Pretty much this.
There are legitimate criticisms of the ability of Bitcoin (and other cryptocurrencies) to actually address these issues but at the very least, the intent was there even if the execution was lacking.
….aaaaaaaand they’re off!
Off their mark, I mean:
Also:
Meanwhile, the value of Bitcoin plummeted early Tuesday, dropping from more than $52,000 per coin to $42,000, before recovering about half of that loss — an example of the volatility that worries many.
Huh. Scary. It must have lost a lot of money on a longer time scale. What’s the total loss on holding for two or five years?
It’s a horrifically bad idea to use a global hyperpower’s bludgeoning instrument as your national currency. Want to trade with X country instead of the hegemon? No money for you. Want to institute a social policy your friendly neighborhood hegemon doesn’t want? No money for you. Want to foster local businesses and stop predatory international corporations from plundering your economy? Whoops, SWIFT just slammed shut on you.
Before the US started handing out sanctions like candy, it made more sense to rely on the USD. Now, however, with the money printing and bludgeoning the US has been doing at an ever accelerating pace, trusting a foreign power to use good money policy is a bad idea - especially future forward.
Anyway, while all national currencies will be cryptocurrencies within a decade anyway, I don’t necessarily think bitcoin (BTC) is itself a good platform for an everyday currency at least for now. You’ll have to do your own research about the bitcoin protocol and its many forks because I’m not about to write a five thousand word essay, but BTC has been hamstrung by its developers so as not to be a peer-to-peer currency. The lightning network, desinged to solve the scaling issues that certain implementation decisions have created, is not currently viable.
The transaction fees for BTC are too prohibitive for anything outside of large transactions like mortgage payments or taxes. The network itself is subject to extreme congestion when adoption spikes.
However, it does come with a lot of benefits to the people of El Salvador. Bitcoin is an appreciating asset, meaning you need no middleman to have a rather impressive yield. There is very little risk - far less than a bank - of losing value in the long term, and this savings is put directly in the hands of anyone with a cell phone. That kind of economic benefit cannot be understated: that’s the kind of thing that can turn po-dunk backwaters into world spanning empires given enough time. The corrupt El Salvadorian government cannot print BTC if they go on a spending binge, meaning the government will be forced into responsible economic policies or it will go extinct. The same corrupt government cannot seize assets or freeze them - sure, armed goons can still abduct you from your bed and force you to hand over your money at gunpoint, but that’s true to all assets. El Salvador cannot vaporize value, as the Indian government did when they said “those large bills you all are saving? They’re worth zero now. Too bad!”
But most of this is a benefit from decentralized cryptos, not BTC itself. I don’t think BTC is a particularly good choice given all the possible coins to choose from.
Why would any stable nation switch to cryptocurrency, much less within a decade?
El Salvador also can’t say “all those bills with a few zeroes and a picture of Ben Franklin on them are now worth zero.” That’s the advantage of sticking with US dollars.
You have never heard of Central Bank Digital Currencies? I would suggest you peruse Google, that is not some small or distant future…
China already launched a failed one called the eYuan (it failed because it was a centralized nightmare better suited for economic control than use as a currency, but it was a CBDC). I believe several european countries are soon to launch trial balloons and the Fed itself has acknowledged that the US will inevitably convert.
That is just a matter of time, however CBDCs will obviously be centralized and therefore inferior in numerous ways to decentealized cryptos.
Instead, a bunch of foreigners who have absolutely no reason to answer to the people of El Salvador and against whom those people can offer no complaint or resistance have that power. Yeah, no thanks…
Edit: I will point out that the Fed has notoriously flip flopped on whether CBDCs are necessary, useless, the second coming or satan. It’s a very reluctant process, but steadily shifting from “crazy kids!” to “future of technology.”
As opposed to a decentralized system where the people of El Salvador can offer complaint or resistance to wild swings in value to non-existent authorities and have no true recourse than to ditch it?
They switched to pegging the colon to the dollar ~20 years ago because they couldn’t manage wild swings in their own currency. They were always free to un-peg but didn’t and I’ll note that the US dollar remains the main currency in El Salvador and likely to remain so for a long while, especially as large swaths of the population don’t have access to the technology to even use bitcoin. It’s that bitcoin will also be accepted and locals will have to account somehow for swings in its value should they use or accept it.
I think this argument sounded better in your head than warranted by reality.
I’m more of the mind to follow the money. Corruption has long been a problem in El Salvador, so the more important question remains “who profits?”.
Bitcoin is bad because mining causes global warming. So it shouldn’t be legal tender.
