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Topic: Bitcoin can never become a currency. Part 2: reward distribution. (Read 751 times)

legendary
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You again come up with mutually exclusive starting conditions

There is no good medium of exchange on par with fiat currency that would be at the same time as good a long-term store of value. Basically, you have just invented a perfect money, instantiated it (which you can't), and then pitted it against a real fiat currency that is always inflationary and thus can't be a good long-term store of value. Indeed, the fiat currency would lose and collapse, but this approach is meaningless as one can always imagine something perfect, not possible in real life, and ignore this fact

What’s the problem?

All your reasoning about Bitcoin taking over fiat can be reduced to and is essentially a tautology, like A is better than B because A is better than B, couched as a question, i.e. is A better than B if A is better than B?

Simply put USD against the national currency of any shithole country and USD will surpass the latter in any aspect.

Bitcoin itself could be such a currency, had we solved all technical issues

It is not a technical issue

You can't resolve the internal, innate inconsistency and antagonism between money functions. Put differently, you can create a good store of value (e.g. gold) and you can create a good medium of exchange (e.g. the American dollar). WTF, you can even create a so-so currency somewhere in between. But you can't create a currency that would outshine everything out there both as a good store of value and as a good means of exchange. You can only hypothesize or theorize about this kind of money at your leisure time
copper member
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    This kind of topic really never gets old. It still pulls my interest no matter how predictable the answer would be or the views of most of the people who indulge in a conversation regarding this topic. What I like about this post though is that it is made easier to understand for dummies like myself. My opinion about this still stays the same as always though; that bitcoin will be very difficult to use as a day to day currency similar to fiat. That's just how I see it. dogecoin is a good candidate though, although I don't know if others would agree.

Edit: I liked the post so I'll be giving a merit. Hope to see the continuations of this topic soon.

You seem to refer to technical issues of Bitcoin. It will be difficult due to drastically inferior user experience, as Bitcoin is obviously not up to the task to compete with conventional payment infrastructure on the consumer level. Solving all technical issues takes a great effort and i've been racking my brain for quite a long time trying to develop a solution to all problems simultaneously.

The truth is, however, that even leaving all technical issues aside, Bitcoin cannot reach the initial goal due to the inherent problems of its economic model, which we are discussing in this thread.
copper member
Activity: 62
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You again come up with mutually exclusive starting conditions

There is no good medium of exchange on par with fiat currency that would be at the same time as good a long-term store of value. Basically, you have just invented a perfect money, instantiated it (which you can't), and then pitted it against a real fiat currency that is always inflationary and thus can't be a good long-term store of value. Indeed, the fiat currency would lose and collapse, but this approach is meaningless as one can always imagine something perfect, not possible in real life, and ignore this fact

What’s the problem? Simply put USD against the national currency of any shithole country and USD will surpass the latter in any aspect.

Bitcoin itself could be such a currency, had we solved all technical issues. Simply make a cryptocurrency that provides:

1) free transactions;

2) no censorship;

3) 10 seconds finality;

4) scalability;

5) financial privacy.
copper member
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It is the effect that counts here

And this effect is present even when two fiat currencies are competing against each other that don't have any intrinsic value (other than transnational utility). You may argue that it is not Gresham's Law, and you would probably be right, technically speaking. However, if there is such a thing or phenomenon as "bad money driving good money out of circulation" (irrespective of the form of money, i.e. whether it is sea shells, hard currency, fiat, or whatever), we have to deal with it somehow and give it a name

If you are referring to the underlying principle of Gresham’s law, which states that people prefer to dispose of a less valuable asset in the first place, this will hold in many scenarios and certainly produce an effect on the subject of discussion as well. This, at the same time, doesn’t necessarily lead to the outcome that Gresham’s law predicts.

Moreover, all known modern currency substitution scenarios showed preference for good money in the long run. We saw many cases of dollarization, but I’ve never heard of bolivarization or rupeezation. You can also check out the political crisis in Venezuela and see that even Bitcoin, with all its flaws, was capable of substituting the national currency for transactional purpose to a certain extent.

