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Comment by anders_p | Hacker News Reader

The value of a currency comes from it being backed by a government, and that government accepting taxes in that currency.

This puts a hard limit on the number of currencies, and how much they'll dillute the dollar (or any other country's currency). Since you'll normally only see a single currency per government.

Cryptocurrencies on the other hand, aren't tied to any country.

There's no hard limit on the amount of them. So every time a new one shows up, they'll they'll take a piece of the cake from the already existing ones, since the space is limited by the number of people willing to invest in them and how much these people have to invest.

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USD is backed by nothing. Nothing.

https://www.treasury.gov/resource-center/faqs/Currency/Pages...

> Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything

There are no limits to currencies. No limits to how much money governments will print. No limits to how much the banks will inflate the money supply through loans.

They're backed by the fact that the IRS wants dollars from me to pay my taxes. I don't think the post you're responding to meant that they're redeemable for anything directly.

But it is backed by reputation, threat of litigation and physical violence (police/military) if you try to interfere with it, where as crypto doesn't yet have this.

Disclaimer: A significant part of my investment portfolio is in Defi.

Actually it is backed by US law and the strength of the US government in terms of enforcing those laws. In particular, the dollar is backed by US tax and debt laws; US taxes must be paid in dollars, debts in the US can be cleared with dollars, and US courts deal only in dollars when working out damages or in bankruptcy proceedings. As long as people doing business in the US follow those laws, which ultimately requires them to respect the government's ability to enforce the law, demand for dollars will exist and thus the dollar has value.

So it is not really about reputation or violence being used against those who would "interfere" with the dollar (whatever that means). I would argue that the value of the Yen is more influenced by reputation than that of the dollar, since people tend to treat Yen as a "safe haven" during economic crises (but ultimately the Yen's value primarily follows from the Japanese government's ability to enforce its laws).

> But it is backed by reputation, threat of litigation and physical violence (police/military) if you try to interfere with it, where as crypto doesn't yet have this.

Also by the fact that the companies of the S&P 500, who are generally based in the US, account for a large portion of global transactions, which they tend to do with USD. If anyone wants to participate in the global economy, the USD often provides the least amount of friction in transactions.

The other most popular/useful/"valuable" currencies, per forex trading volume, are: EUR, JPY, GBP, AUD, CHF, CAD.

* https://en.wikipedia.org/wiki/Foreign_exchange_market#Tradin...

* https://fxssi.com/the-most-traded-currency-pairs

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