As for central bank digital currency, I rarely use coins or currency anymore. My money comes in, and goes out, digitally. If central banks figure out an economically helpful way to use blockchain or similar technology, without mining, as part of digital finance, that will probably be fine. But I doubt a good way to do that has yet been invented.
Yes, that is superior.
First, you need recourse against human greed and self interest because of power disparities. Decentralized systems require far less recourse, because they aren’t heavily weighted towards the interests of one party. Human greed, arrogance or mismanagement simply aren’t factors. Further, there is no power disparity in BTC and it’s a neutral arbiter with defined rules that cannot easily be violated. The rules are set, are almost impossible to change, and those changes require far more than the whim of a few interested parties.
Now, I spoke at length about how I don’t think BTC is a good choice right now and the wild swings are certainly a problem. However, those wild swings will be dramatically reduced if widespread adoption does occur. You’d be a blithering fool not to buy BTC with some other currency on a “downswing” if you knew with certainty that the price of a car or house for instance was still going to be a certain number of BTC. And even if you aren’t wise enough to buy free money, you’d best believe there are millions around the world who would be looking for easy arbitrage. Additionally, as soon as BTC becomes your currency, it’s the USD or whatever alternative that is swinging wildly. Remember, the USD isn’t magical, isn’t universal, and isn’t a standard by anything other than convenience.
Last, BTC has a snowball effect not mentioned here: the more countries that use it, the more sensible it is to be the unit of exchange between those countries. That makes it more attractive to outside countries that want to conduct business or trade with those countries. When international trade begins to be priced in a currency, that currency becomes far more stable. Considering China and Russia make up a large plurality of global industrial output and both countries are absolutely desperate to kick the USD and the SWIFT system to the curb, there’s a huge portion of global trade ready built to accept a neutral means of exchange. All this together means it’s extremely likely that BTC, or some other decentralized crypto (eth?), becomes the global reserve currency. The politics surrounding the USD guarantee it.
Which is completely irrelevant, because you wouldn’t know that, because nobody prices anything in bitcoin. If that’s what you want, then you want something stable and difficult to tamper with, like the US dollar. What, you think the US government can tamper with the dollar? Plenty of politicians have wished they were able to do that-- It’d make re-election campaigns so much easier.
Reduced, yes, but not down as low as money under central bank control. Mining cost changes are one reason.
When we were under the gold standard, depressions were more common, because central banks could not control the money supply. Same here, despite a different, and probably worse for the environment, kind of mining.
You’re arguing in circles, maybe without even realizing it. People don’t price things it BTC because it’s not used as a currency at the moment. When you have to accept BTC whether you want to or not, as in the case of El Salvador, then you’d better believe you price things in BTC.
Are you… joking? Or… just… never… I mean, do I need to post the charts again? Yes, the US government can tamper with the dollar, both domestically and abroad. What do you think the word “sanction” even means? Also, about 40% of the USD money supply was magicked out of thin air within the last year*. Why? To pay for the PPP and other programs that aren’t funded through tax dollars.
Without going into how money is created (again - I find myself explaining that a lot on this board…), I’ll just simplify: every time the US deficit spends it ultimately increases the money supply. The politicians have been doing this non stop for decades. They used to be a lot more sane about it, but now the gloves are off and it’s spend more, tax less, hand funds we haven’t got to our friends who wont use them in a beneficial way and our grandkids will deal with the fallout.
The carbon footprint of BTC is negligible, especially when you answer “compared to what.” This complaint about environmentalism sprouted up because interested parties really need people to hate BTC. You should look into the actual numbers instead of listening to someone who says “BTC BAD! GLOBAL WARMING!” But even if BTC was literally the king of smog… there’s something called Proof of Stake (POS) which has almost zero environmental impact. I mentioned Ethereum (ETH), which is moving to POS and there’s Cardano (ADA) which has taken the #3 spot in the market and is already POS. POS uses 99.9% less energy than BTC’s Proof of Work (POW).
*NOTE: Yeah, that article is not the best source, but it was google’s first hit.
Why would China want Bitcoin or some other decentralized currency to become the world’s reserve currency? I’m sure they would prefer the yuan to the dollar, but I’m pretty sure they would also prefer the dollar to bitcoin.
As far as the US government telling Salvadorans that their cash is no good, how would they even do that? Even Iran, which has a lot more to fear from the US than El Salvador, was happy to accept a plane full of hundred dollar bills from Uncle Sam, rather than demanding Euros or gold coins or Bitcoins.
ETA. Digital currency doesn’t have to mean cryptocurrency.
The present concept of CBDCs was directly inspired by Bitcoin, but a CBDC is different from virtual currency and cryptocurrency, which are not issued by a state and lack the legal tender status declared by the government. CBDC implementations will likely not use any sort of distributed ledger such as a blockchain.
