USD holds value because the government says it does. The government holds authority because they have a monopoly on violence. Or, if your less pessimistic, it's because people believe in the government.

Exactly

To paraphrase a quote attributed to Stalin - how many divisions does Satoshi have?

But then you have to explain why gift cards are worth something. The answer is, because someone will give you something for them.

Meanwhile there are a large number of entities that have already entered into long-term contracts denominated in cryptocurrencies and any of them would pay you something for it when they need to satisfy their obligations.

That doesn't mean the value never changes, but that's also true of government-issued currencies. That's what inflation is.

> But then you have to explain why gift cards are worth something

gift cards are vouchers

You pay $30 to the store so that someone else can spend the $30 in that store.

It's a certificate, not a currency, not a store of value.

It’s “buying power”

  gift card
  noun [ C ]
  uk /ˈɡɪft ˌkɑːd/ us /ˈɡɪft ˌkɑːrd/

  a card that can be exchanged in a shop or on a website for goods or services of the value that is printed on it

it's literally the same thing as cash, a check or a voucher.

it is also entirely dependent on the same external factors of cash, vouchers and checks: inflation, exchange rates, etc.

because it's simply a certification that you can spend that amount of money, in that currency, in that shop and that's it.

Also: a Patek Philippe is buying power as well

everything that can be exhchanged for something else can be defined as "buying power"

but an American Express or a gallon of water in the desert are buying power too.

the definition is too broad to be useful.

I’d counter that buying power is the only metric that matters. All these abstractions of buying power may distract and distance you from this most important metric - often to the benefit of companies and nation states.

> I’d counter that buying power is the only metric that matters

I'd counter that protection of buying power over long periods is what really matters.

My CD collection had an enormous buying power in the 90s, now it's almost worthless.

I reckon one cannot rely on buying power of CD or DVD or VHS.

> often to the benefit of companies and nation states.

In this regards people, companies and nation states interests are usually aligned, i.e a stable currency that provides protection against wild fluctuations and retains its buying power and its usefulness.

Unless you are an enemy of the people, I don't see why someone should not like it.

Good points. Consider all the different investment instruments out there. Abstractions on top of abstractions on top of abstractions of buying power. Yes, a stable currency is desirable. But volatile abstractions are also beneficial to powerful entities.

its a loan to the card issuer

an interest free loan, that's why it has "gift" in the name.

It works the same way as lending the money directly to a person, gift cards are simply more convenient to handle and are safer than cash, but other than that it's just a gift in the form of cash, no matter how many intermediaries are between the sender and the receiver, the input and the output will always match exactly.

If, for example, I give my friend Alex $20 to buy something for his little daughter but Alex uses it to bet on a football match and loses it, Alex has to take some money from his pocket and then buy the gift with his own money. Which is not different than saying he spent his money on the bet and bought the gift with the money I gave him.

If otherwise Alex wins, he will still buy the gift, but he will also have increased the initial sum by an x% which he can keep (or maybe try his luck again)

Buying a gift card is the same process, the company holding the money at one point has to give back something of the same exact value, it doesn't matter what they do with the money in between, what matters to the sender and the receiver is that the amount printed on the card is fully available at the check out (which is just lik getting the amount in cash and then paying with that)

Do gift cards go up & down 50% in a year and have large transaction costs?

Some of them do. Suppose the issuing company gets into some trouble and people fear they won't be able to make good, but then later they take care of it.

For that matter some government-issued currencies do that too.

when you say up and down you are referring to buying power. And yes, the buying power of a $20 grocery store gift card has gone way down the last few years. Consider how much milk and eggs you could buy in 2018 compared to today.

Gift cards are tethered to the dollar, with a discount, because they are essentialy unsecured loans to the gift card issuer.

I also would point out that very few if any people would point to gift cards as a durable store of value and new world currency.

Totally agree. I only meant to illustrate that all abstractions of buying power fluctuate in their ability to secure basic needs - food, water, shelter, supplies.

And the "tethered to the dollar" part is important. They are basically liquidity/risk discounted dollars, as are many of these examples of "buying power".

No one is tethering their Rolex price to BTC. No one is tethering their home purchase budget to BTC.

Why? It's all tethered to your income, in dollars, and your savings presumably mostly in dollars as well.

Even "jug of water in the desert" is tethered more to dollars than BTC because what are you more likely to have in your pocket, and why?

Dollars are tethered to the government taxing us in dollars, so we get paid in dollars, and our government has nukes & aircraft carriers and such. Everything then gets tethered to it because thats what we get paid & save in.

