this post was submitted on 13 Aug 2023
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You are right in that it increases people's belief in money because it is the primary source of revenue for states. But if the majority of people did not believe in the piece of paper, it would be worth nothing. That is the fundamental value of money as we know it.
There have been states where stones were the currency simply because the inhabitants believed in them.
Gold Standard
Linking money to a material with intrinsic value for it's value
Gold has intrinsic value
US Dollar moved to be a Fiat Currency
US Dollar is backed by a Government
Crypto has zero intrinsic value, not linked to anything with intrinsic value, and not backed by a Government
Crypto is an imaginary "item" some people want to have valve. Value is created because of this want.
US Dollar is legal tinder for all US debts, Crypto is not
Crypto is not a currency but a digital commodity
Money and gold have value because they can be exchanged easily for goods and services that are really wanted. As long as crypto currencies make it hard to trade for goods ands services, they will be, at best, a fad, at worst, a scam. There needs to be market for crypto to work. All I see is promises, no real commitments to it.
All I ever see around crypto is this vague notion that it could someday be acknowledged and used widely as real money is. But so could bottle caps. I don't see the mechanism for how it realistically happens. It's no less a moonshot than it was 3 years ago, IMO.
Just because a lot of people are buying into crypto doesn't make the underlying inefficiencies in its design (depending on the coin) disappear and make way for common usage. As it stands now, cryptocurrencies are basically glorified ponzi schemes. The people nonstop defending them deserve to be treated with constant skepticism because they have skin in the game and know there's nothing preventing them from losing it all. It's in their best interest to believe in it and spread that belief.
You are forgetting that cryptocurrency has real uses. You can send money to people without using a bank or PayPal. I use it to pay for things online anonymously and being able to do that is very valuable to me and to other people. You can use crypto to buy a gift card for any store if they don't accept crypto directly.
I have nothing to gain by saying this, since I don't keep any significant amount of money in crypto. I don't care what the price of Bitcoin or another coin is. It's irrelevant and doesn't affect my ability to use this technology.
Cryptocurrency is not a scam. It's just a distributed ledger.
Anonymous...
Distributed ledger...
It's not really anonymous.
John Smith or 253832893 means exactly the same thing without more context. The only way you can tell you have the right John Smith is because we have 253-83-2893 as a social security number (lol social security system).
But if I see 253832893 on the Crypto ledger, I know 253832893 made a transaction. It could say John Smith and I'd be basically in the same spot of figuring out who it was.
Now, if 253832893 wallet paid a home mortgage for John Smith with Crypto, then I'd be closer to figure out who owns 253832893 wallet.
The whole point to Crypto is the block chain and the fact that they are very traceable.
Crypto can be anonymous if you're smart and you don't link yourself to your wallet. But once you are linked to a wallet, it is far from anonymous.
If John Smith wanted to sell me cocaine. Handing him cash is basically untraceable and anonymous. Sending him Crypto ties my wallet to his wallet with a transaction. If the cops seized his wallet and somehow figured out my wallet, they could tell every single time I purchased cocaine from him.
Yes, you can do your best to keep your name unlinked to your wallet number. But it's not foolproof. For example, if I was buying cocaine I wouldn't use my main Crypto wallet but a side wallet. If you only used it to pay for cocaine and filled the side wallet in an untraceable way. It's pretty anonymous.
But to those people that fill their Crypto wallets with their bank account and just think they are anonymous, they have another thing coming if someone wants to trace them.
I can go to a local ATM right now and buy crypto with cash anonymously. I can then pay with it online without having to identify myself. Yes, it is anonymous in this scenario. It depends on how you bought it. But even if you can only buy it through some website that requires ID verification, you can just buy Monero, which has a private transaction history (transactions are mixed together to obfuscate them) and you will be anonymous anyway. In Monero you can have multiple receiving addresses and they can't be tracked back to your wallet. Unfortunately stores that accept Monero are less common, so this can get a bit more tricky.
Then have a separate wallet for your mortgage payments. But even in your scenario only the bank will know who you are (and maybe the government). Some random store will not know your identity, unless you tell them who you are. Another solution would be to use Monero, which has a private transaction history, so nobody will be able to see what 253832893 wallet has done.
Yes, it means you have no privacy, unless you use Monero. In most cryptocurrencies transactions are public, but this doesn't mean you can't be anonymous.
You can create an infinite amount of wallets. It costs nothing. It's kinda like the fact that you can use one email account for every website or have separate emails for different things. Or you can use Monero and not need to have so many wallets.
People buy/sell illegal drugs on darknet and they use Monero.
You are right about that, unless they buy Monero :). But I don't say that cryptocurrency is anonymous, only that it can be used anonymously. Unlike a credit card for example. It is important to make that distinction though.
Gold does not have intrinsic value. It is merely scarce (relatively speaking). The value of gold fluctuates all the time.
Intrinsic - belonging naturally; essential
Gold has physical applications that are needed
Even if people didn't want it because of the looks, gold would still be needed to make things
Gold has intrinsic value because it is always going to be worth something
Gold is never going to be worthless. That's it intrinsic value.
Much of gold's value (certainly before the ending of the Gold Standard) was totally subjective. It looks pretty. Being rare and pretty gave it value.
I suppose you could tie some sort of value to technical application, but it isn't intrinsic to gold itself. If society collapses tomorrow, gold isn't suddenly going to be currency.
Yes much of gold's value comes from the way it looks. Not disputing that.
It is
Gold has properties that are unique. You can't just use iron as a replacement. Apple can't be like, "You know gold is expensive, I think we will just use cheap iron in our phones instead". Not going to work out. There is a demand for gold over it just looking pretty.
This technical application is what gives gold it's intrinsic value
Even if that value is really low it's always going to be something
Well not always because, like you said, if society collapsed, Apple wouldn't need to make phones. But at that point, all economic stuff is out the window. It would have to go through a bartering system until some kind of currency system could get started again. Eventually gold will be needed again. So really it still has value just not at the time.
I recall hearing it was illegal to burn money 😉
Money is a physical representation of the concept of value. Saying "what gives money value" is like asking "why does rain make clouds."
This is why printing money decreases the value of the currency - the value it represents has not changed so the value is diluted across the currency as the amount of currency expands.