Central bank digital currency - Wikipedia
You’ve gone from “countries are looking at changing how their currencies work in a digital world” to “it’s all going to be cryptocurrency”, completely ignoring that the central features of cryptocurrencies are unlikely to be implemented in any CBDC.
BTC is a problem looking for a solution. It seemed interesting when it was brand new, but it persists today entirely on a diet of hypemen and people who tweet HODL all the time. It’s not a shock that the first big cryptocurrency should have tons of technological issues preventing widespread adoption, but it’s fascinating to see people ignore the string of failures preventing attempts at making it a mainstream mode of exchange of value.
Wanna bet?
Every country wants its own currency to be the reserve currency, no doubt. But no country wants some other country to be the reserve currency and the absorbitent privilege that comes with it. Also, nobody but the Chinese want anything to do with the Yuan if they can help it. China loves to manipulate its currency and is one of the worst global offenders, but then the Rubble isn’t exactly stable either. Few currencies are, and even the USD is merely the “fairest mare in the glue factory” or if you prefer the “cleanest shirt in the laundry bin.” Therein lies the allure of a crypto. It doesn’t have to be BTC, but it’s looking increasingly likely that first mover advantage and network effect will win the day despite superior alternatives…
BTC, or whichever crypto wins, is neutral and cannot be manipulated by either party. There’s no trust, no possibility of outside interference, no interested parties with control. It’s as good as gold, except it teleports into your hand and can’t be counterfeited as easily as gold can.
Well for one, don’t tell Korea that. Their CBDC is very much on a public blockchain. Several other countries have publicly discussed launching their CBDC’s as tokens on some of the public blockchains (for those who are unaware, a blockchain can have both a “native” coin and “tokens” which are other coins but aren’t the native coin) simply because the public blockchain offers a degree of security (and ease of implementation) that would be difficult for smaller governments to replicate. Not every nation can afford hundreds of billions of dollars to secure a network, but that’s built in to a lot of public chains (namely ETH and it’s ERC20 tokens).
This is essentially an argument from ignorance. Though I grant BTC as a gen1 crypto has far less uses than other, later-gen cryptos, you should be very careful not to conflate the limitations of BTC with things like ETH, BSC, ADA, etc. You might not understand the use cases for cryptos, but that doesn’t mean they don’t exist. Decentralized Finance, for instance, will absolutely obliterate the traditional financial market. Consider insane things like flash loans (instantaneously borrow X available units of some currency, use it in some arbitrage, and pay it back in the same instant, with a 100% trust free guarantee, all coordinated automatically and without human intermediaries). This isn’t hypothetical by the way, people are making millions off of flash loans right now - though, of course, being a new technology it isn’t without its own pros and cons (namely badly written, not formally tested smart contracts, something ADA and it’s plutus language will likely greatly remedy).
Oh, I already did that years ago… and made a fair bit of profit for my troubles.
You’ve already made money on a prediction that’s going to happen in ten years and hasn’t happened yet? Define your terms, and let’s agree on a wager.
“absorbitent” is an interesting word.
I own a fat stack of crypto. If I’m wrong, it’ll go to zero like y’all seem to think and you’ll have your laugh. If I’m right, I won’t even remember this conversation while I enjoy my 2-3 decade early retirement as a top 1%er (0.01% worldwide).
@Snowboarder_Bo Yeah, I meant exorbitant. I’ve been dealing with microfiber cloths and resin spills all day, sue me.
Not sure about that. If I’m in a car I want to be the one driving it, but if I’m not I still want someone to be driving it.
Regarding this, first off given the complicated nature of macro economics, I don’t know what 40% of the us dollars printed even means. Secondly, this is a feature of traditional fiat currency, not a bug. In your bitcoin paradise the government wouldn’t have been able to funds the 2020 stimulus. Huzzah! our money supply is secure! Meanwhile nobody has any money to spend, the economy falls off a cliff, unemployment sky rockets, millions are thrown out on the streets and we get a depression unseen since the 30’s. But at least we don’t have inflation.
Which brings us to the final problem:
What makes good investment (until it dawns on people that tulips are really just pretty flowers) is precisely what makes it a very bad currency around which to center your economy. High inflation is bad for the economy, but what is even worse is deflation, and bit coin is a deflationary currency. If everything costs half as many bit coin next year as it does this year, why bother buying anything?
Their planned pilot of a CBDC is on a public blockchain. That doesn’t make it cryptocurrency. Even if this not yet started pilot ends up being the basic for their future digital money, the digital money will be but a part of a centrally controlled fiat currency, exactly the opposite of what cryptocurrency fans says makes their crypto holdings such a great investment.