Caveat, national currencies are secured with economic power, a system of law, culture, military power, etc etc. It is a bit different. They aren't perfect either but there is more supporting what people "think" they are worth here.

Bitcoin has it own culture and history, but it is still a baby. I do think bitcoin is a bit more like Gold, although Gold has real uses so that is still a bit of a rough comparison.

Bitcoin does not support monetary policy though. If you read the Wikipedia article on the Gold standard, historians and economists seem to agree that the inflexibility to increase currency supply to stimulate the economy made the great depression much worse than it could have been without it.

Great point, I think bitcoin might end up serving a role more like a weird bond. I don't think it will ever serve as a currency with the high fees and lack of usability for 99% of the population.

Don't forget that whole pesky "have to pay taxes to the state in their chosen currency under threat of the state monopoly on violence" thing. It is somewhat touched on in your first sentence, but at the end of the day, if you want to engage in productive economic activity in a particular jurisdiction, you must render what is Caesar's unto Caesar - and Caesar demands his preferred fiat.

Taxes are good, they pay for civilization and the platform we all operate within :)

I know people hate hearing that, but it is the truth. I am frustrated with how high they are on some things, bad spending, etc. But at the end of the day look around at what we have built as a civilization. That is from the collective pooling of money to build the entire system.

I tend to agree. I sometimes fantasize that it were otherwise, but I don't think it's really possible to maintain a society of any size or sophistication without a state to do a lot of the fundamental things that keep things moving.

Perhaps there are people who don't want the civilisation and platform we operate in to be paid for.

Then maybe they should go try to find another place to be together, rather than trying to wreck the civilization the rest of us think is pretty important and helpful.

For sure! No platform is perfect, and our current one needs a TON of improvements.

I feel like you're undervaluing the role individuals and private enterprise have on civilization. If there were just a bunch of roads and power lines without homes and businesses it wouldn't be much of a civilization.

I value individuals and capitalism a great deal. But without civilization and a platform that shapes their energy they are just more ants in the ant farm. The platform is what gives them the ability to change the world. That is built in a symbiotic relationship but it seems like we forget the taxes/civilization part and worship individuals to often.

Known as https://en.wikipedia.org/wiki/Chartalism, by the way. :)

While these risks clearly _do_ apply to traditional currencies, I do think, as an investor, it's worth considering market cap (as a proxy for "social belief in") and history of stability.

Bitcoin's market cap is probably (factoring in permanently lost coins) something like $750B, which makes it a bit smaller than, say, the Swiss franc, and its history of stability is much, much shorter.

Is there a term for something between Metallism and Chartalism for the value of currency coming neither from innate value nor state backing, but rather our belief in it?

That's where I land I guess.

Magicism?

Chartalism is more of an absolute. I don't claim that money has value only due to this reason, just that it is a significant component of the mass delusion.

Agreed, chartalism as the only explanation for assigned value is clearly empirically false. But as one mechanism, or perhaps one of the stable or reliable mechanisms, is somewhat convincing to me.

At first glance ransomware might seem like a perfectly sufficient reimplemention of the taxes/violence thing. But that breaks down completely when you realize how willingly that particular Caesar would be taking whatever form of payment offered. I suppose it fully reverts to the theoretical grounding on taxes/violence of fiat once that ecosystem of shell consultancies set up for embargos and tax deductability comes into play.

Not only taxes. In a lot of countries private businesses are required to accept the local official currency as well.

> I do think bitcoin is a bit more like Gold, although Gold has real uses so that is still a bit of a rough comparison.

I agree with everything except that last part is understated. Bitcoin is like gold with the only difference that gold has functional uses, whereas Bitcoin is entirely replaceable and can be forked and duplicated.

That's like saying the $ or any other currency is entirely replaceable. What bitcoin has over any other cryptocurrency is the massive mining power behind it, making it the most secure. https://braiins.com/blog/how-much-would-it-cost-to-51-attack...

So if you create another cryptocurrency which could use the same ASICS as bitcoin and you convince a lot of miners to switch then maybe.. it could be replaced but that is a tall ask.

> That's like saying the $ or any other currency is entirely replaceable.

No it's not. That's just another reduction missing the point.

If the dollar was to be replaced, a new currency would be issued, there would be a period of trade-in for old currency, all systems of governance, regulation, etc would recognize it and issues could be handled.

