But it's not like those aircraft carriers are going to show up if someone doesn't take your dollar. State backed currencies (backed by state backed armies) have failed plenty of times. History is dotted with governments who suffered by poorly managing their currencies, no matter what their military power.
Like all dollars, yen, pounds, euros, silver, metal and gold?
None of these things, paper or earth metals, really have any intrinsic value. You can't eat gold. You can't put euros in your car. I guess you can burn money to keep warm, which is what happened to German Marks once people lost confidence in their currency prior to WW2.
The value of money is based off belief systems. When a very large scale economic or state collapse happens, the most important thing to have are a community of people around you who believe in each other.
> When a very large scale economic or state collapse happens, the most important thing to have are a community of people around you who believe in each other.
But isn't that one of the hopes of cryptocurrency -- that it can survive a state collapse, because the relatively normal currency manipulation leading up to said collapse would be less (or not at all) viable? I feel like that was the spirit of OP's tongue in cheek remark and it's going over everyone's heads.
Also (this is pedantic) but many metals _do_ have intrinsic value (ex copper wiring or gold plated connections). It's slightly meaningful because (among other things, like its relative scarcity) has helped those metals be used as relatively stable currency in the past.
> But isn't that one of the hopes of cryptocurrency -- that it can survive a state collapse, because the relatively normal currency manipulation leading up to said collapse would be less (or not at all) viable?
I've always wondered about this argument. It seems to me that a state collapse would be accompanied by the collapse of things that make bitcoin possible: electrical grid, Internet, mobile networks, and so on.
That's definitely a good point and I think it would probably apply in some cases. From my standpoint I"m most interested in the leadup to a collapse where governments start manipulating currency to greater degrees, destabilizing the countries economy (to the eventual point of temporary collapse) further than it otherwise would. I'm not sufficiently well read on the subject to argue deeply about it, just always seemed like if cryptocurrencies were viable they could perhaps alleviate or improve those situations. Maybe modern Venezuela is a good example. I'm not well read enough on either topic to take a strong stance but if it holds water, it's always seemed like a very promising thing for humanity.
I remember when many alt coins collapsed in 2013/2014 one problem was that with miners dropping off, difficulty stayed. Many coins with longer difficulty adjustments couldn't get back to reasonable confirmation times.
So let's say BTC difficulty drops 10x (China cracks downs on farms or simply miners moving to a different more profitable coin, who knows)
Currently this would be ruinous, as difficulty adjustments are every 2 weeks, so that would be 140 days until things get back to normal.
Also, why does our currency need intrinsic value? It represents a debt owed and can be exchanged for things with intrinsic value. The reason dollars, yen, pounds, euros, silver, metal and gold have value is both a social and a legal contract. Cryptocurrencies may have some social contracts that give them value but they lack the legal contract. That's why I think they are doomed unless they open themselves to regulation.
You can use gold (and other rare minerals) in electronics and such though, which creates a demand, and a demand = value.
The demand for USD is cyclic in nature (IANAEconomist, I just made that term up), in that, I need money to buy food, my employer needs me to make them stuff, my employer's customers need my employer's product for their processes, etc.
Yes, but the dollar also has a very long history of being extremely stable. Said another way, the dollar has never had a 30% shock in a year (BTC did today...)
The dollar certainly has had 30% "shocks" in a year compared to gold, which is the usual standard. Most famously, obviously, 1971, but there have been more normal years with such changes as well.
You could also say that the US dollar is really backed by the US economy. Well, the US economy is S&P500 + a few percentage points. Well that has dropped, and gained more than 30% in a year as well (depending on the foreign currency you use to measure this, or if you're talking in gold price, we've seen 60% drops happen. Of course the S&P 500 is worth more than all the gold in the world, so ... this is a bit of an artificial thing to do. Truth is that if someone started buying the S&P 500 using large quantities of Gold, that wouldn't work, so perhaps that is actually right).
Shocks is between quotes because they weren't really shocks. Everybody in finance was perfectly aware of the "real" price for the US dollar, in 1971, but political hubris and re-election factors did not allow the government and congress to admit to this, until every other avenue was exhausted, including lying, cheating (not charging the same price to everybody despite their own laws demanding they do so), fraud, and so on.
Or to put it another way, one might even make the comment that the dollar lost such amounts against gold for the worst possible reason : a refusal by the US government to settle debt for the agreed price (specifically, as has come out, the refusal of the US government and the congress to honor the agreed-upon exchange rate the French government demanded they pay). Surprisingly when I tell my bank that my loan is now only against half my house, such flexibility is not extended to me, and congress in fact has laws preventing this ... weird, since they clearly see it perfectly moral & valid to do this themselves, and even to do it to pay off (their favored) banks.
30% changes in the value of the dollar have happened before, and in all likelihood, will happen again. Granted, it's been a while.
The only thing you cannot do with bitcoin is pay taxes directly. You can do that indirectly by trading your bitcoin for USD. There are a lot of different goods you can buy with bitcoin, some of which you cannot buy any other way (many are illegal but that is a different matter). Bitcoin is traded for other currency all the time.
I tend to believe those who say bitcoin will not last are right, but right not it is a currency. Not the most useful one, but there are countries with a real currency that is not very useful.
That's like saying I can pay my taxes in barrels of oil, I just have to sell them first so that I can pay in my government's currency.
Like, what accountant would be capable of planning finances for a business where every single liability is denominated in a super-volatile asset? The whole thing is nuts.
People rarely do this. However a lot of accountants do this.
Nearly all large and even mid sized companies have customers who use a different currency and have to deal with it. Big companies hedge foreign currency risks. It is common for the press release for a companie's earning to say "we made $x per share driven in part by foreign currency values and ..." Which is to say when looking at a press release they believe their investors (perhaps a legal requirement?) will want to know that a significant factor wasn't sales but just currency trade.
Now bitcoin is super-volatile. That isn't relevant to a general discussion, but it is a major factor when discussing bitcoin in specifics. There are other foreign currencies that have similar considerations at times though, it isn't unique to bitcoin.
Euhm, almost every single country on the planet ? (granted, one or two exceptions)
Even the value of the dollar is significantly in the social contract with Saudi Arabia (not sure if "social" is the right word, but it's definitely not legal, as both sides are sovereign and thus free to change any law or contract between them)
Seems to work well, for the most part. Granted, on occasion disasters happen.