Here’s an extract from an article on dollarization of Cambodia

Quote
The riel is used by the Government and the National Bank of Cambodia for paying their employees, and is preferred by the general public for small transactions. It is also more in use in rural areas.

The dollar serves all functions of money, since it is used as:

• a valuation instrument (prices being often indicated in dollar),

• a settlement instrument (transactions being mostly settled in dollar cash), and

• a saving instrument. The dollar is used by both residents and non residents. Foreign firms, NGOs, agencies and embassies spend in dollars, including paying their employees.

Banks also prefer to carry out transactions in foreign currency. In December 2006, out of 18 banks, 8 did not accept deposits in riels, although the riel was declared by law as the country’s legal tender. Most loans were also denominated in dollars (97%). Out of 18 banks, only 4 granted loans in riels, for limited amounts.

Most banks also had their capital denominated in dollars.

Where is Gresham’s law?
sr. member
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Blue0x.com
     This kind of topic really never gets old. It still pulls my interest no matter how predictable the answer would be or the views of most of the people who indulge in a conversation regarding this topic. What I like about this post though is that it is made easier to understand for dummies like myself. My opinion about this still stays the same as always though; that bitcoin will be very difficult to use as a day to day currency similar to fiat. That's just how I see it. dogecoin is a good candidate though, although I don't know if others would agree.

Edit: I liked the post so I'll be giving a merit. Hope to see the continuations of this topic soon.
legendary
Activity: 3514
Merit: 1280
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1) It is equally good as a medium of exchange.

2) It is a good long-term value storage

You again come up with mutually exclusive starting conditions

There is no good medium of exchange on par with fiat currency that would be at the same time as good a long-term store of value. Basically, you have just invented a perfect money, instantiated it (which you can't), and then pitted it against a real fiat currency that is always inflationary and thus can't be a good long-term store of value. Indeed, the fiat currency would lose and collapse, but this approach is meaningless as one can always imagine something perfect, not possible in real life, and ignore this fact
copper member
Activity: 62
Merit: 17
I heard Gresham's "law" is for commodity money with intrinsic value, like tobacco. Mr. Free to choose said (sorry, I forgot the link/source) in the past tobacco was widely used in the US as money, and in the end, people spent the low-quality tobacco and saved the high-quality tobacco. This behavior droves out high-quality tobacco out of circulation.

If that "law" can be applied in fiat, then Indonesian Rupiah will push better money out of circulation, and you guys will use IDR! I'll be happy if that happens, lul.

That example holds both required properties. First, a tobacco of different quality is exchanged at the same rate per weight or, in other words, has equal nominal value. Second, tobacco can be alternatively used for its intrinsic value: just be smoked. That’s why whenever a smoker gets his hands on a high quality tobacco, he leaves it for himself to smoke, and uses a lower quality tobacco for further exchange. As the circulation continues, good money is literally burned and only bad money is left in circulation.

Gresham’s law’s practical implementations involved commodities mostly, but it also worked with a pair of paper/commodity money. I can’t recall any practical example of two paper currencies in the fiat era though.

Could you give me one example in the present era?

I never bought something other than using currency (physical + digital + virtual) and Bitcoin.

Money is the most convenient MoE, but on certain occasions other assets can provide some benefits that can make them acceptable as payment, given that they are sufficiently liquid.

For example, we are both traders using the same broker. I owe you some $, but I don’t have any free cash, only stocks. I offer you to choose from a list that I’m ready to trade and you pick up a stock that you wouldn’t mind adding to your portfolio. This may look like simple barter, but there are some interesting details:

1)   You do not actually need the exact stocks I offered and wouldn’t buy it on a regular occasion.

2)   You found them liquid (easily and quickly converted into other assets without a loss of value), which is why you accepted my offer.

