> But I think you're locating the problem in the wrong part of the conjunction: the reason fiat currency in a US bank is more secure is because US banks are fairly secure, not because the fiat currency is secure.
Fiat currency is secure in US banks because there is vast institutional protection for banks such as FDIC insurance and extremely strict laws against bank theft, the Federal Reserve, and so on. There are no such institutional protections for Bitcoin and there never really can be, by design.
> If you lent your car to a random French PHP programmer in Japan and he came back without the car, you wouldn't blame that on cars in general being an "unsafe" investment.
Sure I would - if lending a car to strangers was an effective necessity to use one in the same way using an exchange is an effective necessity to use Bitcoin, and there were "alternative cars" (aka fiat currency) that required no such lending to strangers.
Leaving your Bitcoin in an exchange is not now and has never been an "effective necessity to use" Bitcoin. However, for fiat-currency transactions, it is an effective necessity to leave your fiat currency in an "exchange" called a bank, if you want instant electronic transactions. Unlike with the banking system, you can engage in instant electronic transactions with Bitcoin you hold in your own wallet — although some counterparties may prefer to wait for a number of confirmations.
> There are no such institutional protections for Bitcoin and there never really can be, by design.
This is nonsense. Bitcoin's design permits all the same institutional protections available for dollar bills or precious-metal coins, and additionally permits others that are enormously more secure than the mere incentive structures we must rely on in the case of dollar-based institutions. For example, a bank holding gold or dollars cannot produce a mathematical proof of its reserves as a Bitcoin bank can, and there is no dollar equivalent of multisig wallets.
So, in both cases, you are incorrectly imputing advantages to fiat currencies that in reality belong to Bitcoin in this comparison.
> However, for fiat-currency transactions, it is an effective necessity to leave your fiat currency in an "exchange" called a bank, if you want instant electronic transactions
Yes. However there is also cash which allows for instant anonymous transactions in the physical world which is sufficiently widely accepted to be used to the exclusion of banks, if you so choose.
> you can engage in instant electronic transactions with Bitcoin you hold in your own wallet
Isn't the fact that transactions are not instant widely perceived in the Bitcoin community as one of, if not the, greatest barrier to adoption? If not, why all the investment in the Lightning network?
> Bitcoin's design permits all the same institutional protections available for dollar bills or precious-metal coins, and additionally permits others that are enormously more secure than the mere incentive structures we must rely on in the case of dollar-based institutions. For example, a bank holding gold or dollars cannot produce a mathematical proof of its reserves as a Bitcoin bank can, and there is no dollar equivalent of multisig wallets.
You're saying these words but not addressing the substance of what I said. There is no FDIC equivalent for Bitcoin - unless there's an exchange that guarantees replacement of lost/stolen Bitcoins? Replacing Bitcoin seems a difficult proposition when fiat currency can just be created out of thin air but Bitcoin cannot - once it's lost, it's lost, and can only be replaced in a zero-sum way.
> There is no FDIC equivalent for Bitcoin - unless there's an exchange that guarantees replacement of lost/stolen Bitcoins? Replacing Bitcoin seems a difficult proposition when fiat currency can just be created out of thin air but Bitcoin cannot - once it's lost, it's lost, and can only be replaced in a zero-sum way.
I didn't realize you were laboring under the misconception that the FDIC has the authority to mint money, like a central bank. That's why I didn't address it. Now I can. It doesn't. The FDIC is funded by premiums paid by its member institutions, not by creating currency out of thin air; an insurance scheme for Bitcoin depositors in a bank that provided fractional-reserve Bitcoin accounts could be funded in the same way. It could even be provided by the FDIC, which already provides deposit insurance for deposits denominated in foreign currencies.
> Isn't the fact that transactions are not instant widely perceived in the Bitcoin community as one of, if not the, greatest barrier to adoption?
Bitcoin transactions are instant; they reach everywhere in the mempool in a matter of seconds. It's just that until they're a few blocks deep in the blockchain, they might be reversed, like bank transactions can be for several months. This usually takes half an hour or so, and that's a hassle for some kinds of transactions. However, I think bigger barriers to adoption include the network effect of existing currencies, a sketchy reputation, and the fact that Bitcoin exchanges are now illegal in China.
> there is also cash which allows for instant anonymous transactions in the physical world which is sufficiently widely accepted to be used to the exclusion of banks, if you so choose
Cash limits you to transacting with people you can meet in person, which condemns you to poverty unless you are very lucky indeed.
Fiat currency is secure in US banks because there is vast institutional protection for banks such as FDIC insurance and extremely strict laws against bank theft, the Federal Reserve, and so on. There are no such institutional protections for Bitcoin and there never really can be, by design.
> If you lent your car to a random French PHP programmer in Japan and he came back without the car, you wouldn't blame that on cars in general being an "unsafe" investment.
Sure I would - if lending a car to strangers was an effective necessity to use one in the same way using an exchange is an effective necessity to use Bitcoin, and there were "alternative cars" (aka fiat currency) that required no such lending to strangers.