...] covering everything from Chinese renmenbi to Swiss Francs and UKP. All of these change dramatically relative to each other on short notice, all are enemies or economic competitors with some selection of people using them as reserve currencies, and there is no central authority to go crying to if one of them defaults on their debts or inflates their currencies.
And third part - I’m not saying it’s likely any government would replace it’s fiat currency with BTC or any other currency out of it’s control. I’m saying Zimbabwe and many other places don’t really run on their local currency, they run on what people use (currently dollars in most cases, but some places BTC is getting traction) - because their gov’ts destroy the utility of the their local currencies and people can’t trust it.
Oh, that wasn't meant to be an argument against something new. As I said repeatedly, it's an argument against BTC as it exists now and as it will be for the foreseeable future. The expectations for a stable "national" currency are incompatible with the pillars of BTC. That was my original point.
The Fed, the ECB, the Central Bank of China all have price stability and inflation as a mandate, of course for their own currency. And this should already hint that they want control over their national currency. Gold and other countries' currencies are explicitly things that are regulated by the respective countries and/or "relatively" stable. I'm not aware of any national currency as volatile as BTC. They're all substantially more more resilient to outside manipulation because they're regulated and traceable. Governments and Central Banks don't want their country or citizens to rely on a currency they don't have any control over especially in places like US, EU, China, Japan. Just think of the UK refusing to give up the GBP to adopt the EUR because it involved losing control of the currency. So while I can imagine a bank (central or commercial) holding BTC one day as an asset, I'm having a really hard time seeing the "unregulated currency BTC" being used as a "national currency" in any place that matters.
> If you think a central bank is going to hesitate to hold a useful asset for international exchange purposes if a ‘ceo or worse your enemy’ could send it spinning, you’re not paying attention?
If you were to ask Mario Draghi or Christine Lagarde they would tell you no CB should hold BTC. I'm not saying I can see the future but I'm trying to understand what you know and they don't.
When China deliberately weakened the yuan to gain an advantage in the trade war with US (to boost exports) it was immediately noticed and attributed and that could be (was?) used as justification for sanctions and tariffs. Bitcoin is decentralized and pseudo-anonymous.
> I’m saying Zimbabwe and many other places don’t really run on their local currency, they run on what people use (currently dollars in most cases, but some places BTC is getting traction) - because their gov’ts destroy the utility of the their local currencies and people can’t trust it.
So they rely on a well regulated currency like the USD. How would BTC improve on this? The USD is stable enough for Zimbabwe to use because it's under central control.
Taking more practical approach for the regular person, at the absolute minimum a currency is supposed to come with consumer protections that are derived from regulation. BTC was specifically designed to curtail regulations. This won't be fixed by faster or more efficient networks. That can't be "fixed" at all because it's one of BTC's tenets: stay unregulated and out of gov't control. So your citizens are not only using an unregulated currency that offers them no protections, they're also extremely vulnerable to outside manipulation.
BTC is an unstable coin, that cannot be regulated to offer consumer protections or complying with anti money laundering laws. In theory this recommends it to speculators and people who are looking to be shielded from the law. The reality just happens to match the theory to a T.
Some e-currency will surely fit the bill one day though but I'm not entirely sure if there's one to be both regulated and unregulated at the same time, to make everyone happy.
I was quite explicitly referring to speculative future events, and how their odds of happening directly impact current pricing of bitcoin.
USD is reasonably well regulated now and has been historically - by some definition - at least as well as any of its competitor currencies, though none of them are looking particularly great right now by traditional measures.
What are the odds it will remain so for 10 years? 20 years? 50 years? Less than 100%, better than 0%.
As BTC addresses issues over the next 10, 20, 50 years - could it be a viable option for central bank clearing in the way JPY, USD, or gold is now? What are the odds? 100%? 0%?
With the work, attention, and considering the existing progress it's made, will it be a viable option for a trans-national or even national currency over the same time frames? What are the odds? 0%? 100%?
I'm pointing out that 1) none of those options is clearly a 0% or 100% outcome over the time frames we're talking about 2) depending on your individual judgement and how optimistic or pessimistic you are about various parts of these equations, depends on what you think BTC's value currently is.
Even people just hedging their bets against a not impossible outcome can lead to a deflationary spiral, leading to high prices until there is clear data one way or another where things will end up.
Vastly different levels of productivity between regions of the same economic zones or between zones can result in crazy social friction without trade regulation and controls - how will BTC land manage this friction?
Additionally - the energy and security requirements of btc zone participants will become crushing. Why will market participants continue to labor in this spiraling High energy hell when they can retreat to the much lower energy state of a trustful, managed economic zone? It will be like a breath of fresh air.
I doubt population of your country at large can afford bitcoin transaction fees for their daily shopping.
BTW, are you saying that your currency has negative value now? I assume you mean a 2.5x inflation multiplier over 7 years, or +14% per year. That's mild compared to an order of magnitude walk of the BTC-USD rate over just one year.
The only real use case for BTC I see is moving capital between jurisdictions.
The problem is not your Central Bank, it's almost assuredly a total dysfunction of government and the civil services - which will have effects more far reaching that Central Bank problems.
The solution is not BTC.
It's to use something common and trusted, temporarily, like USD or Euros until there is enough credibility in the system for external parties to accept your own currency.
Or - to overthrow your government, install leaders with integrity and hope that international bodies accept the change, because if they do, you'll be in a much easier position issuing your own currency than having to issue debt in a foreign denomination.
Put another way: it's not a currency problem, it's a governance/management problem that exhibits itself in currency problems and other things.
BTC will not really help you have a better managed government.
This is what causes they hyper sensitivity, authoritarianism, and 'blame America for Everything'.
But yes, BTC is completely unpragmatic.
USD, at least in Latin America, has the benefit that it will creep into the system irrespective of what anyone in charge says.
Nobody needs to be told that USD's are 'good' the hairdresser, cabbie, landlord, grocer will just take it.
I wonder if Euros have the same effect in E. Europe and North Africa. Maybe these days.
Hyperinflation is a problem of massive corruption and incompetence in government. It doesn't happen by accident in an otherwise stable society. If you're concerned about hyperinflation, you should assume the bank (or "exchange") will be subverted and transactions will be censored. Bitcoin was built to solve those problems, but does not scale and so cannot.
This is, by the way, the only situation where I'm at all sympathetic to cryptocurrencies. If someone can come up with a cryptocurrency that scales and that isn't controlled by cartels, I'll be glad that it can be used in unstable parts of the world.
You do your daily spending through the normal channels, sure, but why would you need to keep your cryptocurrency savings in a bank in such a situation?
Other cryptocurrencies are faster by smallish constant factors. None of them, at this time, are scalable. None of them are fast enough to be usable by millions of people.
If you're really wanting to compare apples to apples - For traditional banks doing cross border transactions, it takes up to five days at most global banks, not counting weekends or bank holidays to actually settle with a lot more intermediaries involved.