Cryptocurrency continues to gain more ground but I still have my reservations about it being the currency of the future.
If by design, cryptocurrency has a finite volume of transferrable currency, do early adopters have an unfair advantage that could potentially make the currency unusable? I don’t see how it could possibly be fair when earlier mining yielded currency more quickly.
Digital crypto assets like Bitcoin or Ethereum will exist alongside them. Bitcoin can be an asset like gold, of which users keep a portion of their networth to protect from economic uncertainty.
Its deflationary policy may make it less usable as a currency, but at least crypto gives people choice.
I was having this discussion with a friend recently, arguing over what the actual use cases are for crypto, and I came to a similar conclusion.
In terms of facilitating payments, cryptocurrencies are worse in almost every way I can think of compared to existing systems. They are (currently) slow, have high transaction fees, but most importantly the non-refundability of crypto transactions is a bug, not the feature crypto proponents suggest.
However, as a store of value (e.g. "digital gold"), I think crypto has real potential. There is a reason crypto is very popular in places with hyper-inflationary monetary systems like Venezuela and Iran. And compared to actual, physical gold, crypto is almost better in every way: it is much more easily transferred and stored, and the ledger means establishing "provenance" is not an issue. Yes, it's obviously currently extremely volatile, but it's not hard to imagine that volatility lessening over time.
I think this is one of those things where people overestimated how much things would change in the short-term, but will grossly underestimate how much they will change in the longterm.
5 years is a pretty short window in the grand scheme of things when talking about the adoption of technologies.
Gold has been in use for hundreds of years and yet it's still very volatile. If Bitcoin is digital gold that doesn't really solve the volatility problem.
An interesting thing you might do in an overinflationary state, however, is buy a large portion of something like the USDC, the USD Coin, which maps to exactly US$1 all the time. While you are tied to another country's fiat whims, you still have the value add of crypto mentioned above: provenance and distance from the hyperinflated currency of your home state.
What if a bunch of countries peg their currency to crypto like Bitcoin and it becomes so valuable that one day jobs return to America due labor being cheaper in the US because we were to stubborn to chain our policy? Lol is that a thing that could happen?
> Digital crypto assets like Bitcoin or Ethereum will exist alongside them. Bitcoin can be an asset like gold, of which users keep a portion of their networth to protect from economic uncertainty.
Seems improbable, as it is far less stable than Gold. From what I see, it is almost never used as a currency, and almost always as a speculative asset. The main indicator for me is that Bitcoin is always measured in Dollars (or some other fiat currency), instead of having some value that it taken to be it's own. Have you ever heard someone say "This bike cost me 0.63 Bitcoin"?
How much gold only exists on paper? Once people realize there is more in paper than in vaults that stability may evaporate. The Germans move their physical gold out of the US for a reason
Gold was a currency. It evolved from rocks in the dirt, to gold coinage, to paper coupons, to whatever the hell instrument it is today.
You stored your gold in a bank, and the bank gave you paper coupons to redeem it. People traded the coupons because it was easier than trading the gold. This is the birth of modern day banking.
I think the fact that no one controls Bitcoin is actually a major downside. The Fed does a lot of work to keep USD stable (alongside being part of a a stable government).
I trust the USD as long as I trust in the institution.
I don't think there are good reasons to use bitcoin, and I think much of the existing interest is a demand for volatility, in the same way as people are piling into GameStop.
That's a valid analogy but also on a much longer time frame. Bitcoin increased in value orders of magnitude quicker than the value of land in the US. If somebody who bought a house 5 years ago was selling it for 100 times today, you bet your ass people would be mad.
Do they have any greater claim to being mad though? It makes you see it more clearly but I do not think it makes it worse. Besides, for most people they just were not alive when it was possible to claim land and nobody left them any. You could have seen crypto you just didn't, in most cases. I think that makes people more mad but once again I do not think it makes it more unjust, just the opposite.
> If by design, cryptocurrency has a finite volume of transferrable currency, do early adopters have an unfair advantage that could potentially make the currency unusable?
