Topic: Bitcoin vs Fiat - the Difference That no One Talks About - page 2. (Read 349 times)

Yeah absolutely, it's like going to see my village priest to explain to him that the Bible, faith and God are useless, I don't know what use it would be from a rational point of view...


So how come I'm living, eating, smoking and paying bills thanks to mining? You've just discovered that we don't eat banknotes or microchips, so what?

Simple explanation would have save the stress of the forum members. Even the full article, I took only a point from the first paragraph and and all the remaining paragraphs re just for make up paragraphs. Yes as you said in the first paragraph, bitcoin is an alternative currency to the Fiat currency and every forum user who are really here to learn what is bitcoin and bitcoin lovers and investors know that fact. Bitcoin never come to over take and dominate the fiat currencies but to move alongside with it. Bitcoin still give respect to Fiat currency in alll countries.

This was the point where the entire text completely derailed. If you feel that these are pointless features, you shouldn't be interested in bicoin at all, or be on a forum to discuss about it.

Regardless of how fiat and bitcoin systems work for their users, I can only conclude that bitcoin is a new financial system that is better than fiat. I don't think it's too important to talk about something that other people rarely talk about because maybe they don't find it too interesting to get a lot of attention. But you, you've done an in-depth analysis that might be good for discussion with the bitcoin community, especially regarding bitcoin vs fiat.

I'm only interested in your conclusion, it seems you don't like bitcoin so you conclude that bitcoin does not provide benefits for its users. So far bitcoin has provided great benefits for its users both financially and in financial transactions. When I don't have to stand in line at the corner of one bank just to get their service, then that's the real advantage I've been getting from bitcoin.

@OP your comparison would be more effective and easier to see if you present it in tabulated form.  It is exhausting to see a wall of text and most members here will probably read the first and last sentence and may miss your point.

I am a bit confused about how @OP delivers his topic.  Fiat system then he talks about the banking system, Aren't the two entities different?  So if these two are different then it only means that the fiat system also relies upon outside resources the same thing as @OP stated how Bitcoin relies on outside resources.  The only difference between the two is that the fiat system is guaranteed by the government and can be printed infinitely while Bitcoin is not issued by the government is decentralized, and has a finite amount of coins.

We can agree to disagree about the value of Bitcoin but I won't argue with that, just look at the market and it tells us all.  


Regarding protection, the fiat system as I stated is guaranteed by the government.  It is guaranteed to be inflated whenever the government wanted to create more money.  Yeah right, Bitcoin is worthless, just look at the market and see how it fares.  Bitcoin protects the integrity of the transaction, it protects its users from fraud and exploiters like the government.  It enables the economic inclusion of the unbanked.  It protects its users from inflation, and it provides boundless transfers and do not need intermediaries.


Bizarre things happen... why still surprised when the fiat system itself has lots of it.  

The membership based system? You might have understood it in the wrong way because fiat system does not work like that. Banks are literally circling assets. I mean they are one of the financial systems which are working smartly. They use our own money to earn more money with the help of interests on loan they give to others. It’s a sophisticated system which is in place since hundreds of years. In a different ways, under different constitutions but fiat is giant authority run by government. You have not rights, and in the emergency situations we already know what has happened.

On the other hand we already know how bitcoin works. It’s one of the fungible token, if you hold the keys then you are the bank or member of your own wallet itself. That’s the biggest difference and I believe it’s working just fine.

Op actually exposed what is wrong with the fiat system which I typically call evil system partly due to it's opaque or non-transparent nature which is synonymous with darkness/night he or she erroneously tried to equate with transparent Bitcoin system.


In regards to debt based fiat system you say is the reason fiat put into circulation, Bitcoin doesn't need to function in that manner. It's model after gold which is mined with energy/electricity and put into circulation. The miners don't need to give up their house to own bitcoins. They use electricity to mine bitcoins which become theirs rather than borrowed. So they don't need to return any resource that's worth roughly the amount of electricity expended to mine the bitcoins. Just like gold people use energy to mine bitcoins which become theirs and can be used for the exchange of goods and services. Miners don't need to owe a bank somewhere or become debtors to own Bitcoins. Fiat debt based system is actually part of what is fundamentally wrong with it. Bitcoin system is not debt based. Whatever you decide to borrow is between you and your lender. It's not tied to the system like fiat

The Bitcoin system is quite advanced with inbuilt features to protect members . It already has the so called built in mechanism you are referring to. It's a basic smart-contract which can be used to enforce a contract or agreement between lender and debtor. You don't need banks for that. The smart-contract works inplace of banks.

