Assuming you implemented a POW blockchain-based, decentralized (anyone can download and run a node), virtual currency, this would remove control over the supply and generation of the currency from the Swiss National Bank (fiscal and monetary policy experts) and give it to...Chinese cryptocurrency miners + whatever group of developers Switzerland decides to put in charge of maintaining and upgrading the swiss blockchain?
What your friend is referring to is actually an idealized economic concept, the "Stablecoin" - one that is pegged to the exact right basket of goods, services, and semi-finished industrial products that it experiences little to no inflation/deflation and can be counted on as a store of value.
All countries are or should be trying to create a Stablecoin relative to their own economies - allowing private citizens to assume their $5,000 USD will be able to buy roughly the same amount of goods and services in, say 6 months.
All this to say...the Swiss have already created a Stablecoin for their economy...the franc. There is no reason to break up and decentralize an organization that is competently managing a currency. It only makes sense in cases (such as Venezuela) where the central authority is doing a terrible job of managing their currency, and is nowhere near achieving "Stablecoin" status. Or for markets where there is no accepted "Stablecoin" because they are illegal/no enforcement mechanism to honor the transaction (e.g. you can't bring a lawsuit in a US court against a drug dealer if he takes your USD and sells you bad drugs).
The downside is that you cannot control the monetary policy of your of own country. You cannot pump money according to the economic situation. Look at the eurozone, for example, Germany wants to increase rates -hence increase the value of Euro- whereas Greece is still struggling. Leaving your currency to somebody else’s decisions may not be a good idea.
Some reading: - https://www.economist.com/blogs/economist-explains/2015/01/e... - https://www.reuters.com/article/us-swiss-franc-shock/three-y...
Decentralizing control by definition gives power to all of the nodes in the network, requiring their buy-in to conduct any type of "monetary policy" by changing the source code and rolling out an upgraded application.
Any changes that could increase the hash rate, increase the max number of tokens, "destroy" transactions, rollback to a certain state, etc. would require miner cooperation. Whereas right now central banks can just "create" liquidity by tweaking monetary policy without needing the banks and populace to approve and agree to these changes.
a strong financial incentive for the young, working
generation to switch to a new currency, thereby devaluing
all the nominal savings of the old, retired generation.
First, who is producing the new supply? How is the new supply being produced? Hopefully by them, and not a 3rd party that exploits the production and sale of this new medium...
The reason proof of work coins have no inherent value, is because there's zero economic demand except from speculators. Coins are generated though software which has a measurable cost, and why would a vendor or nation state expose their real world assets to be traded for a database token produced though this software method?
You can't just tell all the kids to start using seashells or cryptocoins for their money because it would have to equate or surpass the abilities of normal cash.. for both client and vendor.
If anything, one can imagine a nation state issuing a protocol tied to their centralized treasury but that's not too different than using a debit card.
Huh? They could switch too. I don't see the advantage.
Also, block chain is the perfect tool for governments to track their citizens' spendings.
b) thereby devaluing all the nominal savings of the old, retired generation
In reality it won't work like that (A -> B). In this world you most likely will devalue net worth of 99% of people (poor) and prop up net worth of 1% of people (rich) simply because they OWN actual assets - whole factories and industries, mines, planes, ships, hotels, etc. everything that is bigger than a phone and more useful than a house. This move (if hypothetically it ever happened) will create even bigger disparity and faster than now, in years instead of decades.
Cryptocurrencies serve many specialized needs, particularly in global transfers, but they have little use in day to day, local transactions.
Anything that can be traded for value can be considered a currency, so you could theoretically trade equities with other people for goods and services. But usually, that is much less practical than exchanging local fiat currency.
Same goes for virtual currencies. Instead, you'll perhaps use virtual currencies as an intermediate currency for simplified financial transfers, or perhaps for storing some of your investments, or for utility reasons (such as tokens which are the utility fee tokens for some exchanges), or perhaps as a form of startup investment (as with ICOs).
I do wonder if the effectiveness of bitcoin as a transfer currency was any motivation behind the recent improvement in EU bank to bank transfers. What previously took one or maybe two business days for SEPA transfers has recently been improved to be near instant (so I've read; I haven't paid attention lately). Maybe the banks felt pressure to keep up?
Meanwhile, US banking customers are still passing handwritten pieces of paper around. Once US customers get verified accounts with some of the cryptocurrency money exchangers, quick USD->bitcoin->bitcoin->USD transfers are nice and fast and relatively inexpensive (with the recent dramatic drop in bitcoin mining fees).
Bitcoin fees, for example, are based partly on the amount of data in the transaction. It's not really a percent of amount sent factor. Whether you send 100 BTC (which is a lot of money) or 0.001 BTC, you'll pay about the same fee assuming the same number of input and output addresses.
Also, while bitcoin fees had gotten quite high toward the end of 2017 and early 2018, lately they have reset back down to a very low level. I routinely send batch payments from a dozen input addresses to some output addresses with a value total of a few thousand dollars, paying less than $1 in fees.
And anyway, you can't send people money to their credit card.
UPDATE: It appears bitcoin fees are back on the rise..., 10x what they were a day ago.
A real merchant example: Steam had to stop accepting bitcoins because:
- transactions took too long o complete
- (main reson) fees were unpredictable and sometimes higher than the cost if the game
But credit card companies have made it so easy for users to press one button to chargeback that some less than ethical consumers do this on a regular basis and get away with it.