3)   The exchange happened, because in that particular case stocks featured a lower cost of transport per unit of value than cash (had I converted them into cash, I would lose more on conversion. The same goes for a reverse conversion on your side), so we lost less value during the transaction.

Roughly the same can be applied to a transfer in BTC. In most cases, money is better to transfer value, but sometimes payment in BTC provides certain benefits and we both agree to use it for exchange. The ideological motive also plays a significant role for BTC.

A more common example is bearer instruments. Since they provide anonymous transfers and can pack a large value in a small volume of paper, they are often used as MoE in illicit activities, although their role tends to diminish, as they are oppressed by the AML legislation.

CMIIW, MoE is the most substantial factor in determining whether something is money or not.

Indeed, MoE and accounting functions distinguish money from other assets. The boundary, however, is not strictly predetermined. For example, according to Keynes, when an economy is caught in a liquidity trap, money and bonds become near-substitutes. We can also launch an inverse scenario, making non-cash assets perform the MoE function. Here is an interesting thought experiment on the matter.
legendary
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Which is otherwise known as Gresham's Law. People will save Bitcoin and spend fiat, with bad money driving good money out of circulation under your hypothetical circumstances
I heard Gresham's "law" is for commodity money with intrinsic value, like tobacco. Mr. Free to choose said (sorry, I forgot the link/source) in the past tobacco was widely used in the US as money, and in the end, people spent the low-quality tobacco and saved the high-quality tobacco. This behavior droves out high-quality tobacco out of circulation

It is the effect that counts here

And this effect is present even when two fiat currencies are competing against each other that don't have any intrinsic value (other than transnational utility). You may argue that it is not Gresham's Law, and you would probably be right, technically speaking. However, if there is such a thing or phenomenon as "bad money driving good money out of circulation" (irrespective of the form of money, i.e. whether it is sea shells, hard currency, fiat, or whatever), we have to deal with it somehow and give it a name
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Which is otherwise known as Gresham's Law. People will save Bitcoin and spend fiat, with bad money driving good money out of circulation under your hypothetical circumstances
I heard Gresham's "law" is for commodity money with intrinsic value, like tobacco. Mr. Free to choose said (sorry, I forgot the link/source) in the past tobacco was widely used in the US as money, and in the end, people spent the low-quality tobacco and saved the high-quality tobacco. This behavior droves out high-quality tobacco out of circulation.

If that "law" can be applied in fiat, then Indonesian Rupiah will push better money out of circulation, and you guys will use IDR! I'll be happy if that happens, lul.

A lot of sufficiently liquid assets can be used as a MoE, which doesn’t make them money.
Could you give me one example in the present era?

I never bought something other than using currency (physical + digital + virtual) and Bitcoin.
CMIIW, MoE is the most substantial factor in determining whether something is money or not.
copper member
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And how's the "demand for Bitcoin to the saving side" is going to hurt fiat?

Moreover, the conclusions you arrive at should hold true even without Bitcoin. According to your assumptions and premises, any fiat currency should quickly collapse just because it is inflationary as inflation causes an increase in money velocity, the latter pushes inflation rates even higher, and the hyperinflation death spiral sets in. But it doesn't happen in real life unless the government goes nuts with printing money, and then it is just hyperinflation caused by excessive money printing that has little to do with changes in money velocity

Fiat doesn’t collapse, because there is no asset to compete with. Normal inflation has nothing to do with that.

All right, let’s approach it from another side. A fiat currency is the only perfectly liquid medium of exchange, which is why it stays at equilibrium with better value-storing assets. Normally, the distribution is the following:

1) We use money for transactional purpose, because other assets are not widely accepted, conveniently transferred and because of the legal tender.

2) We use money for short-time savings, because commonly the rate of inflation doesn’t bother us at a short distance.

3) We use money for long-term savings in a less liquid form but with interest (a saving account) in small amounts.

4) We use other specific assets for long-term savings when the value is high.

Money has limited value storage capabilities, but value-storing assets are not as liquid, which is why both are in demand. Everything changes when we add another asset with the following properties:

1) It is equally good as a medium of exchange.

