OP tried to compare Bitcoin to reserve currencies. Reserve currencies are more stable than average.
Have you looked at USD vol in the 1800's? Reichsmark vol? From that angle, vol of "proper currencies" in their early adoption days tend to start looking a lot like BTC vol. At a minimum, BTC today to USD today isn't an apples:apples take at all.
In my mind, this starts to damage vol = bad BTC arguments in terms of analyzing BTC's adoption. potential.
Students of central banking are familiar with central banking in the era of gold and why it was almost universally a disaster. (Most of Bagehot [1] concerns itself with bank runs.)
This paper’s audience is familiar with that history. Talking about Bitcoin would be like addressing why machine language wasn’t used in a CS paper.
[1] https://en.m.wikipedia.org/wiki/Lombard_Street:_A_Descriptio...
Gold [https://goldprice.org/charts/history/gold_6_month_o_usd_x.pn...] is of course one of them, but costs of many other liquid commodities have shot up counterintuitively this time as well.
There is nothing "magical" that has happened to banks when they switched to fiat money.
Of course there is. Deposit guarantees are enabled. That and the central bank’s credible power to influence money supply and borrowing costs as well as act as an unconstrained lender of last resort.
There is a lot of scholarship, originally from the turn of the last century but perennially refreshed, on the inherent failure modes of fixed-supply money systems amidst a growing, industrialising or industrialised economy.
Fixed-supply assets are good. Fixed-supply currencies cease, quickly, to be currencies.
So it was at the time when the king could've simply set the gold rate for the currency, and do the very same thing with borrowing, and lending on behalf of the state. Just before, it was much more likely led to more angry people with pitchforks than today.
No. The de facto currency was estimated mass of precious metal. The king could default, of course. But that is selective; inflation is not. Re-basing happened, but just as with money printing, it is tracked and accounted for and, in extreme cases, fled from.
Equating modern monetarism with gold-standard economics betrays, fortunately, a terrific opportunity to learn from works that have been peer reviewed, in many cases, for over a century.
If a gold standard was a disaster, I don't know what our current system is.
That wouldn't be proper Central Banking :)
Meanwhile the real big money-movers (legal or illegal) are still using bank accounts and paper companies in "business-friendly" jurisdictions.
A new digital, internet-native asset with the greatest monetary properties in history is monetizing before your eyes; meanwhile you're relying on your understanding of an old world to convince yourself it doesn't matter and the people who see something deeply interesting are kooks.
It's very interesting that a large contingent of smart software people on HN heard about Bitcoin extremely early, said it was a useless failure, and then had to re-justify their position for a decade as Bitcoin marches on. It's impossible for anyone to claim Bitcoin has no value at this point, but on every blockchain post on HN there is a core of haters that will make the same tired arguments against it. Meanwhile, no one cares!
You'll never hear that quote about actually revolutionary technologies, because their revolutionary nature is immediately apparent, even if the economic case for the technology is not (at the time).
Cryptocurrency isn't revolutionary. There isn't any use case for cryptocurrency that wouldn't be easier to address with normal cash or credit payment. Cryptocurrency solves none of the actual problems in the current financial or banking systems but introduces a host of new problems that weren't issues in the old system. It's a solution in search of a problem.
I also used to be heavily involved in cryptocurrency, when it first started, and what I saw then is a large part of why I don't see any usefulness in cryptocurrency now and why I'm convinced that it will never replace any part of the financial system.
A lot has changed in 10 years. Crypto has gotten worse. Multiple exchanges were hacked, or turned out to be entirely fraudulent. Black markets came and went. ICOs for non-existent and useless products. The discovery that major participants in the system were manipulating coin values and were engaged in multiple types of financial fraud. The uptake of cryptocurrency as the primary means of paying ransoms to hackers who have encrypted your website, database, or computer. Facebook attempting to introduce its own cryptocurrency. The Bitcoin Craze where awareness of bitcoin hit the general public and the techies who got in first exploited the rubes for everything they were worth(and cryptocurrency industry's response to the criticism: they should have known better!?!? That tarnished all cryptocurrency in the eyes of the public and they learned to avoid all of it, not just Bitcoin. That on its own was a fatal blow to the uptake of cryptocurrency in general use, anywhere, and it was only a few months later that Bitcoin started getting removed from e-commerce sites).
All in all, I'm glad I got out when I did.
Yes, maybe the popularity of BTC will overcome the issues, but I doubt.
I recommend taking a look at something like https://bitcointreasuries.org/
And don't just glance at it - try asking some probing questions, like "What does this mean?" and "What might I be missing concerning the underlying dynamic at play?"
You can also try reading The Bitcoin Standard for a good analysis of the dynamics and history of competition between different forms of money - the central thesis being: History has shown that you can't protect yourself from someone else holding money that's harder (better) than yours. Bitcoin is better money than anything else we have or have ever had.
That's not how money works, if by money you mean a currency. Currencies are issued by sovereign governments, and don't exhibit network effects within that sovereign jurisdiction, because they don't need to. They're legal tender; you're required to accept them, and everyone needs them to pay taxes.
If you mean money as in wealth, that's an entirely different topic.