You do not seem to understands Bitcoin really well. And your writeup generally doesn't really make much sense. I got some headache trying to understand it. Sorry for the harsh words but it's true.

I think technical implementation of payment systems does matter. If money is only something physical, it means you can't use it if you want to pay for something abroad or just order online (if we're talking about the times of Internet). If it's something that has significant weight, you'll think twice before deciding to go far with it for a specific product. If it's only available digitally, it means you can't use it if you don't have relevant knowledge and devices, and if your merchant doesn't have them.

To get Bitcoin, you don't have to give up electricity in most cases because most people just buy BTC rather than mine new coins to use. Also, the fiat system doesn't work as nicely as described. There's inflation, so with the passage of time you keep losing a part of what you got. Also, instead of selling goods and services, debtors can and often do just get new loans (more numbers) to cover the old ones, so it's not a completely safe mechanism. And I don't think most people see fiat through this debt and paying off debt thing.
Instead, one could reconstruct the narrative differently: money is just useful because you can't always directly exchange what you have for what you need. Because of that initial limitation of barter, people come up with something that they'll accept as payment and give as payment when they sell or buy goods. Money is a medium of exchange, and Bitcoin can be that, even though it doesn't work in the same way as fiat.

Well, that is what everyone talks about. My post is about what no one talks about - the lack of mechanism for returning resources in the Bitcoin system and the existence of it in the fiat system.

For this topic it is irrelevant what Bitcoin is. What is relevant is the difference between Bitcoin and fiat. Bitcoin lacks a protective mechanism to return resources. Members of the Bitcoin system cannot eat coins, drink them, live in them, drive them, use them as energy, etc. So once they are in, by holding coins, their coins mean nothing. They need people from outside of the system to get resources. To get something they can live off of. Calling coins resources won't make them eatable or drivable. Fiat system, on the other hand, has protective mechanism, as described in the OP. That's why units in that system are valuable while units in the Bitcoin system are not. It's pretty simple argument.

People no longer have desire much as before on the use of bank notes simce the new payment system was introduced with bitcoin, because they have always been into debt over years with this same financial system of operations, people no longer excha their other forms of physical resources or asset with fiat notes because they have hope in bitcoin for more better opportunities to realize more from it investment ober time.


While reading through your post and story analysis, i thought it could be something tangible as expected not until i come across this part, which gives me a second thought about what exactly you're trying to portray here, to counter a decentralized network or what? If being in debt and scarcity over the years is worth staying with for life then you can continue but don't discouraged how others have been getting back their financial and economy freedom back, bitcoin is far ahead in security than traditional system, the main reason why people want bitcoin is because of it decentralization which i think should be your major point of discussion.

You have totally ruined the purpose of Bitcoin my friend. Your arguments are pointless and doesn't make sense at all. Bitcoin is a resource and those who provide energy to mine it are rewarded with true fiat currencies. If you think that it isn't a resource then can you create a Bitcoin out of thin air? If no then you should learn about its fundamental mechanism of action before creating such long posts that doesn't provide valuable knowledge at all.

Satoshi introduced Bitcoin as a decentralized payment system and when he introduced it the value of Bitcoin was way less than today's values and the mining difficulty was so less that even with Pentium CPU's one could easily mine many Bitcoins a day. Now the things are different and the mining of this precious digital gem requires a lot of processing power, and trust me Bitcoin is a very useful digital commodity these days.

Bitcoin is an easy option to carry than other commodities. If we take the example of gold into consideration then it's quite heavy to hold many gold items in your hand, while holding thousands of Bitcoin is as simple as holding your smartphone. A smartphone with a Bitcoin wallet can hold thousands of bitcoins without any issues and the one who owns those bitcoins can get increased value because of the volatility of the market. Now even after knowing this you consider gold a resource and Bitcoin a non-resource then you're totally wrong.

Although, I agree that Bitcoin isn't a physical resource but in the digital world it's currently the costliest resource that anyone could own. And, unlike gold it's far harder for a laymen to own this thing. There have been many instances in history where people have found gold during the travels, but there hasn't been a instance where ordinary people found any Bitcoin by using internet or any other technology. In that sense the Bitcoin is far more rare than gold in the digital world. And, with each halving that happens in 4 years the value of this digital gold increases.

This post is very long for your first post, some members here will get tired reading this post. You can just simplify it like, Bitcoin and Fiat are two different types of payment system. Bitcoin is decentralized system that uses cryptography to secure transactions, while fiat is a centralized system that is backed by the government. Bitcoin is not reliable to store of value. It is more a speculative investment, and we people should only invest in it if they are willing to take on the risk of losing our money.