> I don’t see how it could possibly be fair when earlier mining yielded currency more quickly.
If by design, fiat currency has an infinite volume of transferrable currency, do governments have an unfair advantage that could potentially make the currency unstable?
I don't see how it could possibly be fair when just printing it yielded currency more quickly than properly earning it.
That doesn't even make sense. For a start governments don't earn money. Secondly, a managed currency controlled by a central bank under the control of a democratic government is a good thing.
Not necessarily. Dogecoin has no fixed cap on the amount of Đ in existence. Rather, it expands at a rate of Đ5billion/yr, much to the chagrin of several currency pumpers.
I did not know this. Thanks for the information. So do this make a currency like Doge more attractive as a long term solution? Will BitCoin be a one hit wonder per se?
Looking at Doge's price-history, it's relatively stable, and its inflationary nature prevents it from becoming an asset to invest in. The enduring popular meme also gives it some intrinsic value that other Cryptos don't have.
I'd like the coin to take off as an actual currency, and of the coins I've looked at, I think it has the most potential for adoption in that respect.
But I don't think it's got the ecosystem to support that right now. A metamask-style doge wallet would do wonders for this.
Also, knowing little to nothing about the backend (or other crypto backends, tbh), other than that it's derived from Bitcoin - I have concerns about scalability wrt transaction settlement times, power consumption, and ease-of-entry with self-hosted wallets.
> cryptocurrency has a finite volume of transferrable currency
This is true of Bitcoin. Others, such as Ethereum, have a known inflation schedule, which would help alleviate the issue you mentioned as being a currency of the future. Furthermore, it is looking like the "currency of the future" may (at least in the short term), look more like a cryptocurrency that is worth $1 and is 1:1 backed by a dollar in a bank account. These are known as stablecoins and are an in-demand topic right now for central banks around the world.
Bitcoin has a property of having a known, fixed supply. This allows it to serve as a store of value. It can and is used for day-to-day transactions, but there may need to be more advancements to make these types of transactions viable long-term (such as the lightning network).
Ethereum doesn't have a known inflation schedule. It has an arbitrary inflation schedule that is decided by the Ethereum developers.
The idea of cryptocurrency is to replace fiat currencies, with an engineered system instead of a political system. There's no benefit in a cryptocurrency that's backed by a fiat currency. It's like building a stone house on a swamp.
Couldn’t a government just destroy a stable coin by seizing the currency backing it? Isn’t the point of a cryptocurrency supposed to be that it’s not controlled by any government?
I don’t know if a government today could just seize crypto, but the USA did so with gold in the past. Imagine owning a whole bunch of gold, and then waking up one morning & finding out it’d been replaced with US Dollars.
A stable coin doesn’t necessarily have to be backed by fiat, DAI is backed by crypto assets and those assets can fluctuate and sometimes need to be increased during volatility.
I think the point of fiat backed stable coins are more for getting around regulations (eg Tether) and a fiat on-ramp for getting into the ecosystem. Certainly if the government seized a large portion of Tethers assets then that could affect other assets, but this actually has already happened with (a small portion, not large) Tether and nothing catastrophic happened.
Not all cryptocurrencies have finite volumes by design. Ethereum, for example, currently doesn't have one. It also uses a proof-of-stake instead of proof-of-work for consensus, so even early owners of hardware don't maintain an advantage.
Historically people have been willing to use currencies with inflation like the US Dollar. The point is that any government could build a out a crypto version of their currency if they so wished and have the same inflation policies they use with paper money. The crypto part doesn't imply a specific monetary policy. Crypto just means you can use it peer to peer over the Internet without an intermediary.
The initial distribution is not fair. This is a disadvantage but it doesn't matter much. It was similar with Gold. The more time passed, the better it became distributed.
If by design, cryptocurrency has a finite volume of transferrable currency, do early adopters have an unfair advantage that could potentially make the currency unusable? I don’t see how it could possibly be fair when earlier mining yielded currency more quickly.