Another thing to keep in mind is that if you operate a business and accept bitcoin as one form of payment, nobody can cut off your means to accept payment. If the kind of product or service you provide is something banks don't want to touch (even though they are legal), then you're left with few options unless you consider cryptocurrency payments. Even if you get a credit card merchant agreement, the ccard companies will routinely shut you down until you have a conversation with them, reminding them that their senior risk department has already verified you multiple times. Trust me, that gets old.
2. All of the perceived problems have known and working solutions. BTW, fraudulent merchants are arguably a bigger problem than fraudulent consumers.
3. If I consider cryptocurrency solutions, I will:
- run into slow non-efficient transactions that can be ground to a halt by a simple cat-breeding game.
- run into unpredictable exorbitant fees that can easily be higher than the price if the product I sell.
- “nonreversible transactions” is bullshit, as there have already been cases of transactions being reversed for hacked wallets.
At point 3, you seem to be strawmanning ETH for BTC, where it seems the user you're replying to is referring to BTC.
Early tech is early tech. We all know this. More people use the internet now that you don't have to dial-up and make your phone line busy for it.
Credit card fees are (typically) pushed to merchants, the actually settlement time takes far longer than the transaction time.
Let's say in 10 years, all of your issues are solved by a cryptocurrency -- would you like the option of having a non-state issued, hard to confiscate, tamper-resistant money?
"Ethereum Executes Blockchain Hard Fork to Return DAO Funds". If you tell me I'm strawmanning ETH for BTC (or whatever other bullshit three-letter acronym) I answer this: it does not matter. Something that happens in one, will happen in another. The precedent has been set, the path is clear.
> At point 3, you seem to be strawmanning ETH for BTC, where it seems the user you're replying to is referring to BTC.
Doesn't matter. Bitcoin is just as susceptible. And no, Lightning will not save it (for obvious reasons which are totally glossed over by the dreamy-eyed proponents).
> Early tech is early tech. We all know this.
Yes. We know this. Cryptocurrency proponents seem to remember this fact only after being confronted with reality.
See how this conversation played out:
- Day to day transactions are actually the most likely to be disrupted by crypto. The reason for this is crypto can trade with almost zero fees
- No, the fees are not zero. In fact, they are prohibitively high, and unpredictable
- Yes, but... but.. the transactions are non-reversible, and there's fraud protection
- There is at least one precedent of a cryptocurrency being hard forked to reverse transactions. Fraud is already being handled. etc. etc.
- Yes, but.. but... it's early tech!
Indeed. It's early tech with very few, if any, practical uses. With exorbitant unpredictable fees, extremely slow transactions, overall inefficiency etc. etc. etc. And yet for some reason it's hailed as the saviour of everyone and everybody now even though it offers a near-zero improvement on what we already have today.
Your conflation of ETH and BTC is disingenuous.
What were your thoughts on the iPhone when it came out?
This comes with its own scalability issues which are currently unsolved (and might well be unsolvable)
> also, if users are also miners they have an incentive to continue the BTC network for their own self benefit even if the fees were less.
This is equivalent to the users themselves paying fees, but much less secure, stable, and decentralized.
1. Decentralized derivative adjusted assets. Basically you are holding a contract of 100 Units (instead of 100USD) that represent a decentralized smart contract which trades against other cryptos. Crypto goes up or down but your contract holds a stable value.
2. Automatic search for gateways and routing of transactions. The merchant just shows you the amount in the universal unit (ie: 35 Units) and a QR Code. You scan the QR code and the merchant is paid. The applications and blockchains figure out the rest and connects the different blockchains together.
I think he meant in the short term, didnt he? In the long term, this is obviously wrong. For two reasons. 1) You dont get a craze like we are witnessing when people dont like the technology. At some point, you have to stop making things complicated: people want it, they are not afraid of it, they are damn excited about it. It's the new gold rush. 2) Cryptocurrencies, once mature, will offer a significant increase in banking quality, innovation and competition. Your current banking system and VISA are 19th-century in comparison of what's coming.
In short, we have: people-love-it + old-system. I call the result of that equation obvious on the long term.
If anything the biggest problem is understanding how to use cryptocurrencies in the first place. For mass adoption that's where we need to see innovation most (and of course scalability, which is directly tied to mass adoption).
I don't see the government adopting/not adopting a cryptocurrency affect adoption in a major way on its own. People who don't understand how to use cryptocurrency still wouldn't use it unless it was forced upon them somehow, like their employer saying their salary will be exclusively offered as cryptocurrency from the next month forward. But that could cause all sorts of issues.
For speculation and investment, not for anything currency-like, though.
He doesn't see people being willing, en masse, to convert the currency they receive (in a paycheck, for example) into another currency unless absolutely necessary. This is a chicken-egg problem if you want crypto widely adopted, where you need the vendors to adopt crypto but it'll likely have to be the government or company first that distributes it to citizens/employees.
He specifically mentioned Switzerland as a great country to explore a system like this (think Anti-Venezuela lol); if they were to found/back a decentralized currency, it could quickly reach mass adoption and we could actually function in society on crypto. I'm interested to see whether Switzerland could go that far with their approach.
The incentives that could be provided to make it worthy for a country like Switzerland to found/back a currency which they don't ultimately control are unclear, but nonetheless an idealistic concept.