As Bitcoin became more widely known to the general public, many began to see it as some kind of alternative to the fiat payment system. Not only an alternative but a superior alternative. This superiority supposedly stems from Bitcoin’s “decentralization”, “security”, and “scarcity”. Here we will show that Bitcoin and fiat are different as night and day. And that the first don`t even belong to the same category as the second.

Narratives about Bitcoin are mostly focused on the field of informatics. However, payment systems belong to the field of economics. Here we will therefore focus on the second. Economically speaking, people need goods and services. They need food, clothing, energy, a roof over their heads, clean streets, medical services, etc. This is what satisfies human needs. In that sense, the technical implementation of payment systems, through which goods and services are exchanged, is irrelevant. Payment systems themselves can neither satisfy human needs nor magically create goods and services. They are only auxiliary means for exchanging them and, most importantly, securing their return.

Why is securing the return of goods and services the most important thing in payment systems? Well, suppose you gave up your house and in return, you got units of the fiat system, i.e. you got banknotes or a deposit account that show the number of received units. These units cannot satisfy your needs. They are not goods or services. So, you gave up a house that can satisfy a lot of needs, and in return, you got units that cannot satisfy any need. That is why, if a payment system is legit, it must have a protective mechanism so that in the future you can return goods or services. The fiat payment system has such a mechanism. Let’s see how it functions.

The units of fiat payment systems are created when banks grant loans to individuals and organizations or purchase government bonds. By exchanging goods and services for banknotes or deposits people become holders of those units. The fiat system ensures that holders get goods and services back. It does that through the liabilities of debtors and their collaterals, i.e., by forcing them to pay off their debt.

Namely, to be able to pay off their debt, debtors need banknotes or deposits. And the only way to get them is if they work for their holders, sell them goods and services, or, in the case of governments, accept banknotes or deposits as a tax payment. So, by being forced to pay off debt represented with units of the fiat system, debtors are returning goods and services to holders of those units. Such returns are realized daily by hundreds of thousands of debtors in the fiat payment systems worldwide.

Let’s now turn to Bitcoin. Bitcoin boils down to a network of computing devices linked together to manage a database according to some protocols. That database stores information on the number of units held by users registered on the network. The units are popularly called electronic coins or bitcoins(₿). How do people become holders in the first place? Well initially, they give up electricity in the process of the so-called Bitcoin mining. This gets them the units. So they give up a good that can satisfy a lot of needs and in return, they get units that cannot satisfy any need. That means that users of the Bitcoin network are in the same situation as users of the fiat system – they need to return goods or services.

And now comes the crucial question: does the Bitcoin network have a protective mechanism that enables users to return goods and services? Well, it does not.

And this is the key difference between the fiat payment system and the Bitcoin network. The first has banks, debtors, loan contracts, government bonds, and pledged collaterals to ensure that users return goods and services. The second has nothing. Users just hold the units, and that is it. The network is not there to protect them by ensuring the said return. Instead, the network is there to protect its units. It takes electricity for its own sake.

“Decentralization”, “security” and “scarcity” are just pointless features of the network as none of that protects users. No matter how decentralized, well-protected, or limited the units are, this cannot help anyone to return goods and services. Network maintainers, miners, protocols, the database, and everything else related to the network are entirely focused on the units. It is like these units represent some kind of transcendental value worthy of worship and high protection. The users, on the other hand, are unimportant. They exist only to sacrifice need-satisfying items or protective units of the fiat system to be able to hold that transcendental value.

There is currently an entire army of Bitcoin users. They gave up an enormous amount of valuable items to get units of the Bitcoin network. And this network has nothing to protect them. Consequently, if people outside the network decide they no longer want to give up valuable items in favor of network units, that whole army is doomed. The network cannot help them to return even a bit of what they gave for the units.

To conclude. The units of the fiat system are valuable because they protect holders by ensuring the return of goods and services. The value per specific number of units can be determined by checking the value of collaterals that banks take when issuing that number of units.

On the other hand, the units of the Bitcoin network are worthless because they do not protect holders. The fact that the Bitcoin network is designed to protect its units instead of its users is pretty bizarre. What is even more bizarre is that some people are currently giving up 30,000 protective units ($) to get one non-protective unit(₿). This indeed looks like sacrifice in favor of some transcendental value. And shows that the whole thing is some kind of digital religious practice instead of something related to economics.