JackCuyler, I think we're on the same side here, but I'm not confused. Bitcoin is fiat money (or, more properly, fiat currency?). That is, people have arbitrarly pronounced it to be money. Fiat money in the past may have relied on government force, but the term itself doesn't necessarily.
Jtimon, I wan't to reply but I'm not sure what you're saying. Pardon my confusion I'm not meaning to ignore you. Anyways, all I'm saying (and which nobody has objected to yet, so I assume I'm right), is that bitcoin was not valued as a market commodity apart from and prior to its use as money, therefore it's fiat. Do you deny this?
Anyway, bitcoin supporters should be falling over themselves to proclaim what I said as true. If they really believe their fiat currency to be supreme above all other fiat currencies in history, why are they ashamed of its fiat nature?
Because it's not fiat, unless every single other item people value subjectively is also fiat. All fiat currencies have required government intervention to come into being, and they always will. That is what Mises' Regression Theorem taught us. You can't suddenly look at a piece of paper and decide it's worth 100 dollars, and you wouldn't be able to decide how much 100 dollars could buy. It must first be tied to a commodity [scarce resource], and then the tie must be severed by an authority with enough clout to do so. Bitcoins attain value through mutual voluntary exchange. How many times do I have to say this? In fact, you could have a fiat money based off of Bitcoins. Asking "what value did Bitcoins have apart from money." is like asking "what value did gold have apart from being gold?" You don't need a backing for Bitcoin's, it stands on its own, which is destinctly different from a "fiat money". It's rediculous to strip Bitcoin of all of the attributes that make it valuable and then ask where the value is. (Though as jtimon has pointed out, those same attributes can be used for far more than just a currency.)
bitcoin was not valued as a market commodity apart from and prior to its use as money, therefore it's fiat. Do you deny this?
Yes, I have denied this several times. Bitcoin has uses (and value) apart from being money. For example, you can issue shares that certificate the ownership of a given company with bitcoin WITHOUT A CENTRAL AUTHORITY to regulate its exchange. The share owners could even vote annonimously. That's pretty useful. Do you deny that?
You insist in not separating unbacked and fiat which makes discussing more difficult. If you used fiat for "by decree" and unbacked for "not a physical commodity nor backed by it" everything would be easier for everyone, but I'm not going to insist on that. There's a difference between a money whose use its enforced and a private money, that's what's important.
You even reject to recognaise the usd as money, making an absurd and totally useless distinction between currency and money. Citing the notorious Austrian Jesús Huerta de Soto "today this paper is money we like it or not".
I believe that bitcoin is superior, not only to the usd and eur but also to precious metals as money.
Now tell me the secuence of events for a the crisis of confidence in bitcoin, without monetary inflation. Note that "Because it is fiat" is not a sequence of events.
And then tell me why that same sequence of events cannot occur with gold-money.
Agghh, money is not a commodity is an agreement, anyway...
No, money is the universally acceptable medium of exchange. No agreement is need between anybody for USD or drachmas or any other money to have value. It has value because people will readily accept it, with or without agreements.
Clayton -
Bitcoin has uses (and value) apart from being money. Red herring, although I'll address it. I stated that bitcoin is fiat money, and you said it has value. That doesn't make it not-fiat.
I admit I don't have perfect knowledge of bitcoin, but it seems it was developed for the purpose of being currency. I can use my FDRs to make origami, and that origama may have value on the market apart from it's original use as money, but that doesn't make them not-fiat money.
Note, I'm not arguing against bitcoin, I'm not arguing that it doesn't have value, and I'm not arguing that it doesn't serve ends. But it does seem that it was made to be a digital currency. I don't really buy (haha...) that it was a market commodity valued for its non-currency uses before it became so valued and met all the requirements of money that people decided to use it as such. So I'm arguing that it is fiat money.
you could have a fiat money based off of Bitcoins
Seraiah, no one disputes this. You keep posting strawman after strawman. Let's settle some points of agreement:
But none of these points are the point of contention, which is, is Bitcoin money? The answer is, clearly, no. Can it become money? Yes, but not because "it has value by virtue of its features" because it doesn't have value by virtue of its features, it has value because people value it.