Why is this important: note "public." To do this legally, they had to convince: - external auditors - internal compliance - external/internal legal - and where it gets interesting: the institutional investors who are large enough to matter, i.e. your big-money movers. This party says no at a shareholder meeting, the conversion isn't happening.
CFO who led this found that last party were all ok with the move given explanation, and most owned BTC already. 1 holdout took some convincing. These big money-movers hold BTC already, in short. Yeah it's not 100% of their assets, but this isn't an argument about that.
Ding, ding, ding!
A digital currency that directly fits the digital use-case being described by these papers written by central banks, that is in turn ignored by these papers, is sort of like talking about WW2 without mentioning Germany's role.
I can definitely understand the aversion given the implications of a non-CB controlled digicoin, but just ignoring its existence really blows a hole in the intellectual rigor of these whitepapers.
Ultimately, the network adoption will play out as it plays out. We don't have USAweb and RUSweb (maybe moving toward that, but different topic), we have the decentralized, multi-party, ICANN/IETF/private sector/public sector-led The Internet. When you track how the Internet came to be, and how it's actually controlled now, it starts to look a lot like the Bitcoin network's growth plan at the moment. What will be will be. Once it gets analyzed as a network protocol with digital native payments, vs. a digital currency on the regular internet, the blind spots in BTC criticism start to show.
Even if the technology would adapt cryptographic ledgers, there is no reason to use another currency for that. You use sovereign currencies as before.
I can think of a few huge practical benefits:
1. Try to transfer money cross border within the EU/SEPA zone on a Friday. It'll be in the receiving account on Tuesday (and usually not in the morning). That's around 96 hours between sending and receiving. During weekdays this goes to 24 hours. Not even talking about intercontinental transfers. And this is assuming there are no national holidays in either the sending or receiving country during that period. And then there are people that complain that Bitcoin's < 15 minutes is slow, lol.
2. Transfers through central counterparty clearing and settlement sometimes get rejected/delayed for absolutely no reason at all. They can also be rejected/delayed for political or other (good) reasons. BTC doesn't suffer from this.
3. Transfers through central counterparty clearing and settlement can get stolen by attacking the IT systems themselves. Example:https://www.bankinfosecurity.com/another-swift-hack-stole-12.... BTC doesn't suffer from this. Yes, BTC can get stolen through phishing or by attacking end-points, but so can those transfers.
4. Going through central counterparty clearing and settlement requires both the sending and the receiving party to have some type of bank account in the locations that they want to send or receive money to/from. This means dealing with very time consuming local bureaucracy. Especially when the receiving party (for example) wants to receive money in a "new" country that they're not "set up" in yet. Setting this up can take days/weeks of turn around time and hours/days of man-hours. BTC doesn't suffer from this at all.
5. Transfer costs and high exchange rate spreads.
There are probably more issues that I didn't think of.
As a traveler only dealing with relatively tiny amounts of money across borders, BTC has already saved me a ton of time, money and frustration in trying to access my own money across borders. Even I as a nobody can see the benefit, I imagine those benefits only get greater for people dealing with larger amounts (as I assume the bureaucracy and problems go up with the amount of money transferred).
Here's one interesting angle in POS comparison that I never see mentioned anywhere:
VISA, MC, AMEX set a high-standard being able to very quickly process transactions even under high-load times like holidays.
But they did this in part, because they practically had to...Think of holidays shoppers at physical retail stores lined-up at a cash register -- they need approved or denied answer ASAP.
But with that sales model is dying a noticeable death -- no one doubts it will soon be gone -- which brings me back to BTC and and me finally making my point
If you're making a retail purchase from Amazon and choose Next Day for delivery, does it matter that BTC is going to take 15 minutes or even 30 minutes to clear?
You can argue that's a bad thing if you want, but just ignoring that it exists doesn't make much sense.
Also I'm not claiming that the BTC will take over the dollar, I'm saying dedollarization will occur in general. This isn't a particularly controversial opinion at this point in the finance world. The average CNBC guest is willing to admit this at this point.
US Feds have gone overboard on tracking financial crime, but I really dont see people thinking Euro, Yuan or Yen is safer. Certainly non-CB cryptocurrencies are worthless as soon as sentiment turns.
> The average CNBC guest is willing to admit this at this point.
That really doesn't hold a lot of credibility with me though. :)
BTC is also something that individuals can buy in extremely small increments. It is an escape valve for people in Argentina, Turkey, Venezuela, etc. to protect their wealth from horrible and corrupt central bankers.
Deep in the footnotes comes the contorted logic,"According to the IMF Treatment of Crypto Assets in Macroeconomic Statistics, crypto assets such as Bitcoin do not meet the definition of a financial asset—and hence currency—in macroeconomic statistics." and presumably that's what lets them off the hook, nevertheless, the ONE payment-rail that BTC fits perfectly is precisely that of international settlements between Central Banks/countries - such settlements typically involve the large-scale transfer of assets, they're not especially time-sensitive, and the transfer cost is inconsequential (and in the case of BTC negligible against the values transferred).
So I'm still left wondering: Why the aversion?
Fear? Lack of control by recognised "authorities"? Their argument that it's "too volatile" is largely untrue over the past year or two, with Bitcoin showing no greater volatility than any of the world's fiat currencies, so I doubt that's the factor at play.