Suppose that bitcoin or similar are used as currency in practice (that it's very far of happening, by the way). Even if you are able to do all your operations in a cryptocurrency, you will need to pay taxes. Governments only accept their own currency, so, you need to get it to pay taxes, so, demand of national currency is going to exist always.
>> "economic vessels like national bonds and other treasuries that nations rely on to borrow money?"
This is only an institutional arrangement. Nations with their currency don't really need markets to get money. For instance, in the case of USA, the FED can produce so much money as they think is appropriate (1).
I think that cryptocurrency fans suffer from that old illusion that economy can be separated from politics.
The people of Zimbabwe and Venezuela appear to disagree with your sentiment that national currencies aren't risky.
Your notion that crypto fans can't separate economy from politics doesn't seem right. Re-read the Bitcoin genesis block. Bitcoin began because of bullshit by bankers and barristers. Politics is the reason for Bitcoins existence.
The people of Zimbabwe and Venezuela suffered a fall in productive and/or export capacity (agricultural and oil respectively).
Never mind the currency, crypto or not, you can expect inflation when real resources are reduced and you have to grow the monetary base to keep the economy working. See (1) for more details.
I didn't say anything about risk.
I didn't say that crypto fans can't separate economy from politics, quite the opposite, I said that, it seems to me, crypto fans think, erroneously, that economics can be separated from politics.
But wouldn’t that have a profound impact on the value of a currency? If all demand for it dissappeared except taxes what would happen to it’s value relative to other currencies? What would happen to trade?
> Instead of exchange currencies in order to be able to pay taxes, why not accepting payment in the government currency in the first place?
You don't need to exchange all your currency to pay taxes, and in the hypothetical scenario we're discussing you would want the rest to remain in cryptocurrencies because that is what you need to pay all your other expenses. Beyond the network effect, exchanging only the amount you need for taxes would improve security and limit your exposure to currency manipulation.
Suppose that bitcoin or similar are used as currency in practice (that it's very far of happening, by the way). Even if you are able to do all your operations in a cryptocurrency, you will need to pay taxes. Governments only accept their own currency, so, you need to get it to pay taxes, so, demand of national currency is going to exist always.
>> "economic vessels like national bonds and other treasuries that nations rely on to borrow money?"
This is only an institutional arrangement. Nations with their currency don't really need markets to get money. For instance, in the case of USA, the FED can produce so much money as they think is appropriate (1).
I think that cryptocurrency fans suffer from that old illusion that economy can be separated from politics.
(1).- Video of Greenspan explaining it: https://www.youtube.com/watch?v=DNCZHAQnfGU