Hacker News Reader

Comment by freefrancisco | Hacker News Reader

"Bitcoin's only real value in its ability to ultimately be sold for a fiat currency" You have that backwards, a fiat currency's only real value is in its ability to ultimately be exchanged for goods and services that you need or want, for things of actual value. So if bitcoin is not directly exchangeable for dollars but it is exchangeable for other things, it doesn't ultimately matter. The no arbitrage conditions of financial markets guarantees that even if bitcoin is not tradeable for dollars directly, it will preserve its value if it is easily tradeable for something of actual value.

View on HN

"You have that backwards, a fiat currency's only real value is in its ability to ultimately be exchanged for goods and services that you need or want"

The value of fiat currencies lies in their ability to pay taxes, and in general the legal structure that surrounds them. The USD would be worthless if you could not at least use it to pay your taxes in the United States.

Your entire theory is predicated on the idea that currencies are valuable simply because they exist. Supply is not sufficient to create value; demand must exist also, and your theory does not make it clear why anyone would demand any particular currency. Why is CAN not used in the United States? Why are Euros not used in Japan? Why would the citizens of the United States almost all use USD, when so many other currencies exist? Why don't people just use monopoly money?

Take the exchanges away, and you take away the demand for Bitcoin. With the exception of a few cryptoanarchists, the demand for Bitcoin is really the demand for secure and anonymous electronic payments. Claiming that Bitcoin can exist in a vacuum is like claiming that Paypal can exist in a vacuum -- in other words, it is delusional, because people are engaging in electronic transactions for the purpose of spending and receiving their nation's currency.

Not necessarily taxes, it's "legal tender" to settle all debts, public (taxes) or private (any private contract). You can pay any debt in the equivalent amount of USD. If I owe you bitcoins I can choose to pay you in USD and you have to accept it.

> If I owe you bitcoins I can choose to pay you in USD and you have to accept it.

That's not true at all. Legal tender laws mean that an offer of US dollars is legally recognized as an offer to fulfill a debt obligation; i.e. if the issue ended up in litigation, the court would treat your offer of dollars as a settlement of the debt.

But that doesn't mean that anyone is actually obligated to accept your offer of dollars, or that the agreement that generated the debt wouldn't give you a strong incentive to pay in BTC as opposed to USD.

Is this not taking a literal interpretation of his words a bit too far? Is your scenario really that because someone can stick their hands in their pockets and refuse to take the US dollars (and then a court declares that the debt has been paid), they didn't actually HAVE to accept US dollars because they can just stick their hands in their pockets? By that reasoning, I don't HAVE to not murder people, you can't make me, it's just that the courts will put me away for life. The whole conversation becomes meaningless.

Well, no; the point is that the legal tender status of US dollars is only relevant if and when an outstanding debt becomes the subject of litigation. How often does that happpen?

Further, an agreement could say something to the effect of "borrower will repay lender the sum of $1000, or 50 BTC", stipulating an effective exchange rate that makes repayment in dollars entirely unrealistic.

Agree with Gormo here -- I spent some time looking into this on the occasion of a previous Bitcoin thread.

If you have incurred a debt, and have not previously negotiated around the specifics of that debt, than the creditor must accept payment in dollars.

However, if there is no debt, for instance if you're walking up to a cash register in a store to buy a candy bar, there is no requirement that they accept any particular form of payment, at least not in the USA -- other countries, like Canada, seem to have stricter interpretations of "legal tender"

And, within limits, any two business entities can contract to trade just about anything for anything else. If you want to get paid in Twinkies in return for making someone a web site, that's up to you. Employee salaries are a different matter -- the way I read the law, you have to pay minimum wage in USD.

Reply on news.ycombinator.com