So we have to inquire as to why people are valuing it. The answer may be relatively simple, as in the case of gold - gold has historically been a money and is still used as money in extremely large inter-bank transactions and has low susceptibility to large fluctuations in purchasing power by virtue of the costliness of mining it, the immense ratio of above-ground stocks to new mining and the monetary and non-monetary demand for it. Or, the answer may be complex as in the case of Euros. Either way, the fact that people are valuing Bitcoins says nothing about whether they are or even can be money until we understand why they are valuing them.
My theory is that people are valuing Bitcoins because of the global lock-down on the above-ground financial system. What this tells me is that people don't value Bitcoins because of their specific features but, rather, those features are just a means to another end, which is to evade the global financial controls or speculate on the eventual movement of people seeking to evade the global financial controls into a black-market digital currency, even if it is unbacked. People facing the tidal wave of unavoidable taxation, inflation and capital controls which are coming their way will be willing to tolerate even very large risks in order to escape 50-90% taxation rates. Bitcoin can experience massive speculative swings and still remain an attractive currency as capital controls increase globally.
If you have a better theory, feel free to advance it but everything you've put forward so far doesn't hold up to even cursory scrutiny and mostly consists of strawman arguments or worse.
And the elephant in the room which none of the hyper-ventilating Bitcoin proponents have addressed is how a backed digital currency built on precisely the design of Bitcoin but - in addition - contractually backed by a certain amount of dollars or ounces of gold or silver or whatever (let's call it Bitcoin+) is at least equal if not superior to unbacked digital currencies. If they are at least equivalent, then there can be no reason people wouldn't prefer a backed digital token over an unbacked one. So, the only remaining question then is whether legally-binding backing is possible in the current climate. The answer is, obviously, no (cf Liberty Dollar, e-gold, Robert Kahre, etc.) But if that were to change (I'm not predicting it will any time in the near future), then Bitcoin would be less attractive than Bitcoin+. Hence, backed digital currencies (aka money substitutes, no different than paper banknotes of old) would emerge the winners in a race against unbacked digital currencies. Thus, we see that - in an unhampered market in money production - digital money substitutes are preferable to unbacked digital tokens.
And there will be me-too's that come along and people are going to look at BTC's and the me-toos and think, "What's the diff?" So, even though BTC (or the ideation of money) might be at the top of the pyramid of the masses of people that have projected monetary power on it, the 'integrity' of that pyramid will begin to turn to sand.
At this time, people project value and act as if THE bitcoin has value and this organic coordination and subsequent economic action genrates value but it's nothing to do with THE bitcoin but rather everything else.
And of course there is pschology in everything we flawed humans value, but when its value is 100% psychologically based, the volatility eminating from the volatile minds of man will end it's run.
I think the motivations to validate BTC are partly due to the emotional and financial investments that have been attached to it. I don't believe that anyone truly finds enough value in the ACTUAL bitcoins to say that 3,000 bitcoins is approximately equal to a new car. If they do, then they're seriously disturbed or schizophrenic.
What many are finding value in (and I put myself in this camp) is the LIBERTARIAN SPIRIT that is rallying around BTC. It's this desire to diminish political power that lends much value to this BTC movement. In fact, I think 'movement' describes bitcoin and its inspired economic activity quite well. It's a movement and bitcoin is its flag and something such as that can inspire many of us to invest in such a movement. And if the current regimes topple and they morph their totalitarian aspirations into further action and try to scape every last piece of liberty into their bowl, that bitcoin banner could rally even more to its cause.
