Governments certainly will attempt to issue IOUs backed by bitcoin. And some people will accept them.

If you are willing to trust your bitcoin to an exchange, as many people are, you should certainly be willing to trust your government.

But a lot of people hold their bitcoin offline, in hardware wallets, in cold storage. It's not that hard.

Another feature that bitcoin has, that gold does not, is proof of reserves. Barely any exchanges do this, but this will change with time.

Proof of reserves pretty much makes bitcoin IOUs for the government useless. You can't cheat by printing more.

I think far fewer people will trust their government with bitcoin under a bitcoin standard, than trusted their government with gold under a gold standard.

Particularly after a few governments default.

I discuss this more in depth at

https://web.archive.org/web/20210116135412/https://taaalk.co... (long)

Selection bias. The sort of people interested in BTC tend to be the ones who already don't trust government.

I don't expect governments to cater to the mistrustful, so I don't anticipate governments adopting BTC as their core currency in my lifetime.

Yeah that’s fair, if a few govts default who knows how that’ll shake things up. Thank you for the thoughtful response!

Thanks for having an open mind :)

Why would people accept bitcoin IOUs when the real thing is more interoperable, saleable, private etc.etc. and of course doesn't require trust in the issuer. The answer is force [0]

[0] https://en.m.wikipedia.org/wiki/Executive_Order_6102

The same reason people accept IOUs for literally anything else: credit. It is actually extremely useful to be able to borrow productivity from the future and use it today.

Yanis was talking about the government central bank, under a time of stress.

Without force, will the government have enough credit?

This is what allows the big re-armaments before / during a war, btw. See for instance Hjalmar Schacht's mefo bills in

https://en.wikipedia.org/wiki/German_rearmament

In this case stealth rather than force but same principle. It's also a lot harder to do stealth with a non-inflating currency that has proof of reserves.

Yanis was talking of lending.

Lending in Bitcoin can happen in two ways: the first is through imaginary Bitcoin (“borrowed from future installments”) in a layer 2, which is what he was describing, although I agree that, unless the government mandates accepting money from that layer, it is hard to make it systemically used.

The second one is to only lend coins that you have. In a deflationary monetary policy, lending is strongly disincentivized, as it would need to beat both the rate you would gain from the value of your coins increasing, and the default risk.

Much of monetary policy is about finding a balance where financial institutions will be incentivized to lend despite the risk (which is already a hard sell even under inflation!) without nudging prices.

It is plausible that a Bitcoin economy in stablestate (once coinbase transactions are no longer) would have very little lending. Is it outside of the realm of possibilities that, in such a world, innovation may decrease, and legacy becomes a more relevant factor for wealth?

I think a bitcoin economy in stablestate would have about the same amount of lending as a gold economy under the gold standard. There is enough history during gold standard periods to have some idea how this would be.

https://en.wikipedia.org/wiki/Gold_standard

These times weren't perfect, but no time ever is.

In short there would be less lending than under fiat with MMT, but certainly not zero lending. On the plus side, much more stability, and no hyperinflations, ever.

Seems worth it to me.

> [Bitcoin will have] much more stability [than fiat]

Why would it reach more stability?

Historically, cryptocurrencies have been significantly more volatile, not less. Arguments were made back in 2013[0] that:

> this volatility will decrease as Bitcoin markets and the technology matures

But volatility has remained consistent over the past 10 years[1], seemingly uncorrelated to its adoption, market cap, and coin supply. In the same period, USD was an order of magnitude better[2].

[0]: https://web.archive.org/web/20130916231759/https://bitcoin.o...

[1]: https://vlab.stern.nyu.edu/volatility/VOL.BTCUSD%3AFOREX-R.G...

[2]: https://vlab.stern.nyu.edu/volatility/VOL.DXY%3AFOREX-R.GARC...

Valid point. As cash and savings there's no reason to accept the IOU. At which point you need access to credit you can move to that world.

All crypto "held" on exchanges are just IOUs. Traded as derivatives and no guarantee it's not fractional-reserve.

The IOUs would be more private since your transactions aren't public. Likely faster with better user experiences too, per Moxie's argument for why blockchain systems already look more like that.

This was clearly a due process violation by the same man who set up concentration camps for Japanese Americans. He packed the Supreme Court so he could get away with it.

The sAme reason people use Coinbase.

I think it's more due to force than trust.

I don't particularly love the USD, but if I don't pay my taxes in USD, I'll go to jail.

In the hypothetical future world where Bitcoin has replaced other currency, trust in the central bank is probably gone already (due to hyperinflation or devaluation most likely).