2) It is a good long-term value storage.

In its current state, Bitcoin doesn’t satisfy the first condition, which is why nothing happens. In my thought experiment, I assumed that it actually became a currency, hence was capable of performing the transaction function on par with fiat.

Now imagine that we have an exchange rate of a fiat currency (FT) and Bitcoin (BTC) set to 1:1 initially. You get payed 100 in FT and I get paid 100 in BTC. Say we both spend 80 and save 20. We both can spend our money equally, because they are equally accepted. When it comes to savings though, I can easily keep it in deflating BTC, while you do not wish to keep it in inflating FT and seek to convert it into BTC.

When I’m paid next time, I assume the following: I can spend 80 and keep 20 of my BTC as usual, but I can also spend 60 and sell 20 to you for 22 FT. You will accept an unequal exchange, because otherwise you risk losing more as a result of FT’s devaluation. With the help of speculations, I gain 2 extra FT to spend, which is why it’s a bargain for both of us.

You go to your employer and say that you no longer agree to get only 100 FT and demand to pay you either 100 BTC, or 110 FT, because BTC is appreciated more. Your employer agrees and pays you 110 FT next time. He also raises the price of his goods in FT by 10% to compensate for the growing payroll. Besides, he is aware that the market exchange rate of BTC/FT shifted by 10%.

You get your 110 FT and want to repeat the previous exchange, but I no longer agree to sell 20 BTC for 22 FT. I’m aware of the prices’ correction and such an exchange in no longer profitable, which is why I demand 24 FT for my 20 BTC. You conclude that it’s better to pay 24 now, than to wait until it grows to 26. The next time you get paid, you just go and straight exchange all your FT into BTC, because it can lose value before you will be able to spend it. How are you going to escape the spiral now?

The problem is that it’s a one way train. BTC is always demanded by FT holders, but BTC holders have no interest in FT, because FT can give you nothing that BTC cannot. With an infinite demand for BTC, there is no equilibrium where the exchange rate can stabilize, which leads to the depreciation of FT down to zero.

Why doesn’t it ever happen? Because there is always a two way demand between different assets. First, we buy a value-storing asset for money, but then we have to exchange it back to spend the value. When a demand comes from both sides, the exchange rate balances around an equilibrium.

I hope now it is clear, I won’t be able to find strength to explain it anymore.

Which is otherwise known as Gresham's Law. People will save Bitcoin and spend fiat, with bad money driving good money out of circulation under your hypothetical circumstances

No, for God’s sake, please, leave poor Gresham alone. The process I refer to is only temporary. The Bitcoin’s velocity will drop, while fiat is still capable of satisfying the transactional demand at least to some extent. As the fiat currency inflates and dies, bitcoins will return to the circulation, because there will be no alternative left.
legendary
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My gold or my farmland never become a currency still I traded them then what will be the problem to occur if I try to trade bitcoins for dollars or for another product/services. I mean bitcoin never need to be a currency to exist along with us; it can be what it is today forever to exist with us and to serve us. I read by 2014/2015 itself some European countries started considering bitcoin as digital property. I guess that must be the most appropriate perception on bitcoin.

Not able to become as a pure currency will not block any of bitcoin's growth in my opinion. By considering through the high volatile nature of bitcoin, I guess it is most suitable to be considered as a property. Probably after bitcoin may attain a stable price like how gold is doing these days, maybe bitcoin will start existing as a currency but till then we will keep using/spending bitcoins for whatever purposes we need regardless of it is a digital asset or anything.
legendary
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You basically assume that the fiat currency would depreciate due to increases in money velocity, but how can it increase if people won't be spending their bitcoins? In other words, you set up mutually exclusive initial conditions, i.e. explicitly asserting that people will hoard bitcoins and implicitly assuming that they are going to spend them. Then you proceed to draw an impossible conclusion, which is Bitcoin destroying fiat. However, in that case you wouldn't even need Bitcoin as any fiat should quickly deteriorate on its own for just being inflationary. You see, there are huge holes in your reasoning

