Topic: Bitcoin vs Fiat - isn't this a bit of a double standard? (Read 2246 times)

Going with Pieter Wuille's definition of "intrinsic value":

Bitcoin would not have value if it were not a medium of exchange.

Namecoin would.

Most of gold's value, by far, is not its so-called "intrinsic" value, but rather its speculative value.

What because you do something in the Namecoin system with a namecoin that is intrinsic value?

You can do something in the Bitcoin system with a bitcoin too.

Best explanation I've read in a long time. I would like to add that bitcoin as a system is backed by math and logic which is public information.

Namecoin has intrinsic value. Does that mean namecoin comes closer to digital gold than bitcoin?

You don't seem to by applying the definition of fiat correctly. While the colloquial term is almost always interpreted as "fake" it's definition and meaning is derived from a point of authority. Fiat currency is so because it's issued by an authority or decree.


Bitcoin is not the product of arbitrary orders or decrees, but instead the autonomous result of a decentralized network of people that participate in commerce.

Exactly.  To the best of my knowledge, George Selgin is the only semi-mainstream economist who understands this; everyone else has a really hard time making the conceptual leap from tangible to intangible, with some Austrian goldbugs being some of the most obtuse.  In that regard, Bitcoin seems to cause similar anguish and outrage as other "abstractionist" movements in human history, e.g. cubism in art, electronic music, etc.  Our monkey brains take one or two generations to assimilate disruptive paradigms.

The Universe runs on math, why shouldn't our money?

So true, this is the mistake made by gold standard advocates.  Every single "backed" currency in history, has failed, because backers are humans, and humans cannot be trusted.

And actually, even when humans stick to their word, tangible money standards can still suffer involuntary disruption with advances in technology.  Two examples come to mind:

• the large inflationary dump of precious metals into the Spanish economy after the discovery of the Americas
• David O'Keefe completely taking over the Yap Island economy via introduction of advanced transportation and tools
   http://blogs.smithsonianmag.com/history/2011/07/david-okeefe-the-king-of-hard-currency/

History has shown that if we want a long-term, incorruptible, stable money standard, it must be composed of abstract intangible units whose existence is controlled exclusively by math.

Dollar: backed by nothing, made of paper which has poor attributes

Gold: backed by nothing, made of gold which has awesome properties like being denser than almost everything, never rusting or corroding, being malleable, etc

Bitcoin: backed by nothing, has incredible properties like near instant transport to anywhere on Earth, can be combined and split easily, can be hidden easily, can be backed up.

Backing is garbage. It's a promise to deliver something that usually last until someone wants a lot of delivery. The dollar used to be backed by gold, we saw how that turned out.

Here's what you are missing:  BTC cannot be counterfeit.  Pretty simple isn't it  

Can you tell me how many BTC are out there?  Yes you can, it's public.  Any kid with an internet connection can tell you there are 9.7 million BTC out there.  

Can you tell me how many EUR are out there?  No you can't, it's simply not possible to know.  Economists with years of training will give you their best estimates.  

Are there any limits to how many new USD can be created?  Not really.  Regulators can try to limit it, but in the end regulators are subject to the same human psychology and they will be tempted to make a deal and print some extra for whatever reason they can come up with.  

Are there any limits to how many new BTC can be created?  Yes, and they are cryptographically secured.  

  

Bitcoin is capped at 20 million.  Governments can print into oblivion, and you can't do anything about that.
Bitcoin is convenient.  It has features that cash will never have.
Bitcoin protects you from people trying to take your money - cash will always remain physical or stoppable.
Bitcoin will only become worthless if everyone stops using it.  Cash will become worthless because governments misbehave.

I can go on for a while, let me know if you want more.

Correct.  The people who like bitcoin & complain about fiat for those reasons (gold backing) are hypocrites.  And those people do exist on this forum, but I would say a majority have different complaints about fiat like how its monopolized & inflated that aren't the same with bitcoin because the supply is inflated on a fixed schedule & no one is forced to use it.