Gold would still be used for everything from electronics to satellite coating to who-knows-what.

In the case of Bitcoin it would just disappear. You're arguing it's hard to replace because of its participants, which may be true, but is far less likely than the participants in the dollar.

Some businesses dependent on it and a lot of individual participants would lose their value in their wallets, and that's it. Believing in Bitcoin is betting on that being enough to prop it up. Gamble accordingly.

Any property you hold is gambling to a certain degree, if you buy a house you gamble that the society you bought it in will provide security for it and based on the laws of that society you will be able to keep it.

You gamble your property tax won't jump 50% or that police will stop rioters from stealing from it. I admit it is a much smaller gamble than bitcoin but it is still a gamble.

Holding your savings in $ is a bigger gamble than buying a house and some would argue it is a bigger gamble than holding bitcoin.

> Any property you hold is gambling to a certain degree

The degrees are what separates milk from butter, or a paper box from a house. That is the entire point. If you ignore the degrees to which something is different from another, then sure, everything is everything else.

> Holding your savings in $ is a bigger gamble than buying a house and some would argue it is a bigger gamble than holding bitcoin.

Perhaps, I'm not one of them. Time will tell.

What would you propose the actual mechanism is for these giving fiat its value? Simply these things giving people more faith in fiat? Minimum wage laws, target interest rates and federal reserve shenanigans?

I think if anything all that give me less faith overall than something maintained by people who operate a currency for the love of it.

The value of my past work being tied to the success of something I have no control over, a machine that murders innocent people in drone strikes across the world?

That's not something I want to have faith in.

> Simply these things giving people more faith in fiat?

Yes, it rests largely on the trust and faith you have in the currency. At a basic level, you at least need to trust that your money won’t lose half its value overnight. Otherwise, you’d just use another currency; there are a couple of examples in recent history. Now, whether your faith is justified or not is another question. Then you can look at the size of the economy or the power of whatever is backing the currency.

> The value of my past work being tied to the success of something I have no control over, a machine that murders innocent people in drone strikes across the world?

Such is the world we live in, whether we like it or not. As a side note, a lot of the drone murdering is done more or less transparently for economic reasons. Yes, a government powerful enough to project power on the other side of the planet to secure a good supply of cheap oil or to ensure some form of hegemony does inspire confidence in its currency. I wish it weren’t so, but here we are.

All of those are memes too.

This is often repeated, but it always ignores that there are state-level actors (often called a "state") propping up currencies, often supported by central banks. In this regard Bitcoin is definitely not "like any other currency".

This is by no means exhaustive, there are a myriad of differences

Zimbabwe has entered the room. Also had a central bank before the last round of hyperinflation/reset. One could argue that the lack of a central bank is a feature. What other differences would would you imagine distinguish bitcoin from central bank currencies?

“One state is doing terribly” (or even a handful of them, before someone mentions the Weimar republic) really is not equivalent to “it is impossible for a state to do it well”.

I would counter that Bitcoin is not a currency. A currency is used as a medium to exchange goods/services so you don't have to take goats down to the market to purchase seed.

It operates more like a stock than a currency and can be moved by any person/firm/entity that has a few billion dollars. I would venture a guess that the number of individuals using bitcoin to purchase goods/services is less than a couple percent of the total number of people that have bitcoin.

It is a currency, a fairly new one that hasn't gained mass adoption yet, with many problems (tx cost and tx/s limits) but people can and do use it to buy stuff. My energy provider in Romania lets me pay my bills with bitcoin.

That's like saying any new social media website you create isn't really a social media website because it has only 10 users.

If a currency hasn't gained mass adoption, I don't believe its a currency. I can claim I have a currency of green marbles and my son lets me buy candy from him with green marbles and he buys candy from a friend with green marbles so therefore its a currency.

I'm not saying bitcoin can't get there, its certainly possible, but when the majority of use cases use terminology like "holding", "investing", "trading" its treated by users as more of a security/equity than a currency.

You can pay for things with Cypto using PayPal, right now, and for a while now.

It's a currency. I've paid for many things with crypto.

https://www.paypal.com/us/smarthelp/article/how-to-use-crypt...

we might be underestimating the market for drugs as that seems like the primary use

If you demand a currency to pay taxes and fines, there is always going to be people that need to acquire it.