And I hope that all of man is rallied to its cause. However, I would nonetheless, as unpatriotic as it may sound, describe the bitcoin as a movement and not as being money. But if people can be inspired to a rallying point, to a place to throw their hats and their forces and the bitcoin movement is that rallying point, then who could deny the value of such a movement? But in the end, if liberty is prevalent, the bitcoin will fade in projected MONETARY value and things such as gold and silver will emerge and may indeed be incorporated into the infrastructure forged by the bitcoin movement.
Let me add that I don't know if there could've emerged anything more brilliant than bitcoin and those that were and are willing to finance this movement. Sure, there are many that aren't so high-minded and may simply partake so as to enrich themselves or may indeed be convinced that bitcoin is money. But when you think about all the ways that man can overcome his oppressors, bitcoin is ingenious. People that aren't even very political could partake and not even know they're lending power to this movement. Liberating options are so limited today. What are they, vote or revolt? Voting has in many ways become a choice between degrees of evil, between this system of oppression and another. Revolution, unlike the Ron Paul kind, is bloody, costly and at this point in time unwanted by 99% of us.
So what does the bitcoin movement do? It inspires more autonomous economic action and it gives people a place to go for such actions. It says, "Black-market - THIS WAY!" And what better way to engage the enemy than by shopping, than by participating with others in a fully voluntary way, all the while ignoring their interventionist aspirations, depriving their system of our blood, sweat and tears? And such actions can be easily spread because the resultant infrastructure is substantive and enduring, unlike slogans and other movements. Even the bleating sheep could be enticed and instead of their herd instincts taking them to the butcher they could actually take them to greener pastures. I could trade some Federal Reserve Notes for a movement like that.
Bitcoin - The Monetization of Liberty
"The best way to bail out the economy is with liberty, not with federal reserve notes." - pairunoyd
"The vision of the Austrian must be greater than the blindness of the sheeple." - pairunoyd
btw, I also believe that it is blind allegiance to a thing or movement or person that can also put freedom in a ditch. Not being able to accept that bitcoin isn't money is such a blindness. It's zeal over truth and that is not a fortuitous internal compass..
How is this one for an equivalent argument
btw, I also believe that it is blind allegiance to a thing or movement or person that can also put freedom in a ditch. Not being able to accept that bitcoin is money is such a blindness. It's zeal over truth and that is not a fortuitous internal compass..
Torsten:Anything that is accepted as a general means of payment is MONEY. Whether it has the governments stamp of approval. And whether it has the libertarian/anarcho-capitalist/gold-fetishist stamp of approval.
Nobody disputes this. The question is about "generally accepted".
In my point of view you only can answer that in defining the reference point. If you ask for money in a geographical area, then with an admitettly quite tricky to do geographical definition you could argue that in this area BTCs are money even now.
However seen on a global basis I only see two things that are money currently. The USD and Gold (All other currencies are derivatives of the USD). With both you won't be able to get stuff at a retail shop everywhere in the world, but you can everywhere in the world go to a bank and use them to get the local currency.
(Even in a world where there was a 100% reserve Gold money it is easily thinkable that due to advanced electronic payment systems most retail shops would not accept a physical payment but only electronical payment... )
@ all
Cool down a bit.
meant to say that not being able to accept that it is NOT money
never mind. i see you adjusted my words
Bitcoin has uses (and value) apart from being money. Red herring, although I'll address it. I stated that bitcoin is fiat money, and you said it has value. That doesn't make it not-fiat. I admit I don't have perfect knowledge of bitcoin, but it seems it was developed for the purpose of being currency. I can use my FDRs to make origami, and that origama may have value on the market apart from it's original use as money, but that doesn't make them not-fiat money. Note, I'm not arguing against bitcoin, I'm not arguing that it doesn't have value, and I'm not arguing that it doesn't serve ends. But it does seem that it was made to be a digital currency. I don't really buy (haha...) that it was a market commodity valued for its non-currency uses before it became so valued and met all the requirements of money that people decided to use it as such. So I'm arguing that it is fiat money.
