Indeed. A thought experiment: say the US government created a USD-prime currency that floated freely from USD. You could still use the USD in private transactions, but the US government would only transact and tax in USD-prime. What would be the fate of the original USD?

My belief that it would go to zero. I’m curious whether “fiat is backed by nothing” proponents would disagree.

Both fiat currency and Bitcoin are backed by the same thing: mass belief. An incredibly powerful thing.

Yep, but my point is that one is mass belief that the US government will continue wanting USD, the other is a mass belief that other people will continue wanting BTC. Both could be right, both could be wrong, but they are not the same proposition.

Don't forget that the US gov itself is also propped up by mass belief. Its authority rests in the people.

Now you might say "actually its authority rests on people with guns", but that's only to the extent that the people with the guns believe in the governments's authority to tell them who to point them at.

Underneath all is belief and sentiment.

Gold and silver became money for similar reasons (probably). Kings and Emperors found that supplying their armies was much easier (especially in peace time) if they used the method of taxing the population in gold and/or silver and then using that to pay their soldiers who would supply themselves on the open market. That way you did not have the standard problems of a planned economy. The peasants have now need for gold, so they would not need/want to trade stuff for it unless they were forced to have some to give to the tax man. It's much more complicated than that, of course, but like fiat money, gold and silver do not have much intrinsic value besides using it to show off your wealth.

Maybe they didn't have any intrinsic value in the past besides looking pretty but in the modern era both gold and silver have industrial uses. They are not just stores of value. One could also argue that both metals also had intrinsic value in the past since both metals were used in jewelry and various items to make them look good.

The industrial usefulness is an irrelevant byproduct when considering gold and silver as an investment.

Put another way, if people lost faith in gold as an investment tomorrow, and the value fell to the economic value of the industrial use cases, investors in gold would be ruined.

I’ve never thought of it this way. I wonder what the price of gold and silver would be if they were strictly used for manufacturing and jewelry instead of speculation and store of value?

It is not irrelevant if the price is based on anything else besides raw speculation. Gold and silver have always had utility outside of trading.

>It is the only thing the government accepts for tax payments. Given that you can be arrested for not paying your taxes it is "backed" by the barrel of a gun, a threat to your very being. In one sense this is the only real thing there is.

That's more than enough reason why we should try something else. It doesn't inspire a lot of confidence. By that reasoning, the USD has the same sort of backing as the Venezuelan Bolivar. So what's to stop the prior from becoming like the latter?

One has more guns(planes, tanks, etc) than the other.

Ok are you saying that is a good reason to invest in it? I always hear this and it seems like if force or military force is your only bastion of reason left to invest in a currency you should have left it long ago.

This argument doesn't really refute the argument for bitcoin as digital gold. It's not as though you can't exchange bitcoin to pay your taxes.

Gold has an intrinsic use value. Maybe not as high as its current monetary value, but it isn’t zero.

Bitcoin has no floor. You can only exchange bitcoin for taxes if someone wants the bitcoin.

Gold is intrinsically scarce. You can't fork gold and have Gold 2.0 which has the exact same properties of the original Gold.