If literally all you know about money is that it is a token that lets you buy stuff at the grocery store, here is trwhat you don't know - how long is that situation going to hold up.
> "Just as I wouldn't tailor my own paragliding chute, because otherwise companies could rip me off."
I wouldn't try to sew a normal parachute let alone a paragliding chute. But one thing I know about safety-critical pieces of nylon or related things is that wear and tear is visible. A moderate rip, hole, tear in material, an engine that coughs, a tire that's deformed, all this stuff is a clue that there are problems ahead.
What signs tell you when there's problem in the relationship between your tokens and the grocery store? That's where a bit more understanding of money is useful. And, as the OP say, that understanding is difficult, actually (edit: tbh, that's literally the only worthwhile point in an otherwise terrible article).
But you don't actually need to know the internals in order to know how long it will hold up.
You can black box update your probability of fiat currency holding up every month that fiat currency doesn't crash (let's define it as "lose 50% of its value"). In fact, by this metric it's pretty clear that fiat currency probability of holding up is much better then that of most (and all major) cryptos.
If anything, a lot of what ML/data science/quantitative finance has shown us is that hand constructed explanations made by experts typically have bad predictive power and statistical estimates typically have ok predictive power. For things related to money I would trust data over any expert mechanistic explanation.
No one can know with certainty whether a given object or situation is going to hold up. Life isn't guaranteed.
Sure, you can tell yourself "X has worked so-far, that makes it continuing to work quite likely". But X is "driving your car without adding gas or oil", that it worked for a while hardly makes it more likely.
And, of course, you can't claim predictive power for a sequence of individual experiences. And if you apply regression to a Ponzi scheme, it will seem like a great idea.
I make no mention of it and I am simply replying to "black box is a fine way to understand things" arguments. My point, my only point, a point removed from crypto entirely, is that one need specifics and not mere trends, to understand anything.
And how exactly does Bitcoin help to answer that question?
Just looking at roller coaster ride that is the Bitcoin to USD exchange rate suggests it is an extremely volatile currency.
I would suggest that the last thing you would want in a currency system is extreme volatility.
If anything, I would say that an understanding of money would show that it's based on a web of trust and so bitcoin indeed solves no problem of money as such and is effectively some combination of Ponzi scheme, money laundering scheme and ideology.
EDIT: Seriously. Just because our Western bureaucrats are comparatively honest these days, doesn’t mean how it functions doesn’t matter? Things could change, you know, as history repeats itself.
“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” -Satoshi Nakamoto
And why are cryptocurrencies, which are also a limited resource that can't be diluted, immune to inflation?
There are issues of Bitcoin one could argue about - but inflation is not one of them.
Give us a concrete scenario.
(Sorry if I came across as arrogant.)
On whether deflation is bad for the economy. The standard example of this is the Great Depression, where massive amounts of credit was created and later people opted out of USD and wanted gold. There were bank-runs, as I’m sure you know. Thus FDR ”banned” gold (he even forced people to return gold or risk confiscation and jail time).
Of course dollar prices go down then, i.e. deflation.
I don’t see this as an argument that deflation is bad.
Or do you have another example or perhaps can correct me?
Simple example, if bitcoin is the only exchange token in circulation then bitcoin will become more valuable as a function of time simply because the amount of "stuff" increases. This is as opposed to fiat, which increases in supply to compensate the increase of material wealth in the world.
The reason deflation is bad is because it discourages investment. If I can buy more stuff later with the same amount of tokens then I have an incentive to not spend my exchange tokens, thus reducing the total circulation of tokens/investment/etc. It also makes loans more painful (unless interest rates are negative), but if interest rates are sufficiently negative then this encourages people to not deposit money into loan originators (traditionally banks, but in crypto world could be something else).
> The reason deflation is bad is because it discourages investment.
I agree that economies are naturally deflationary because people don't stop working. So what? I think printing money is bad (as opposed to the concept of "inflation" which is an effect) is bad, because it distorts market mechanisms that occurr naturally - I'm talking about (more) efficient capital allocation here.
No. Bitcoin is not a get-rich-quick scheme, it's a not-get-poor-slowly scheme. It's mainly protection against inflation, not hope for massive deflation.
Sure, you can easily answer cherry-picked questions about Bitcoin.
But the important thing is: nobody in his day-to-day life needs to know these answers about real money, nor have they ever wondered about it.
I can buy groceries just fine with my Euros, without wondering how exactly it has been created. Just as I wouldn't tailor my own paragliding chute, because otherwise companies could rip me off. I just trust in sensible regulations, paraglider-making experts and, finally, the social fabric of society.