Ok, at least you admited that is money. Not sure if you're admitted that bitcoin doesn't contradicts the regression theorem. Now, given that you use your own definition different from anyone else in the forum, please, formally define "fiat". The rest of us are using fiat as opposed to voluntary/private.
Also explain us how is that gold is so superior to bitcoin and why bitcoin is in risk to be demonetized overnight (lose all the value it has that is derived from being money) and gold doesn't suffer any demonetization risks.
Bitcoin and gold are so similar to me...I like to classify different monetary systems (there's more than you would ever imagine) and both fall under the same cathegory in most of my classifications.
Look at how I classify monies:
Agghh, money is not a commodity is an agreement, anyway... No, money is the universally acceptable medium of exchange. No agreement is need between anybody for USD or drachmas or any other money to have value. It has value because people will readily accept it, with or without agreements.
This is kind of off-topic and I don't think most bitcoiners will agree. That's why I didn't want to expand on tihs. But what I mean is...
No, money is not a commodity. Cash is just like indirected credit. You have provided wares to society and society as a whole owes you. Money is information about who have produced and consumed what. Like some kind of productivity certificate. And cash-money (as opposed to credit-money) is just an implicit agreement among all its users, that will keep on accepting it. That agreement has been broken a lot of times in history and could be broken (demonetization) for gold just like has been broken for silver or fiat (usually through hyperinflation in this last case).
I know my definitions aren't widely accepted, but I've chosen them for its usefulness for studing different monetary systems.
"It's money. It's money. It's money."
Now I do believe that the infrastructure that has arisen as a result of those inculcating efforts can indeed be used to facilitate transactions, but the bitcoin portion of it could be replaced by a billion things. Do you think that all of this capital and technology has been employed so that people can give and receive bitcoins? No, it's so that they can give and receive. PERIOD! The use of bitcoins is incidental. It's interchangeable.
If the entire resultant infrastructure was duplicated would that infrastructure need bitcoins to succeed? No, they could mirror all the surrounding economic activities that have accompanied bitcoins and instead use crapcoins. The only reason bitcoins would have the edge is because the infrastructure is already in place and the economic activity is there and the inculcations and projections are there.
And usually money is gotten not made. Gold is here but then is mined, purified and sometimes coined. Bitcoins were created/imagined, then they were called money and then they were 'mined' from artificial/mathematical obstacles.
BTC creator starts out by first employing the concept of money, then creates numbers/information that he associates with that concept, he substantiates this process on terminals and limits their appearance with a mathematical formula, people read that he calls the substantiated money-concept associated numbers/information - bitcoins - people inquire, they're told it's money.
And what do some people say to this? Some say he's nuts. Some say he's brilliant. As time passes, more emphatic yea's and nay's emerge. One chorus may win out. But isn't it strange that a chorus spawns the essence of bitcoin? A cacophony of cries could establish its predominance whilst gold has evolved into money over the course of thousands of years. No cheerleaders. No doctorate-required discussions upon its moneyness. It just is. A money that requires so much from the mind of man in order for it to be and stay money has a fatal flaw.
Now I do believe that the infrastructure that has arisen as a result of those inculcating efforts can indeed be used to facilitate transactions, but the bitcoins gold portion of it could be replaced by a billion things. Do you think that all of this capital and technology has been employed so that people can give and receive bitcoins gold? No, it's so that they can give and receive. PERIOD! The use of bitcoins gold is incidental. It's interchangeable. If the entire resultant infrastructure was duplicated would that infrastructure need bitcoins gold to succeed? No, they could mirror all the surrounding economic activities that have accompanied bitcoins gold and instead use crapcoins silver. The only reason bitcoins gold would have the edge is because the infrastructure is already in place and the economic activity is there and the inculcations and projections are there.
Should I have replaced "crapcoins" with "bitcoins" instead of "silver" to make it more clear?
