Comments on: Will we all be using a blockchain currency some day? https://lifeboat.com/blog/2018/11/will-we-all-be-using-a-blockchain-currency-some-day Safeguarding Humanity Mon, 05 Nov 2018 19:28:17 +0000 hourly 1 https://wordpress.org/?v=6.6.2 By: Philip Raymond https://lifeboat.com/blog/2018/11/will-we-all-be-using-a-blockchain-currency-some-day#comment-338892 Mon, 05 Nov 2018 19:28:17 +0000 https://lifeboat.com/blog/?p=84263#comment-338892 Caycee, you quoted Dodd: “[With bitcoin], money can be created out of nothing, i.e., from within the network itself.”

Yes, but I believe that *ALL* forms of money are created out of thin air. The real question is why should we believe that Bitcoin has durable value, and not a dollar, Picasso painting or a caycee-coin? This is where a believable formula and a robust, two sided network come into play…

In modern times—and especially in the internet era—money is more likely to take the form of testable credentials rather than a truckload of grain, goats or even gold. To be a widely recognized credential, the document, note or electronic proof must be something that is portable, transmittable evidence of value, net worth or promises, and it must be accepted almost everywhere.

This leads me to my original assertion that money derives its value from just one thing: supply-and-demand (O.K. two things! Users also need trust. That is, they must have confidence in something). And since supply and demand ultimately floats freely, a fixed or very believable supply rate takes high-risk uncertainty out of the equation.

Goats cannot be easily transported or transmitted and grain goes bad if it is not carefully stored. (If carefully stored, then the owner still has a need for portable and transmittable evidence of his assets).

Bitcoin is more real, tangible, and desirable than any other chit that comes to mind. The only reason that I compare the US dollar (i.e. for believability, supply confidence, likelihood of inflation), is because the dollar is widely recognized and it has been widely trusted for the past 150 years. For all this time, it enjoyed a reputation for slow inflation (at least during periods of economic growth). That is, its purchasing power has not rapidly eroded.

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By: Philip Raymond https://lifeboat.com/blog/2018/11/will-we-all-be-using-a-blockchain-currency-some-day#comment-338888 Mon, 05 Nov 2018 19:04:03 +0000 https://lifeboat.com/blog/?p=84263#comment-338888 Just to be clear and transparent, Cacee, that reference is me (writing under the pen name that I use in my blog). And so, I am not suggesting that another pundit agrees with me. I was only pointing to that past article to clarify my position on intrinsic value.

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By: Caycee Neely https://lifeboat.com/blog/2018/11/will-we-all-be-using-a-blockchain-currency-some-day#comment-338859 Mon, 05 Nov 2018 15:42:19 +0000 https://lifeboat.com/blog/?p=84263#comment-338859 “I respectfully disagree, Caycee.”

I’m sure you do. Plenty of cryptocurrency people do because they refuse to accept a couple of factors related to cryptocurrency.

I think the problem is that we rely on two separate definitions of intrinsic. You’re relying on “value in, and of, itself” while I’m relying on “originating within a body, organ, or part,” which is to say, a real object. In other words, cryptocurrency isn’t based on any real value or, as Dodd said,

“a pure token devoid of any connection to an underlying material substance, money created ex nihilo, and as simulacra without reference to the real. With bitcoin, “money can be created out of nothing, i.e., from within the network itself. [1]”

A statement that your reference also agrees with.

“Bitcoin is backed by math, a firm cap, a completely transparent set of books, and the critical mass of a two-sided network. [2]”

“I believe that value arises from supply and demand — and absolutely nothing else.”

Even if that value is completely imaginary based on self-created limiting definitions? Bitcoin and the majority of the rest of the cryptocurrencies have created an artificial cap and pretended that it has some value based completely on your desire for it to be. They’ve also separated the creation of the currency from any real-world connection. There is no connection to the energy required to run the processes and they’ve managed to completely separate it by externalizing any costs in its creation.

Just to reiterate, this is also the problem I have with most currencies. They’re not connected to any real resource and they externalize the real costs of their production. It is critical that we find a better way. Especially if we’re moving into space because we can’t keep ignoring the real costs and inefficiencies of our technologies.

[1] Dodd, N. (2014), The social life of money. Princeton University Press, Princeton, NJ
[2] Davies, E. (2017), Spell it Out: What, exactly, backs Bitcoin? A Wild Duck,
[3] C. Mora, R. L. Rollins, K. Taladay, M. B. Kantar, M. K. Chock, M. Shimada, and E. C. Franklin, “Bitcoin emissions alone could push global warming above 2°C,” Nature Climate Change, vol. 8, no. 11, pp. 931–933, 2018.

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By: Philip Raymond https://lifeboat.com/blog/2018/11/will-we-all-be-using-a-blockchain-currency-some-day#comment-338524 Fri, 02 Nov 2018 00:27:01 +0000 https://lifeboat.com/blog/?p=84263#comment-338524 I respectfully disagree, Caycee.

Related:
What exactly backs Bitcoin? http://awildduck.com/?p=4904

Even gold has questionable “real world” value when used as a currency. Only a very small fraction of gold demand and consumption is used for electrical and dental. The rest is either used to adorn the body, add pretty touches to buildings and picture frames or hoarded due to the imagined demand of one’s neighbors.

Aristotle never defined “intrinsic”, but it has long been assumed to mean a value unto itself, because of its importance to mankind. By this definition, we had best barter with food, clothes, housing or artificial knees and hips.

I believe that value arises from supply and demand — and absolutely nothing else. And so I am keenly fascinated on what sustains demand, and is it likely to continue sustaining demand. IMO, trust in a currency is sustained by trust and a capped supply. Bitcoin has both. The dollar only has history and it is not a great history. Many of the creditors and countries that value the dollar are searching hard for a replacement.

We need water, but if one is not crossing the desert, we don’t value it so much, because in our homes, the supply usually exceeds our needs. We value dollars because they are widely recognized; have a large, fluid market; and haven’t tended to inflate as much as the currencies of other nation.

But with massive debt eroding looming under the surface and countries that see USA-keystone status as a handicap, the world is beginning to shun the dollar as a reserve currency. There is an alarming race to accurately guess the next trusted settlement chit, at least for large international contracts. For these reasons, I believe that bitcoin is also likely to become the next legal tender. It serves all of the desirable qualities of a reserve currency without the baggage or susceptibility to manipulation or conveying preferential benefits.

~Philip

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By: Caycee Neely https://lifeboat.com/blog/2018/11/will-we-all-be-using-a-blockchain-currency-some-day#comment-338521 Thu, 01 Nov 2018 23:59:43 +0000 https://lifeboat.com/blog/?p=84263#comment-338521 “It lacks ‘intrinsic value.’
It seems that your argument is that this is irrelevant because regular currency has no intrinsic value. However, this is not an excuse, but it also not an excuse for regular currency. In fact, the lack of connection to some real universe asset is a problem with bitcoin and regular currency. This issue needs to be resolved which is why I like SolarCoin, which combines the best of cryptocurrency and the need for a connected real-world value.
https://solarcoin.org/

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