BTC is tethered to nothing, and there is no natural value you can back into such that you can justify any price level of it.

Other than its usefulness as "untraceable" (what people think, but not what is true.. it is more like "unblockable") cash, and for money laundering/drugs.. it is a trading instrument for punters.

> No one is tethering their home purchase budget to BTC.

Whether you tether the purchase of a home to bitcoin or the US dollar is more a state of mind, tribalism, etc. Both the US dollar and bitcoin have no intrinsic value. They both derive value from a human belief system - I believe they have value and that others believe the same. They are both just networks in that sense.

> Even "jug of water in the desert" is tethered more to dollars than BTC because what are you more likely to have in your pocket, and why?

This is silly. But to add to the silliness - you could have bitcoin in your brain. Just memorize your words.

> Dollars are tethered to the government taxing us in dollars, so we get paid in dollars, and our government has nukes & aircraft carriers and such

Now THIS is truly different. The US dollar has violence on its side. I concede that bitcoin is a peaceful currency - at least thus far. Hopefully it stays that way.

> Other than its usefulness as "untraceable" (what people think, but not what is true.. it is more like "unblockable") cash, and for money laundering/drugs.. it is a trading instrument for punters.

This is political bias and parroting talking points of anti-bitcoiners. While your other points are thoughtful, this is not. Why not just call bitcoin a butthead?

> USD holds value because the government says it does.

so how do you explain dollarization of failed economies? Such as lebanon, or venezuela etc?

Surely, you're not saying that the US gov't somehow is exerting violence on another country to make the dollarization happen.

The people in Lebanon and Venezuela trust that the US government will continue to exist and that they will either meet with people who want to do business with it, or will meet people who assume they will meet people who will, etc. So they have value.

So if people trust that Bitcoin will continue to exist and they will meet people who want to do business with it etc...

except bitcoin is one of the worst choices for that purpose

even the Iranian Rial is more reliable

can't edit anymore, the point is Iranian Rial is accepted by 90 million people in Iran, all the Iranian businesses and the Iranian government, there are much less bitcoin users, technically there are a lot more accounts, but that doesn't mean real people or real businesses.

Not surprisingly Iran and Russia are teaming up to create a new stablecoin and not adopting BTC, because using BTC right now is literally the best way to get caught (for example infringing sanctions).

The people that can afford to trust and use bitcoins for exchanges are the people who do not have to fear the surveillance of State actors/secret services/national agencies(NSA,FBI,Europol,China's central bank,...)/etc and that would be much better off using another FIAT currency (USD, EUR, etc.)

That's the only thing that gives Bitcoin value. So, in a crisis it can become false for some people, then spread to the people they know, etc.

With dollars, all Americans need them. So do international companies that transact with Americans. If you think the US government will hold, then that belief will be true, it's only a question of the number of steps.

> in a crisis it can become false for some people

it depends on what the crisis is, and whether this same crisis also makes people believe that the US gov't will not hold.

In general yes, but with the difference that the dollar (or other "real" currencies) are encoded in law to have a value with the whole state backing it.

US Dollar has value largely because the United States government is legally obligated to accept it to settle debts.

Also, any debt in the US can be paid with dollars. They even printed "for all debts, public and private" on the bills.

Yes that is one small dimension of why the dollar is valuable. But a far bigger part is the fact that using dollars enters you into the US financial (and by extension legal) systems which has been far more stable, reliable and predictable than other systems over the last century. For a point of reference consider Switzerland, whose currency is a minor reserve currency and whose banking and legal systems are globally appreciated, despite the fact that they have no power projection and a tiny population in comparison to their financial markets. The Swiss central bank has even deviated from their usual stable policy since 2008 and yet still they see inflows.

I have to agree, fiat currency seems very similar to bitcoin. Its a manmade currency essentially that is backed by nothing.

Bitcoin appears to be the next phase of that manmade currency.

Also the US government threatens (and occasionally delivers) military and financial harm on entities that refuse to use USD for certain transactions.

Yes, this is the key dimension of the "currency" front. But bitcoin "advocates" (a term I'll use for diplomatic purposes) say that within a context that implies that is somehow a low bar to clear or just a consquence of the monopoly of force or somehow morally questionable. But becoming something people trust (or at least have some amount of confidence in multiple dimensions in) is one of the most difficult things for any new asset class or medium of exchange.

Some of the main ways currencies and commodities get there are value stability (sticking within a certain band with <100% annual swings), wide acceptance and utility. After 10 years of many techno-smart people trying to engineer cryptos to become that we are nowhere near any of these promises being fulfilled.