Much of the value of gold and silver, esp silver, is in their non-monetary uses. I personally prefer silver over gold, but I know that current societal valuation has placed gold much higher than silver.
On that continuum of non-monetary valuations, sits gold and silver. They're pretty high up that 'ladder'. Now when you move down you'll come across other metals (along with a host of other things), including nickel, then copper, then zinc. How far down this ladder do we have to go before we come across the valuation of the non-monetary portions of bitcoin?
If this guy that invented bitcoins decided to set up another money generator and everything was the same except the name, bitcoin1, bitcoin2, bitcoin3...would these successors be as valued as the bitcoin? EVERYTHING is just the same. If they wouldn't be, why not?
Do you think that someone could bring more gold to the market but call it gold1, gold2, gold3...and its value be different than what others call gold?
If a silver miner found highly accessible, nearly pure veins of silver and it was in such excess that it increased the current silver supply by a factor of 100, what effect would this have? It would diminish silver's role as money but it would in the end enrich society because there are many uses for it.
Now do the same with bitcoins. Increase them by a factor of 100. Would society be better off? When most things of value easily increase in supply, that is with very little effort, society benefits. What value would another 2 billion bitcoins bring?
Ok, at least you admited that is money. Fiat money, yes.
please, formally define "fiat". Declared to be prior to its use as. As opposed to what I would term money proprer (that is, money in the austrian sense), which is just any market commodity that has value and serves ends apart from being money prior to being used as—and then recognized as—money. So you don't have to convince people fish or cigarettes or silver or gold is money, because it had it's own uses and value on the market and therefore people began to use and recognize them as money. Whereas bitcoin was created to serve the purpose of a medium of exchange—fiat.
How do you explain the current prices of gold and silver?
My explanation is that despite having a lower supply and a higher industrial demand, silver has almost no monetary value (value that comes from the fact of being money) and gold is still highly monetized and a direct competitor of fiat currencies.
Some say that gold is not money today, but to me is clear that still is. Why would central banks store it if not as a reserve currency? Tradition ;)?
The price of gold would be much lower if it were completely demonetized. With a lower price It would be much more used in industry.
The question remains...How having a industrial uses (that have nothing to do with money) make gold a better choice than bitcoin AS MONEY???
Ok, hashem. You then define fiat money as any money that is not commodity money. I find my definition more useful, because in the rare cases that I want to refer specifically to commodity money (from the high diversity of monies that there exist) I can just say that: commodity money. But I'll find easier to undesrtand you from now on.
I'll reformulate the main question:
How is that commodity-money is so superior to bitcoin and why bitcoin is in risk to be demonetized overnight (lose all the value it has that is derived from being money) and commodity-money doesn't suffer the same demonetization risks?
Apparently my computer's security settings wont allow me to quote you guys. Any help? Ive been able to in the past on a different computer, but I dont know what settings I need to change.
Because those industrial uses are collateral, ie they help to ensure that the person on the money side of the trade isn't holding something of trivial value, ie pieces of paper or bitcoins.
Commodity value in money is all about safety and value hold, which is to say it's a protection against hyper-inflation.
A commodity money could not be hyper-inflated, because you can't make gold and other commodities out of thin air.
In the past, a non-commodity money was subject to rapid devaluation, hyper-inflation, whenever the government controlling that currency found it expedient to do so.
In bitcoin we have a non-commodity money which also cannot be hyper-inflated and is not controlled by any government.
So it violates the reasons why we, in the past, had tended to trust commodity moneys.