No, you just didn’t get it right. I did’t not refer to the overall “money velocity.” We have two separate monetary supplies: fiat and BTC, each with its own metrics. Currencies are exchanged at a market rate (there is no legal tender law setting a hard ratio.) Under such conditions, the demand for the fiat currency will tend to the spending side, while the demand for BTC will tend to the saving side. This disproportion will lead to the increase in velocity of fiat’s circulation, which will start a hyperinflation feedback loop ultimately leading to the extermination of the fiat currency

And how's the "demand for Bitcoin to the saving side" is going to hurt fiat?

Moreover, the conclusions you arrive at should hold true even without Bitcoin. According to your assumptions and premises, any fiat currency should quickly collapse just because it is inflationary as inflation causes an increase in money velocity, the latter pushes inflation rates even higher, and the hyperinflation death spiral sets in. But it doesn't happen in real life unless the government goes nuts with printing money, and then it is just hyperinflation caused by excessive money printing that has little to do with changes in money velocity

Under such conditions, the demand for the fiat currency will tend to the spending side, while the demand for BTC will tend to the saving side

Which is otherwise known as Gresham's Law. People will save Bitcoin and spend fiat, with bad money driving good money out of circulation under your hypothetical circumstances
copper member
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It depends on how strict your view about money. If it's so strict, then Bitcoin is "near money" or M3.
It's more "hard money" (not about politics) or "sound money" compared to fiat currency.

I don’t think it’s correct to mess with money aggregates here, we will simply end up comparing apples and oranges. Although it’s said that money aggregates are classified according to liquidity, it seems a different flavor of liquidity, more in the sense of accessibility. It’s like money is absolutely liquid itself but is packed into different containers, each of which obstructs our access to the money inside to a different extent. The harder it is to pull the money out of the container, the higher M it gets.

According to this approach, money in the narrow sense is an aggregate that provides near-instant access to the money inside, which is usually M1. We also have a notion of Money Zero Maturity, which also coincides with the logic of accessibility. If we apply the same logic to Bitcoin, we can state that its natural form (a record in the blockchain) is close to M1, because it is accessed almost in the same way as a common demand deposit account. We can also ponder on the LN form of Bitcoin, but i'll leave it to someone else.

At the same time, we cannot compare Bitcoin directly to an M1 fiat currency supply, because it has an obviously lower liquidity (in the sense of convertibility into other assets in a given economic zone).

Moreover, it can be used not only as SoV but also as MoE, although limited.

Perhaps what you mean is about Bitcoin to be the legal tender or currency, well at the moment, it's unrealistic because, for that to happen, countries need to abandon their fiat currencies.

A lot of sufficiently liquid assets can be used as a MoE, which doesn’t make them money. Legal tender is not necessary, just a wide acceptance. The problem is that something tending to be a SoV cannot be money in the modern times. Gold performed both functions simultaniously, but that was long ago in a completely different setting. Nowadays, we cannot go back and adopt a similar asset as money, the economy won’t accept it under normal conditions. It's only possible in some extreme situations.
copper member
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I went and checked that thread

To sum it up, Bitcoin could only destroy fiat in "your own imagination".

That’s true. The described scenario is a thought experiment that can unlikely occur in practice, as it is based on a number of unrealistic assumptions. Bitcoin will unlikely go this far to compete with national currencies. I needed a model that neglected all other Bitcoin’s flaws and assumed that Bitcoin is equally liquid to a national currency to show that the scarce supply alone was reason enough not to try to adopt such an asset as money.

