Bitcoin falsehoods to refute, Charlie Lee talks Litecoin & Segwit, Peter Schiff, China

in #bitcoin8 years ago

Is the storm over? Bitcoin is above $900 again. Peter Schiff devoted quite a bit of time to Bitcoin on his latest show. The results of the Coinbase Altcoin poll are in. The Chinese government's Bitcoin thoughts. Charlie Lee wrote a great article about segwit and Litecoin.

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Bitcoin actually is fiat. Fiat simply means that something is manufactured to represent value. It has no inherent value, but is conveyed value through the expense of mining, limit on supply and acceptance for trade.
That doesn't denigrate it at all, IMO. And I know that crypto fans like to refer to government currencies as fiat in contrast with cryptos. But both are fiat, by definition.
BTC has the integrity of being severely limited in inflationary terms, as well as absolute issue. It's also not centrally controlled. These make such instruments completely different than centrally controlled government sanctioned (mandated?) fiat currencies, that are entirely subjective in their management. It also puts such cryptos a notch closer to fitting the true definition of money, which centrally controlled fiat can never do.
Only instruments that occur naturally and cannot be manufactured/created can be counted as non-fiat, such as gold, silver, etc. Even clams don't work. ;o) They have inherent value based on their scarcity, difficulty in obtaining and inherent properties. Only life has intrinsic value, from a purely economic perspective.
I hope that doesn't burst anybody's bubble. It shouldn't. Bitcoin rocks!

No, bitcoin is not fiat.

I've heard both sides argued pretty convincingly. Generally, austrian economists will consider it fiat. Perhaps others don't. Maybe this comes from a strong understanding of human action as it relates to economics as well as the definition of money as it relates to currency.
The general consensus of the crypto community has embraced not calling it fiat. If you accept the definitions that require government sanction, then you would be correct. If you accept the purely economic definition of it simply being by decree, then you would consider it fiat. Due to the fact that it is created, ex nihilo, by man, I would assume the latter.

Here's how this argument would go, basically. We both read parts of this and go "Yeah". We both read portions and say "That's what I said". And we'd just end up arguing without convincing. This link will save us the trouble - https://www.quora.com/Is-Bitcoin-a-fiat-currency. It has some great arguments from different perspectives.

Well, I saw from your opening post that your definition of "fiat" is attenuated. Fiat is not just anything that is manufactured to represent value. The vital characteristic of fiat is this: the only reason that it has value is because a trusted authority backs it. Without that authority, it looses it's value as a money system. For instance, you or I could make up as much of our own currency as we like, we could decree that it is valuable, but if we have no authority, nobody will care and the money is useless. Does that make sense?

As this pertains to Bitcoin, there is no authority that you can identify that gives Bitcoin its value. There is an inherent utility to the bitcoin protocol that gives it a natural value, and then people speculate on top of it giving it also a speculative value. The natural value of Bitcoin is not given by decree or authority, rather it is inherent to the protocol. Neither is the speculative value given my decree, rather it is determined by a free marketplace of voluntary trade.

The only arguments for Bitcoin being a fiat currency are strawmen, because they assemble a reduced definition of "fiat" that is not what fiat actually is, then argue that these traits apply to Bitcoin. If you are using the true definition of fiat, then it's clear that Bitcoin isn't that.

Here's a really interesting article addressing the discussion - https://fee.org/articles/fed-economists-try-to-portray-bitcoin-as-a-fiat-currency/
Demelza pretty much nails it, and she agrees with you. BUT, I think she gets one distinction wrong. Perhaps it's a matter of degrees. Like she says, there aren't "degrees" of fiat. But there are degrees of understanding. Here's where I make the distinction from her perspective.
Satoshi was actually the authority that gave BTC some value. While he couldn't establish what people would accept in regard to barter, it was his code that provided value through mining and scarcity.
She says that it could be considered a "retro-fiat currency". But I think this is only true if two distinctions are made: 1) Satoshi wasn't the authority that created BTC and 2) BTC is backed by a commodity.
This is what makes the argument confusing. The value isn't centrally based, but market based. That's never happened with a created instrument with no real inherent value before. So it doesn't "seem" like fiat. Does that make sense?
I'm not threatened either way. It's just a distinction that's valid from an economic perspective. The discussion I linked earlier helps to muddy the waters more. The comments in this comment's linked article are interesting as well, and show some very good arguments from different perspectives.
Regardless, I recognize the distinction made on exchanges. It's accepted terminology, so I roll with it. Our Meister friend was pretty adamant though, so I figured I'd offer some balance.

Satoshi is not an authority that gives Bitcoin value. To say that he is is to not understand what authority means in this context.

Here's how we can prove that Satoshi is not an authority: if Satoshi came out tomorrow and decreed that Bitcoin doesn't have value, that wouldn't make Bitcoin valueless. However, if the Fed came out tomorrow and said the federal reserve note has no value, that would make it valueless. Does this make sense?

It's important not to be relativistic with our terms. When we don't use terms correctly, actual conversation stands still, and it just becomes people talking nonsense trying to sound smart -- and that's really not an exercise in which I want to engage.

Adam was adamant in saying Bitcoin isn't fiat. That's good, because he's right. I'm the guy he was talking about in the video (Shayne/Modern Apostate) suggesting that more outreach was necessary to correct these untruths.

Per my original response to you, this goes nowhere. But you really need to learn to not talk down to people. You might be smart, but you're not omniscient. And, while you might be an expert in cryptos, you're not one in economics.
You err in your perspective of how authority works in this regard. It does not need to be managed. It is a matter or origin. You can say that the value comes from the protocol, and you are right. But the protocol comes from man. It was invented, not found. It didn't exist in any capacity prior to Satoshi. It is fiat - created by decree.
Part of the challenge is that it is not a typical fiat. I don't think anyone would argue that. It's certainly not centrally controlled, which fiat typically is. But neither is it money. It doesn't fit the definition of money. So the cypto-guru gets offended because he knows it's not like state/crony controlled fiat, and he's right. The economist recognizes the created nature of it in contrast with real money, so sees it as fiat rather than money, and he's right.
Your purist attitude about this will keep you in your stubborn phase, even as you attempt to label those who disagree with you as stubborn. Perhaps someone will come up with a term that satisfies the tension, but for now it would be wise to not be so hard-nosed and recognize the economic arguments have validity.
Reading through the comments of that last article I linked will show how some incredibly intelligent economists are attempting to relieve the tension, but still cannot. Neither have I. I just accept it, for the time being. Neither have you. You're in good company. The quotes of Rothbard are especially relevant to the argument.

I'm not a "purist." And I'm not an expert in crypto or economics, either. I'm a philosopher, and I hold as an axiomatic principal that the origin of wisdom is to call things by their right name. This is 'grammar' according to the Trivium system.

I keep seeing a trend towards relativistizing the meaning of words like "fiat" and "authority", and it's preventing us from having an actual conversation about topics. Instead, we go in circles trying to come to terms.

What I'm trying to do with you, right now, is come to a consensus about the grammar. This semantic argument must be solved, otherwise we will be talking about different things, resulting in confusion.

I am presenting my arguments for the terms, and providing evidence and logic for these arguments. If the response to this is "well, people have different ideas about what the words mean" then the conversation is effectively cut off before it's begun.

I am not going to accept the grammar that you have presented because it does not agree with the reasons that I have presented. What I need from you is to use logic, not appeals, to prove your semantical position, so that we can agree on the terms used and move forward.

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