Hacker News Reader

Comment by ubernostrum | Hacker News Reader

It will likely never replace fiat

Bitcoin is a fiat currency, in several senses of the term. A Bitcoin has no intrinsic value, it is unbacked and its value is not defined in reference to any other asset or quantity.

(though arguably it is not a currency at all)

View on HN

It is not a fiat currency.

https://en.wikipedia.org/wiki/Fiat_money

It is not backed by any government, it is not legal tender, and it is not state issued.

It has no intrinsic value, you're right about that part.

Fiat currency does not have to be issued by a government, and does not have to be legal tender. And Bitcoin certainly meets one of the "various" definitions given in the Wikipedia article. There are plenty of other definitions of the term it meets -- at root, a fiat currency is simply a currency whose value exists because someone said so, rather than because it's tied to something else. And... well, Bitcoin has value because people say it does, not because it's tied to something else.

But that's true of a good portion of currency. The USD became a fiat currency in 1971.

It's part of the definition of "Fiat currency." i.e. It's issued by fiat[1].

[1] fi·at

ˈfēət,ˈfēˌät

noun

1. a formal authorization or proposition; a decree.

I'd argue that all currencies are by some definition "fiat," in that no currency has ever had nor ever will have an objective value. A dollar -- or a bitcoin or a gold nugget -- is worth what we believe it is, and in every case that belief requires some level of trust, usually in one or more institutions. Believing in the Federal Reserve or the US Government isn't intrinsically more (or less) silly than believing in private banks issuing certificates that they assure us are redeemable for fixed amounts of gold, or for that matter believing that the gold itself is valuable. (There's no reason gold is a better backing for currency than silver, shells, or salt -- all of which have been used as legal tender.) Bitcoin's novelty is in attempting to take institutions out of the equation, but it ultimately hasn't taken away the requirement of trust -- and its wild volatility at least raises questions about whether institutions trying to actively manage the value of currency are actually such horrible things.

TL;DR: the phrase "fiat currency" annoys me. :)

Reply on news.ycombinator.com