Clayton: And the elephant in the room which none of the hyper-ventilating Bitcoin proponents have addressed is how a backed digital currency built on precisely the design of Bitcoin but - in addition - contractually backed by a certain amount of dollars or ounces of gold or silver or whatever (let's call it Bitcoin+) is at least equal if not superior to unbacked digital currencies. If they are at least equivalent, then there can be no reason people wouldn't prefer a backed digital token over an unbacked one. So, the only remaining question then is whether legally-binding backing is possible in the current climate. The answer is, obviously, no (cf Liberty Dollar, e-gold, Robert Kahre, etc.) But if that were to change (I'm not predicting it will any time in the near future), then Bitcoin would be less attractive than Bitcoin+. Hence, backed digital currencies (aka money substitutes, no different than paper banknotes of old) would emerge the winners in a race against unbacked digital currencies. Thus, we see that - in an unhampered market in money production - digital money substitutes are preferable to unbacked digital tokens.
There is nothing about a promise-backed bitcoin that would improve the utility of bitcoins.
There's a difference between a promise and a contract. The latter is enforceable, the former is not.
A promise IS a contract
Rothbard eviscerates this idea in EoL and elsewhere. But even non-libertarian law acknowledges the difference between a promise and a contract.
We have 3 monies: paper fiat, gold and bitcoin. All of them have two sources of "value", one that comes from its utility as a ware and one that comes from its monetary nature. Let's guess some percentage's for the value of the underlying ware (completely irrelevant for trade) in comparison with its value as currency (which is higher than the commodity value).
Paper: the paper is worth 0.1% of its nominal value
Gold: the commodity material would worth in a market in which gold is not money 10% of its current market value (as money)
Bitcoin: whitout being money it would worth 0.001% of its current market value
----------------------
Paper: Bernanke% annual monetary inflation
Gold: 2% annual monetary inflation
Bitcoin: 0% annual monetary inflation What you say: "The first data is much more relevant for the value of a currency than its supply". I guess that when you receive different fiats from different countries you don't care about the monetary policy of the country. You just look at the size of the bills and weigh the underlying paper you could burn in case of total demonetization. That's what everybody cares about when accepts money, how good would it be as a storage of value in case of demonetization. People don't think about what they will buy later with that money using indirect exchange. Trade is just an addition, storage of value comes first. Rational people would chose the gold not because of its limited supply, but because with gold you would only lose 90% of what you've just receive it, if the money stops being money before you get to spend it. Even if you are going to spend it that same day, it is better to minimize risks.
A gold backed digital currency (be it promise or legal contract) is an IOU from someone. Is onether person's liability. It is a relationship between two agents. Bitcoin is real cash. It is a relationship only between the holder and all the other users of the money. With the gold backed digital currency (by the way, open transactions implements this digital "cash" as untraceable), the digital token is not the money in itself, the real money is the backing and the issuer of the IOUs can cheat you. With open transactions you have to trust the minter of the currency, but bitcoin (like gold) is completely trustless. Bitcoin is superior.
A gold backed digital currency (be it promise or legal contract) is an IOU from someone.
Of course. But the key issue is that such IOU's are not masquerading as actually money. They are money substitutes, nothing more.
Is onether person's liability. It is a relationship between two agents. Bitcoin is real cash.
That was the point of Bitcoin+... Bitcoin+ is "real cash" in every sense that Bitcoin is because the only difference is that there is a contractual agreement from the Bitcoin+ issuer to redeem X number of Bitcoins for X amount of backing (dollars, gold, whatever). Yet it's obvious that anyone offered either 5 Bitcoins or 5 Bitcoin+s would prefer the 5 Bitcoin+s. Hence, the idea that Bitcoin is "real cash" by virtue of its greatest flaw (that it is unbacked) is a mockery of our collective intelligence.
This technology that you say assures you that the bitcoin is real, is real what? It's a real blip that a group uses as if it's money? So what if we issue goldcoins and proclaim that they're real? And on top of that, how about we actually make it a claim on a certain amount of gold? You say that gold might not be there? Well why would that matter? There's nothing backing bitcoin. Why should goldcoin have the additional burden of actually having gold behind it? We could just say that there's gold backing it and then look at the price of physical gold and assign it that value. 1 goldcoin equals 1 oz of gold. And if you really want the gold that's backing it and it's not really there, then you can just go on the open market and trade it for 1 ounce of gold. Now it's gold backed!
