Riddle Me This: Is Bitcoin the Greatest Fiat Currency Ever?
Does that seem apocryphal to you? Bitcoin is supposed to be our savior, our decentralized means of leaving central bank controlled fiat currency. I do believe that bitcoin has fundamental differences from other fiat currencies but it is starting to gain qualities that make it similar to sovereign money. But first we need to have agreement on a key term.
Fiat currency is government issued money that has no intrinsic value. Basically, it’s worth what we (the world) agree it’s worth and does not have a fixed exchange rate with a hard commodity (such as gold or silver) or a legally mandated reserve. Every single government currency is currently fiat. The USD became fiat in 1971 when President Nixon broke the fixed exchange rate to gold. So what key features make fiat currency and bitcoin similar?
No intrinsic value — This is pretty simple. Neither bitcoin or any fiat currency in the world has a fixed exchange rate to a fixed asset. The last government currency to have a legal gold requirement was the Swiss Franc; in 2000, Switzerland ended the 40% gold reserve requirement.
Centralization of power — wait a minute! This is one of the key tenets of bitcoin! That power is decentralized and control of information is decentralized. Yes, but bitcoin mining is becoming very concentrated. What used to be someone’s old PC set up as a mining rig has now become a hardware intensive, $1,000,000 plus capital expenditure business. The top 6 mining pools control over 80% of the hashrate distribution. Bitcoin still has inherent decentralization aspects but bitcoin mining is becoming a winner take all endeavor.
Ability to increase money supply — How can this be? The incremental increases in bitcoin supply have been pre-ordained! Yes, but we do have hard forks in cryptocurrency. What is a hard fork? This is when a cryptocurrency splits from one into two cryptocurrencies and requires different blockchain technology. Bitcoin experienced a hard fork in 2017 called Bitcoin Cash and this was not the first or last hard fork, but has been one of the most successful hard forks.
One can argue that a hard fork does not increase money supply and hence reduce value. However, any hard fork takes away marginal demand from the original currency and increases supply in a very similar currency. A hard fork is not classic “money printing” or quantitative easing but there are similar effects.
There are still huge differences between bitcoin and government fiat currency. Bitcoin is not fiat currency with a different wrapper. However, as bitcoin “grows up” and and is pulled in different directions, it has adopted some fiat currency characteristics.
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First I would like to say before you start declaring Bitcoin Fiat money or Currency take Look at the definition.
While Bitcoin does have some qualities that Fiat Currency has it is by no means a Fiat Currency. A currency yes by no means fiat.
No corporation or government enforces the intrinsic value of Bitcoin as of yet.
According to Wiki Definition of fiat money your statement appears to be FUD. https://en.wikipedia.org/wiki/Fiat_money
(1). Any money declared by a government to be legal tender.
(2).State-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
(3)Intrinsically valueless money used as money because of government decree.
I would say it could fall under this definition if it fails. Right now it has a grand valuable use.
It is scaring the hell out of banks and governments and nothing else we poor piss-ants have done seems to have accomplished this other than Bitcoin adoption.
(4.)An intrinsically useless object that serves as a medium of exchange (also known as fiduciary money.)
Because we decide what Bitcoin is or is not not a government.
If we are Crypt-tards they win period.
Fiat money
Fiat money is a currency without intrinsic value that has been established as money, often by government regulation. Fiat money does not have use value, and has value only because a government maintains its value, or because parties engaging in exchange agree on its value. It was introduced as an alternative to commodity money and representative money. Commodity money is created from a good, often a precious metal such as gold or silver, which has uses other than as a medium of exchange (such a good is called a commodity).
Governments currently adamantly deny bitcoin is money. They have deemed it a commodity with intrinsic value. Check with the IRS please. It can be held in an IRA just like gold.
Last time I checked, Australia and Japan declared Bitcoin a transactional currency about a year ago.
Latin fiat ("let it become", "it will become") used in the sense of an order or decree.
I agree that bitcoin is not fiat currency. The body of the article makes it clear that bitcoin has some fiat-like qualities. This article is not intended to denigrate bitcoin in any way; I hold BTC and think it has enormous potential. However, it's important to always question popular narratives. Thanks for your input.
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