You basically assume that the fiat currency would depreciate due to increases in money velocity, but how can it increase if people won't be spending their bitcoins? In other words, you set up mutually exclusive initial conditions, i.e. explicitly asserting that people will hoard bitcoins and implicitly assuming that they are going to spend them. Then you proceed to draw an impossible conclusion, which is Bitcoin destroying fiat. However, in that case you wouldn't even need Bitcoin as any fiat should quickly deteriorate on its own for just being inflationary. You see, there are huge holes in your reasoning

No, you just didn’t get it right. I did’t not refer to the overall “money velocity.” We have two separate monetary supplies: fiat and BTC, each with its own metrics. Currencies are exchanged at a market rate (there is no legal tender law setting a hard ratio.) Under such conditions, the demand for the fiat currency will tend to the spending side, while the demand for BTC will tend to the saving side. This disproportion will lead to the increase in velocity of fiat’s circulation, which will start a hyperinflation feedback loop ultimately leading to the extermination of the fiat currency.

I can’t say for sure what will happen to the velocity of Bitcoin meanwhile. It would be reasonable to say that it should decrease, as BTC tends to be hoarded, but spending cannot be cut to zero. As the hyperinflating fiat currency will lose the ability to satisfy the transactional demand, more and more Bitcoins will be transacted. We can assume that Bitcoin’s velocity may be low initially, but then will slowly increase until BTC completely substitutes the fiat currency. This depends on multiple conditions (mostly, the behavior of the aggregate demand), so I don’t find it safe to make any strict presumptions, which, anyway, are unnecessary.

It's utterly ironic that you yourself appeal to "good old" Gresham’s Law in your first post in exactly the same sense I used it here. How come?

Ironic is a relevant word here. I was aware of the erroneous application of Gresham’s law to cryptocurrencies within the community, so I left a little sarcastic reference. It shouldn’t be taken seriously. I also stated that it wouldn't work in that situation, just didn't want to delve deeper and extend an already long post.
copper member
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Perhaps it cannot become a currency, but it certainly can become useful money. And with Bitcoin's nature, not only it is scarce, but also it can be pretty damn liquid too.

In fact, equally liquid to bonds, stocks and other financial assets that are traded on the free market.

Criticizing Bitcoin is not that interesting though because the argument of the limited supply, transaction cost, reward distribution, etc., is pretty much known. And yet, if people still use Bitcoin, it is not going to disappear anytime soon.

It's probably more interesting if you try to explain what is your idea, about your system, about the ideal cryptocurrency in your mind. Preferably about the economy so you can post it here.

Nice writings by the way.

I surely will. I just need to explain some premises not to turn it into another discussion about the reasons why Bitcoin cannot achieve the same.
copper member
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As a battering ram dominance of fiat money with all the damage. Crypto practitioners should learn that the main function of cryptocurrency should only be greasing the transaction. Cryptocurrency must be able to improve the weaknesses of fiat that are made into commodities. In a capitalist economic system, money is also seen as a commodity. Therefore, according to the capitalist economic system, money can be traded with excess both on the spot and on hold. From the perspective of the capitalist economic system, money can also be leased.

Money should not provide direct use, which means that if money is used to buy goods, then goods that will provide benefits are not money. So money must become public goods. Stockpiling of money causes money not to circulate, causing economic congestion and money becomes unproductive. Hoarding of money mentally will give birth to the miser, arrogant, greedy, and lazy. Monopoly & hoarding of money means withdrawing money while from circulation means slowing the circulation of money. This means minimizing the occurrence of transactions, so the economy becomes sluggish.
If I got it right, you are talking about the speculative motive for the demand for money, which is a notion of Keynesian liquidity preference theory. The scarce supply of Bitcoin stimulate people to hoard BTC and speculate on the price fluctuations, which I addressed in Part 1. We can improve on that. What we cannot do is to get rid of operations with money derivatives, as they are a product of an off-chain legal framework. So, if someone takes our coin and packs it into some derivatives, which then are traded on the free market, this is just out of our reach.
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Bitcoin was exactly that project. Satoshi's ideas are embodied nowhere else but in his/her/their creation which is Bitcoin. However, those same ideas and creation were so incredible that they themselves caused a very coveted BTC as a result.

