All you have to do is convince your recipient that there is at least one other person who would trade the crypto for something else valuable. Then you can send it to your recipient and they can convert it into whatever they want. You don't have to convince them that everyone finds it valuable.
But to answer your specific point, even if you could convince someone else that they could trade it for something else valuable, you have to keep going up the chain or it is purely bilateral and no longer a currency but a barter good. > they can convert it into whatever they want. They can't convert to to whatever they want, unless the other people also engaged in this economy value the currency and are willing to trade goods and services for it, hence (2)
The biggest of all of these (tether) has a daily transaction volume often higher than BTC itself, has never had an outside audit, has admitted to not being 1:1 backed and is currently under investigation by the NYAG.
They've also expanded supply by ~$12 billion this year.
Further, the massive, overwhelming breakage due to the user-hostile nature of cryptocurrencies has led to staggering deflation. 20% is gone already [1].
Finally, the worst part is that the Bitcoin wealth distribution is worse than any banana republic; 0.00088% of addresses control 17.5% of all coins. 4.11% of addresses control 96.53% of coins. [2] Unless you're a whale, you're fighting for scraps today, and the next generation of market participants will be basically serfs. Deflation and breakage exaggerate this problem.
If you thought letting them eat cake was bad...
[1] https://www.investopedia.com/news/20-all-btc-lost-unrecovera...
[2] https://howmuch.net/articles/bitcoin-wealth-distribution
And this is exactly what happened early in Monero's history, where the lead developer got ejected from the community: https://monero.stackexchange.com/questions/1011/monero-incep...
And this is also what's happening now in Bitcoin Cash, where the developers of ABC (up until now the client almost everyone used) wants to assign themselves 8% of the rewards from a mined block. And the the rest of the community are rejecting it heavily.
So yes, the community would fork it.
And yes, a lot of Bitcoin has been carelessly lost, but these are mostly old cases before Bitcoin had any exchange value. You've probably read about people throwing away hard drives with 1000s of mined bitcoins that ended up being worth millions a few years later. Hindsight is 20-20.
It should also be pointed out that a sizable chunk of Bitcoin is essentially frozen in Satoshi's wallets. Whether to count them into the supply is debatable. Same for Hal Finney.
Yes. Miners with huge operations whose profitability depends on people's trust in bitcoin are going to refuse to deploy the new software.
I also disagree that 3.4% is a "better" inflation than many national currencies. It's lower, sure, but I am reluctant to draw a value judgement as inflation has a specific and important role in the economy. I don't know enough to tell you authoritatively that 3.4% is "too high" and "worse" than the classical 2% US target.
[1] https://news.bitcoin.com/analyst-1500-bitcoins-lost-every-da...
Any artificially-induced inflation of the money supply is economically destructive, promoting malinvestment and waste. Some inflation in the beginning is inevitable, of course—you have to start from somewhere—but it's a very good thing that Bitcoin will have an supply inflation rate on par with, or lower than, most national currencies before it becomes prevalent enough to significantly influence pricing in the investment markets.
Inflation does have an important role in the economy. When it happens naturally it tells investors that we are in desperate need of more capital investment, and it basically doesn't matter what kind of ROI can be expected as long as it's at least somewhat positive. The issue is that this same investment behavior readily leads to diverting resources from more productive investments to less productive ones when the economy should be deflationary (indicating a positive average expected ROI) but the money supply is manipulated to make it look like there is a shortage of capital.
> Any artificially-induced inflation of the money supply is economically destructive, promoting malinvestment and waste.
I'd love to see your sources there, because I don't agree. Inflation plays important roles like pushing for allocation of capital. Inflation only matters if you hold dollar bills under your mattress. Once you invest it in anything, including real estate or a savings account, the effect is decimated, or reduced below zero.
> Inflation does have an important role in the economy. When it happens naturally it tells investors that we are in desperate need of more capital investment.
What is "natural inflation" in Bitcoin? Does it naturally sprout more coins in steady state? Or are you suggesting velocity of money in a currency unable to respond to externalities should suffice?
[1] https://static1.squarespace.com/static/5d580747908cdc0001e67...
Could anti-authoritarian outsiders use (3) to effectively support anti-authoritarian insiders?
Everything else in a crypto economy is built on top of that as an analogous structure to regular physical currency/digital currency verified by a third party (i.e fiat) economy.
Not needing a third party to verify the authenticity of digital transactions does not automatically make you immune to regulation.
In very specific situations (i.e failed states undergoing civil war), if you lose the trust in your entire govt. you can now reliably still trade digital currency without it necessarily being backed by a third party, however everyone you are transacting with must buy into three things: 1) This new digital currency is now the dominant currency. 2) Everyone trades goods and services based off of this new currency 3) People outside your country respect that everyone inside the country values this at some specific value and honours trade in that currency.
It is extremely unlikely you can convince anybody outside a country of (3) without some intervening international body, so the "crypto economy" replacing currency to fight an authoritarian regime is practically never going to happen.
With regards to the article. Ultimately, if you trust your government to in general protect you, this is a good thing. If you don't trust your govt. to do so, this framework is a bad thing.