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I must learn more about this Kindleberger fellow.
No currency maintains a steady value. The dollar fluctuates with respect to the Euro. The Euro fluctuates with respect to the Yen and so on. In addition to fluctuating with respect to each other (more commonly known as exchange rates), currencies also fluctuate with respect with to goods (more commonly signified by prices and inflation).
If the keepers of bitcoin issue too many coins, its value would collapse. In the 'real world', governments do this through printing money. Print excess money and this results in hyperinflation. Print too little and it becomes illiquid. So you see, bitcoin is not all that different from other forms of money as you claim it to be.
And here come the wave of comments of ignorant fanboys in anonymous, generic "guest" accounts.
The joys of the internet.
This is an article written by a smart guy with high-level understanding of Bitcoin - so it sounds reasonable but it's underlying arguments are faniciful and the title is unjustified clickbait.
As the protocol is currently designed Bitcoin is sound money. Sound money is not fiat. The argument seems to be that because iterations to the protocol's codebase are determined by consensus and consensus is determined by people, people can choose to run any code they wish. Therefore, consenus could be reached around changing Bitcoin to a protocol that replicated fiat currency similar to the way it exists today.
Sure, the users of the network could choose to turn Bitcoin into fiat if they wished. However, in doing so they would destroy the value of the network in undermining it's principal use case as a store of value. The Bitcoin protocol works because it forces potentially adversarial parties to reach consensus through the incentive structure. Therefore, it's naive and wrong to ignore the existence of those incentives in critiquing Bitcoin.
The title may be a clickbait, but author's point that bitcoin is essentially the same as legal tender is still wrong. Author's contention that the circulation size of bitcoin is ultimately determined by human beings behind machines running codes therefore has no difference than decisions made by central bankers is wrong. Because decisions made by central bankers are legal ones with enforcing mechanism (government sanctioned violence), while decisions made by consensus of users of bitcoins are not.
Bitcoin is not legal tender also in the sense that a merchant can refuse to accept my bitcoin, and he can not demand payment in bitcoin. However, he can not refuse to accept, but can demand payment in, legal tenders, lest John Wayne comes in with gun blazing...
The author is wrong. Bitcoin is not a legal tender, therefore can not be a fiat money (which is another name for legal tender).
I don't think demonetisation had anything to do with the surge in value of Bitcoin. Demonetisation banned only certain denominations of notes. To invest in Bitcoin you need to have an online banking account, i.e. money must already have been deposited in your bank account. Once money is deposited in a bank account, online transactions are fairly easy to trace - whether in bitcoin or otherwise.
Bitcoin is really Bit-Tulip, No intrinsic value, No national backer, No long-term future, when the market psychology changes on it, game over.
My point is that these technologies are still here, they grew initially at a staggering rate, you could call those initial growth spurts a bubble or exponential growth with a correction, but they bear no resemblance to the tulip bubble , where the price returned to near zero, and the whole thing effectively dissappeared.
Now it is possible that Bitcoin could end up like the Tulips, but there is plenty of recent evidence to show that this is not the only outcome, and in my view Bitcoin is probably more like the internet than tulips.
Yes, it is a fiat currency.
But at least it has some practical brake upon it's ability to be inflated. It costs energy to create.
National currencies have a nearly unlimited ability to be inflated by the banking system due to the design.
How do we know you're not a bot ?
I think the biggest issue with bit coin is that generally Governments have been generally unfriendly towards any type of alternative currency. Should bit coin work out the various hurdles to become more widely use, world leaders will move against it. Should the bit coin bubble burst on its own, it will serve as a cautionary tale for future crypto currencies.
Yep, pretty much like gold.
Accepting Bitcoin as payment dies not mean that it is currency. The vast majority of payees immediately convert Bitcoin in dollars or some other national currency.
No digital currency as currently designed woukd make a good currency. There is no way to maintain a steady value, which is one the the cardinal rules of currency.
The author is 100% correct. The editor who chose the headline title is wrong.
Control-F (find). "F I A T". The only occurrence on the page is the title. The word doesn't appear in the article.
Read your Kindleberger...
Good thing his literary career only spanned over six decades.
How about pointing to the relevant books or articles?
Bitcoin is not money. It meets some, but not enough criteria to be money. Its biggest failure is that it fails to maintain a steady value. Holders are obviously happy that the value has gone up, but if one write a contract in Bitcoin, then the person who has to pay in Bitcoin will be unhappy if the value gies up, forcing him to pay more to acquire enough to pay off on the contract. If the value drops, then the receiver of the Bitcoin woukd be unhappy.
There is literally no mechanism for Bitcoin to maintain its value. It is whipsawed by its own market.
I have a bunch in my South Seas plantation--but I only accept Bitcoin.
As the miners learned in the Klondike--you cannot eat gold.
This article is wrong on a couple of counts. 1.) what keeps a distributed ledger from just printing out more money? The fact that the amount of "money" printed is controlled by an algorithm, no one human or group of humans can change this. 2.) bitcoin cash is not the same thing as bitcoin, they are two completely different currencies so they are not in fact "printing more money". The use of blogs to twist and form people's opinions when you in fact are uninformed is unbelievable.