Or you could have silvercoins or landcoins or treecoins or housecoins or carcoins. All these coins would be backed by their namesakes. And if we somehow get screwed by the backer, we'll just go get backing in the open market.
Ridiculous? This is exactly the premise of bitcoin, except bitcoin is everythingyoucanimaginecoin. It does it all! Wow, why didn't I think of that? Me and my dumb, limited coins!.
Aside from the question of computer security that all transactions would face, do you really think that fraud in open transactions with gold and silver are really so easy to perpetrate?
All of these negatives that you cite are a given in any free-market. There will always exist those who try to reduce their costs thru fraud. With bitcoin, it's a fraud (as in 'a phony') from the get-go. Not only does its user face the perils of free-market trade but it faces the perils of existentialism. That cost right there outweighs any fraud costs you've associated with gold and silver.
Clayton:Bitcoin+ is "real cash" in every sense that Bitcoin is because the only difference is that there is a contractual agreement from the Bitcoin+ issuer to redeem X number of Bitcoins for X amount of backing (dollars, gold, whatever). Yet it's obvious that anyone offered either 5 Bitcoins or 5 Bitcoin+s would prefer the 5 Bitcoin+s. Hence, the idea that Bitcoin is "real cash" by virtue of its greatest flaw (that it is unbacked) is a mockery of our collective intelligence.
Jtimon points out that the real industrial value of gold is perhaps 10% of its current price, because 90% of gold's current price is its exchange value as money, having been driven that high by a jittery market worried about unstable currencies the world over, etc.
So, you would agree then gold is only 10% money :P After all, it's only 10% backed. It's not like the real industrial value of gold today is $1600 an ounce.
I think his and Mises's argument are compelling, that every commodity could be used as money, and in that capacity it has its original commodity value as well as its exchange value.
Bitcoin has a vanishingly small commodity value (as electricity), but it's exchange value is MASSIVE compared to its commodity value, perhaps far, far more than gold's ratio of exchange to commodity value.
This may indicate that Bitcoin is already the world's premiere currency, if we take ratio of exchange to commodity value as a measure of success, which it would seem rather reasonable to do, because the better that ratio the more valuable purely as money that thing must be.
And bitcoin hasn't even been adopted by a major economy yet. Just wait.
pairunoyd: This technology that you say assures you that the bitcoin is real, is real what? It's a real blip that a group uses as if it's money? So what if we issue goldcoins and proclaim that they're real? And on top of that, how about we actually make it a claim on a certain amount of gold? You say that gold might not be there? Well why would that matter? There's nothing backing bitcoin.
This technology that you say assures you that the bitcoin is real, is real what? It's a real blip that a group uses as if it's money? So what if we issue goldcoins and proclaim that they're real? And on top of that, how about we actually make it a claim on a certain amount of gold? You say that gold might not be there? Well why would that matter? There's nothing backing bitcoin.
I assume by "goldcoin" you mean some sort of paper or electronic certificate?
The problem is that a simple gold certificate, backed or not, is subject to inflation and thereby also hyper-inflation which is the death of a currency. There's zero guarantee that whomever is printing gold certificates will limit themselves to one certificate per unit of gold supposedly backing the certificate. Ultimately, a gold certificate is not much different from a fiat currency. Rather than being backed by the full faith and credit of some government, it's backed by a limited quantity of some commodity, which you cannot be sure matches the amount of currency that's been printed.
In practice, someone printing gold certificates can print two, five, ten, one hundred times more certificates than he has gold, or more, until the system collapses and the currency is devalued and thereby destroyed, akin to a run on the banks.
The ideal currency would be immune to hyper-inflation. So let's use that as our rubric:
1. Gold. Immune to hyper-inflation? If traded in pure metallic coin and bar form, essentially yes. Unless we discover large gold reserves somewhere in the universe or the ability to cheaply transmute elements. So the risk is there but it's rather remote.
