I don't think currency is just a confidence game. The most important thing is that the currency is actually used to make transactions that are meaningful to human life. A currency that isn't used to exchange goods is just a collectible. There is no such thing as an abstract "store of value" that has no actual utility other than as a store of value. Crypto will fail when people tire of owning the collectible and want to exchange it for something useful.
I think this theory is nonsense but it's true that if enough people believe it, it can become sort-of-true for a while, until it's not anymore.
The sad answer is population growth. The optimistic answer is that the person ate the potatoes which gave him the strength to harvest potatoes in 30 years. The realistic answer is that you should have no expectation that you ever get any potatoes back as the potatoes have spoiled and nobody is exerting additional energy to counteract the loss.
Millions of people use cryptocurrency on a daily basis to make transactions that are not only meaningful, but absolutely critical to human life. Here in New York I personally know more than a dozen people who regularly send cryptocurrency to their families in other countries. It is cheaper, easier and faster than using banks and legacy money transfer vehicles like Moneygram or Western Union and it has the added bonus of not being saddled with the red tape or regulatory requirements that go along with these institutions.
Here's one personal anecdote. Several years ago I attempted to send a small amount of money ($50) to a friend in Ecuador via Moneygram. When my friend went to pick up the money, it wasn't there, so I called Moneygram. They proceeded to ask me a series of questions about why I sent the money, who I was sending it to, and a variety of other intrusive questions that (in my opinion) they have absolutely no right to ask. If I had sent that money in crypto, I would have paid less of a fee and had confidence it would arrive without going through the third degree by a middle man.
I find that wealthy people, those with deep ties to traditional banking systems and those who don't value their privacy are the ones who have the biggest problem understanding the value in cryptocurrency. They don't see the need to operate outside of a system that works very well for them. For many, the system doesn't work well, or efficiently, and crypto offers a valuable alternative.
This situation feels unsustainable. Traditional institutions don't ask questions because they love getting into your business, they ask because of AML and KYC regulations. If crypto eats the lunch of these traditional institutions because it doesn't have to follow the rules they do, things are going to come to a head sooner or later.
Yeah people have been saying this about bittorrent for about 15 years too: since it's illegal it'll have to a stop because the government will end it. And yet take a guess how I just watched HBO's Succession?
I could believe that having someone else hold your bitcoins and allow an easy webpage interface to break the law will end.
Except, nothing forces people to spend their money so the barter transaction may never conclude which allows economic imbalances to build up over the short term which violentely resolve themselves through a crash. Inflation could be interpreted as a tiny crash every year that rebalances transactions made in the economy.
If I were a speculator, that instability would be attractive. But I'm not.
Real money is backed by your obligation to pay taxes in that currency.. not popularity or confidence.
Many areas today have local currencies, which are not accepted by any government for taxes. Prisoners use things like cigarettes as currency. On the island of Yap they used giant stones, which nobody attempted to tax.
According to David Graeber, money actually arose as an abstraction of debts. You can have debts between people without having taxes.
This didn't happen in a society that didn't have money. Prisoners have an approximate idea of how much a cigarate is worth in dollar terms and how much they're willing to pay for..a phone call (?)
> David Graeber, money actually arose as an abstraction of debts
Yes. I think you're drawing the wrong conclusions from that chapter of the book. The money that we have today is an IOU from the reserve bank which is backed by an iou by the government. And since taxes are essentially a form of debt on the citizen's part, you pay taxes and all this should cancel out.
Needless to say, none of these ponzi coins are of this design
That seems like a tautology.
> The money that we have today
Well yes, I didn't claim cryptocurrency works like the money we have today.
However, no given individual has to accept the currency and has to owe anything to anyone. Because there aren't any explicit agreements or written contracts between parties anyone can back out at any instant. That is why gold is so highly speculative. Nobody really knows how much stuff you can get out of it if you were to trade it for products and services.