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Comment by rrrrtttt | Hacker News Reader

You're presenting a strawman. The choice for Lybians and Syrians isn't between their local currency and Bitcoins, it's between the local currency, Bitcoin and one of the first-world currencies. And people in the third world have been choosing to hold USD for decades.

In fact your comparison exposes the biggest problem with Bitcoin: it's a solution in search of a problem. The USD has a long track record as the best managed currency in the world. The 70's stagflation debacle was a minor hiccup by world standards, and the current quantitative easing policy is nothing. Why would anyone in their right mind convert their dollars into Internet funny money? I mean, sure, back in 2009 when Bitcoin started, people were panicking having witnessed the Lehman collapse and TARP. But now we know the world isn't coming to an end, so why bother?

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This is not true, or at the very least, only true of the higher echelons of society. I can't speak about Libya, but in Argentina there are currently currency controls against USD. As a (non-politically connected) Argentinian citizen it is incredibly difficult to hold USD right now. This btw is not new, it happens every time Argentina goes into its ~9 year bust cycle.

I think the issue is that you are speaking from a position of comfort from the US. Of course USD seems fine to you, the US suffers the least in all these recessions. But for people outside the US, they often see their entire life's savings vanish. In Argentina inflation is not something that is only academically talked about, it has a real effect on every day life, the government understands this (and exploits it), and thus works hard to prevent everyone from fleeing the currency. Bitcoin does offer a real new alternative in this regard. Whether it will prove to be any better is admittedly an open question, but the idea that USD is some saving grace for foreigners is naive.

You're incorrect about me. I live in a country that went through hyperinflation a few decades ago, and I was born in another country whose currency was wiped out in the late 90's. In both of these places society responded by converting de facto to US dollars. People would stuff their mattresses with dollars and prices for anything other than groceries would be named in dollars. Sure Bitcoin offers an alternative if you live under a regime that can tell you what kind of currency you can hold, but wouldn't that sort of a regime also crack down on holders of Bitcoin if that were to catch on?

P.S. Correct me if I'm wrong, but didn't Argentina go through a dollarization phase at some point?

The trick in Argentina's case is that they have fixed the exchange rate to USD at an unfair amount and have enacted capital controls restricting the movement of currency into and out of the country. This is basically for the purpose of preventing people from trading their money into USD.

Brief Economist coverage here: http://www.economist.com/blogs/americasview/2011/11/argentin...

There was a decade in which pesos were directly convertible to USD at 1:1 exchange. That system collapsed when the government became insolvent.

With regard to your experience with hyperinflation -- why do you thus think it is a solved problem? Surely there are some advantages to encrypted digital wallets over "stuffing dollars in a mattress" in the same way that emails are better than snail mail. At the very least it is nice to have multiple alternatives.

With regard to "dollarization" in Argentina - Yes, and it should serve as another counterexample to your point. During the 90s when everything was fine Argentina "backed ever peso with a dollar". At stores no one cared if you used dollars or pesos as they were 1-to-1. (Similar to how the US used to back every dollar with gold). Then when things went south they "undollarized" (once again robbing people of their money as devaluation soon followed).

And sure, a country could crack down on holders of Bitcoin too. But the point is that it is a lot harder to catch someone purchasing with bitcoin, or even holding bitcoin, than it is to catch someone with dollars in their mattress or trying to buy something in a physical black market with physical dollars. Its really hard to catch someone with bitcoin "on hand" in general.

In this case though the real problem you're dealing with is that the Argentine government has enacted capital controls (from an outsider perspective, it looks like this is to force people to use pesos while they monetize away their spending). I think if a lot of people were trying to move their money out of the country using bitcoins the government would crack down on that too.

Just out of curiousity, is it easier for Argentines to get Bitcoins than USD? I find BTC really hard to get even in the United States.

I think (or perhaps predict?) that Bitcoin will require I higher level of sophistication to control, if for no other reason than it is new. Not to mention that the countries we are talking about in these scenarios are probably less sophisticated in these matters to begin with, coupled with the fact that there are no central authorities to deal with when it comes to Bitcoin. Argentina can't just go to the "big Bitcoin banks" and tell them not to accept their citizens' business.

At the end of the day, when a currency becomes worthless people start trading in something else, whether that be USD or cigarettes (like in post-war Germany). The attraction of Bitcoin is that it is basically tailor made for this and additionally is accepted by people outside your country.

Only time will tell of course. My point is simply that it is not just trivially "just another currency" where all the same rules apply. That being said -- it may crash and fail for completely unrelated reasons.

What about AUD, EUR or other stable currencies? Is this policy unique to USD?

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