Bitcoin was, but didn’t turn out to be in the end. I’d say that Satoshi’s ideas were embedded, but not fully embodied in Bitcoin. The idea of a decentralized independent currency was truly incredible. I was shocked and excited when I first learned about Bitcoin and its capabilities, which is why I wish that idea to be fully implemented in the initial form. Bitcoin is a brilliant solution, which gave a start to a whole new industry. Being the first of its kind, however, leads to inevitable mistakes. Satoshi foresaw many problems but made some mistakes too. Now, after many years, we can study all emerged problems and propose a solution to them.

I wish you luck. But this one is not a road less traveled. Toying with this exactly same idea in the not-so-distant past were shitcoins. Bitcoin Cash claimed to be the project carrying the original ideas of Satoshi. And then came Bitcoin SV. This is not to count other shitcoins which are not forks of the original. And all in a span of a decade.

What you listed are early projects that cannot be considered a serious improvement, just minor alterations of the same concept. We can also add anonymous coins like Zcash, Monero and others. They introduced a number of good useful technologies and actually made a huge contribution to the industry, but at the same time didn’t progress much toward creating a widely adopted currency.

After the creation of Ethereum, everybody turned to a decentralized virtual machine concept and I didn’t see any serious attempts to come back to the initial concept and create a platform solely for payments.

Finally, it seems to me that the creation of an embodiment of Satoshi's ideas is not as hard as selling it to the public. The source is right there, tweaking here and there is a bit easy, but good luck telling the people yours is the real epitome of Satoshi's philosophy.

You are terribly wrong about this. It is extremely hard to create a solution for all problems at once. I’d say nearly impossible. The scalability issue alone is a problem that no one managed to solve properly. And we have a bunch of other problems of equal importance. We actually had to revise literally everything we now about decentralized SMR systems and build a protocol completely from scratch. It took two years just to design the system.
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Money by definition is the most liquid asset or an asset that is accepted in exchange for all other assets. The key property is absolute liquidity: you know that you can use money to purchase anything you need without the need to convert it into intermediary assets. Bitcoin is not accepted as such, and thus cannot be considered money.

If we assume that Bitcoin somehow managed to become money (which is unrealistic), it will destroy the fiat currency according to the scenario that I described in my previous post.
It depends on how strict your view about money. If it's so strict, then Bitcoin is "near money" or M3.
It's more "hard money" (not about politics) or "sound money" compared to fiat currency.
Moreover, it can be used not only as SoV but also as MoE, although limited.

Perhaps what you mean is about Bitcoin to be the legal tender or currency, well at the moment, it's unrealistic because, for that to happen, countries need to abandon their fiat currencies.
newbie
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The difference between the real and investment sector is the fluctuation of exchange rates, transfer prices and times.
The investment sector needs volatile prices in order to achieve profits, these fluctuations in prices are what makes digital currencies attractive as investments.
The real sector needs constant exchange rates and faster and cheaper transfers, which will happen soon.
legendary
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If we assume that Bitcoin somehow managed to become money (which is unrealistic), it will destroy the fiat currency according to the scenario that I described in my previous post

I went and checked that thread

To sum it up, Bitcoin could only destroy fiat in "your own imagination". You basically assume that the fiat currency would depreciate due to increases in money velocity, but how can it increase if people won't be spending their bitcoins? In other words, you set up mutually exclusive initial conditions, i.e. explicitly asserting that people will hoard bitcoins and implicitly assuming that they are going to spend them. Then you proceed to draw an impossible conclusion, which is Bitcoin destroying fiat. However, in that case you wouldn't even need Bitcoin as any fiat should quickly deteriorate on its own for just being inflationary. You see, there are huge holes in your reasoning

We cannot apply Gresham’s law because we do not have good money and bad money and we do not have legal tender (or any other ways to set an equal nominal value). We only have money and Bitcoin

It's utterly ironic that you yourself appeal to "good old" Gresham’s Law in your first post in exactly the same sense I used it here. How come?
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