2. Fiat money: Not even close to immune to hyper-inflation; in fact these currencies fail all the time. Governments like them because they get to control them and steal money by inflating them.
3. Bitcoin: Immune to hyper-inflation. End of story. The more popular this currency becomes the more immune it becomes as well, due to cryptographic means.
Conclusion: bitcoin is as close to the ideal currency as mankind has ever created.
If you meant rather Clayton's idea of a backed bitcoin, then I apologize. A backed bitcoin would be just as usable. As with gold, its exchange value may come to be much higher than the price of the commodity backing it, meaning it might not be worth the effort in a situation where hyper-inflation is impossible.
In short, I'm arguing that where hyper-inflation is impossible you don't need a backed currency.
pairunoyd:Why should goldcoin have the additional burden of actually having gold behind it? We could just say that there's gold backing it and then look at the price of physical gold and assign it that value. 1 goldcoin equals 1 oz of gold. And if you really want the gold that's backing it and it's not really there, then you can just go on the open market and trade it for 1 ounce of gold. Now it's gold backed!
Yes, that's true, in a sense. You would also need to cryptographically limit the number of coins to fairly closely match the total amount of gold in the world or in some reserve. However, it wouldn't be accurate for two reasons.
One because more gold is produced each year. And two because much of the price of gold right now is wrapped up in its exchange value.
Clayton: virtue of its greatest flaw (that it is unbacked) is a mockery of our collective intelligence.
Clayton: There's a difference between a promise and a contract. The latter is enforceable, the former is not.
Clayton: masquerading as actually money
Bitcoins are a scarce resource...
FTFY
Promise versus contract. They're certainly different, but he's right in the main. I think it would be correct to say that, technically, a contract is a bi-directional promise. Whereas promises generally can be uni-directional or bi-directional. A contract can definitely be oral, but due to the difficulty of proving oral contracts after the fact, people typically resort to written contracts for more important matters.
The difference between a promise and a contract is the transfer of title to property. There is no transfer of title in a promise, whereas there is one in a contract.
I have no idea what Torsten is going on about, but he clearly did not understand Rothbard's points, and I question as to whether or not he even read what Clayton suggested.
Seraiah: JackCuyler: Bitcoins are still not money... Whatever dude! It's a cryptocurrency capable of becoming "money" (However you choose to define it.) Unless your definition includes "Can't be cryptocurrency!" (Or something similar.), in which case money will just be superceded by the better system.
JackCuyler: Bitcoins are still not money...
Please reread my post to which you replied. I chose my words carefully. Notice I did not say incapable of becoming nor did I imply that idea. I simply said Bitcoins are not money. The word are is present-tense. My post does not address the future.
jtimon: No one is explaining us bitcoiners how its value will collapse to zero without monetary inflation and why that "crisis of confidence" is impossible for precious metals.
Bitcoins' value, and the value of any metal used as currency, could certainly drop due to a crisis of confidence in their usefulness as currency. The difference is how far the value will drop. Bitcoins have no value outside of their value as currency. Metals have industrial applications. It is doubtful, though I guess an extremely remote possibility, that even if there was no confidence in gold as currency, everyone would also cease to use gold in jewelry and electronics.
faber est suae quisque fortunae
hashem: JackCuyler, I think we're on the same side here, but I'm not confused. Bitcoin is fiat money (or, more properly, fiat currency?). That is, people have arbitrarly pronounced it to be money. Fiat money in the past may have relied on government force, but the term itself doesn't necessarily.
Actually, yes it is. Fiat means by decree. Fiat money is money because government declares it so and enforces its use. This is the definition. No currency/money/etc can be "fiat" unless the government is involved.
JackCuyler: Please reread my post to which you replied.
Seraiah: Whatever dude!