It is not hypocritical at all, let me explain.

Fiat money is immoral, and many of us rightly bitch about it, because of two facts: A) a monopoly group is granted license to print it at whim and B) we're forced to use it.

What this means is that we (society) are forced to earn and save using a medium which can be created out of thin air by banks. This results, over time, in an insidious form of taxation/theft which are are forced to endure. We are slowly, but continually, impoverished by the perpetual debasement of the money forced upon us.

Bitcoin is completely different. A) no monopoly group is granted license to print it and B) it's used voluntarily.

Fiat money is money given value through force of use. Bitcoin is given value by voluntary use. Fiat money is unlimited. Bitcoin is capped (and the inflation up to that cap is perfectly known to all parties). Fiat money is controlled by some individuals at the expense of others. Bitcoin is not controlled by any individuals - or we should perhaps say, each individual has the right and ability to control only his Bitcoins, and no one else's.

See the difference?

What is gold backed by?

Backing is a simplistic concept.  The United States dollar is backed by the economic and military power of the United States.  How effective of a backing that is doesn't really matter is it backed by something.  Likewise Bitcoin is "backed" by something.  It gains value from the utility created by the network (secure, fast, decentralized transactions).  Is that "backing" worth $14? Well the market is saying right now it is.   Maybe you think it is worth more or less but it is backed by something.  If you think that isn't true I would gladly sell you 28 quadrillion D&T coins for a mere couple thousand of your Bitcoins.  Since they are both backed by nothing obviously that is an amazing deal.


The difference between fiat and bitcoin has absolutely nothing to do with a simplistic concept of "backing". Fiat means BY DECREE.  The government issues money BY DECREE.  Money you have absolutely no control over.  You may get a promotion and 20% pay raise this year only to have the government over issue currency such that your "higher" pay actually means you are poorer in real time (adjusted for inflation).  If the FED prints an extra $1 trillion what can you do about it?  Nothing.  The currency is issued by DECREE.  The govt mandates it existance and you suffer any ills from that centralized control. 

What makes Bitcoin different than fiat is ... it isn't fiat.  It isn't issued by decree.  You can't force anyone to accept Bitcoin.  If they do it is by choice.  Nobody control Bitcoin.  Nobody can choose to alter the rate of inflation (to their benefit and the detriment of others).

Note I sidestepped the entire argument of which is better, just pointing out bitcoin IS different than fiat currencies and the reason has nothing to do with "backing".

Gold is backed by? If you are in the desert and you need water, your gold isn't very useful.

Fiat money can be printed as will, when they want they print some billions, inflation happens, your saving lose value and ta-dah, basically they steal from you

Bitcoin cannot be printed as will. 21 million, no more.

Neither bitcoin or fiat currency are backed by anything (in the traditional meaning of the word backed: guaranteed to be exchangeable for something else); in that sense they are very alike. Despite being modeled as digital gold, bitcoin isn't: gold has intrinsic value (it would have value if it were not a medium of exchange), though the intrinsic value of gold is a lot less than the exchange value.

One difference between fiat and bitcoin certainly is the fact that one is secured by laws, and the other by an algorithm. But outside of the country in which a fiat currency is legal tender, its exchange value to other currencies is mostly dictated by a free market, which is also true for bitcoin.

I think the largest distinction between fiat and bitcoin is not in its economical properties, but technologically. It allows people to store and transmit value, in a digital way, across the globe, without needing to trust any third part (be it a government, a bank, a payment processor). That, and the fact that it is inherently digital instead of being a digital representation of a real-world thing with value, makes it unique.

Fiat money isn't backed by nothing, it's backed by government force.  Bitcoin is better because it's backed by a free market.

Rhe rate at which bitcoins are being printed is predictable and the final supply is capped to 21 million. That's a big difference to the fiat currencies of the world featuring a supply that can be increased indefinitely at the will of politicians and bankers.

Barney's singing justin beiber songs?? IN MY SHOWER??

Oh wondiferous day!