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Can cryptocurrency be money?

Discussion in 'General Discussion' started by Syntheist, Nov 20, 2017.

  1. Syntheist

    Syntheist Active Member

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    That's the title of this very interesting presentation by Prof. Steve Keen, a favourite of mine because he takes a no bullshit approach to the business of economics.

    Following a debunking of the idea of an economy based on barter (one has never existed) and an introduction to the properties of money based on monetary circuit theory, Keen concludes that Bitcoin is hyperdeflationary money that will be a speculative bubble unless its value becomes driven by transactions.

    This is especially true once the block reward reaches zero, at this point transaction fees form the only compensation for miners, if we imagine a hypothetical world where everyone hodls there would be no transactions and therefore nothing to reward miners. In a very real sense it is the circulation of money that gives it value and, in the case of bitcoin and Dash, sustains its existence.

    I find myself in agreement, as long as the price of Dash is driven only by speculation and not by real world usage it can never be stable, instead being at the whim of profit seeking booms and busts.

    Give it a watch and let me know your thoughts.

    https://www.patreon.com/posts/can-crypto-be-15448054

     
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  2. stan.distortion

    stan.distortion Active Member

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    Interesting vid, thanks. Came to many of the same conclusions via different routes, some thoughts:

    Firstly barter and the claim it never existed. A bizarre claim to my mind and to some degree contradicted in the vid, it never existed in a grand scale but it was certainly widespread and still is today. It comes to us naturally, you only have to watch kids making deals with each other before they have any knowledge of money to see that but before now it could never exist on a grand scale because it becomes exponentially more complex as more people are involved, lots of small groups but no single big system.

    Later he mentions its influence on society, that barter was never a major influence. In part that sounds legit, I'd say it's a major influence because we understand it on a very basic level but it never shaped an age in the same way as money but on the flip side of that, how many times in history has money been so important in our lives as it is today? Very rarely imo and in almost every case it hasn't lasted but there are some notable exceptions, ie. peoples lives having a value under brehon law.

    From there on out he seems kind of stuck on one way of thinking about money, established ideas and takes a long and complex route to explain their failings and it's really only overcomplicating the issue, money as we know it today simply doesn't work. If you could chart the stability of a money system it would look like a flattened S, a relatively flat centre with a rapidly steepening curve into failure at either end, in simple terms either hyper inflation or deflation and unless you're looking at a stagnant society we're constantly pushed to one side or the other and given enough time that force is eventually overwhelming. It doesn't really matter if you're using something like the gold standard or limitless debt, the end result is the same.

    Maybe there are exceptions but actually using them is another issue and one that applies to the subject of the talk, "Can cryptocurrency be money?" could also be asked as "What would we use as money?" and the answer to that in relation to cryptocurrency is an almost certain "yes". We'll use just about anything as money, whether it's good as money is another question entirely and one we're more inclined to make bad choices on (especially if we get something for nothing). Sound mechanisms do exist, there are real economies that manage to sit on that sweet spot in the S for millennia (most life on the planet for ex.) but we're not inclined to base our artificial economies on them.

    As a side note, Aristotles original definition of money is often misunderstood imo, we regard it as criteria that must be fulfilled to create a money system but I think it's the other way around, we will find things that fulfil those criteria and it doesn't have to be a single thing, for ex. using one thing as the portable, divisable and commonly accepted medium of exchange and something else as a fungible store of value. The term "money laundering" is a contradiction, if you're distinguishing between money from different people then it's no longer money but when you look at some of the methods, buying and selling miscellaneous goods on ebay for ex. then the money is in 2 parts, the fiat and the goods themselves, the goods are the fungible component.

    So, all our money systems are artificial, cryptocurrency and fiat are no different in that regard and that leads us into a real problem when comparing them, they're not mutually compatible and can't co-exist for just the same reason todays fiat and the gold standard can't co-exist. One is constantly creating new units, the other limited, eventually they push each other off either end of that stability curve. The question then is which is accepted for goods and services and that's not as simple as it looks, fiat obviously has a major head start but in that doomsday "crypto takes over the world" scenario with fiat losing value by the minute and crypto gaining it, which would you choose? Maybe that will give rise to a whole new unit, maybe something exploiting that situation at the point of balance between 2 opposing collapses, who knows?

    One thing is for certain, we're going to need to radically re-think money and very soon. Things like automation and high employment can't continue side by side indefinitely and simple truths like the rich getting richer and the poor poorer can't be addressed without altering the meaning of "rich" and "poor". That's happened before, moral economies are quite common in history as are solid structures built around favours, "I owe you one" having a quantifiable value. Folks have all kinds of crazy ideas on how money works, a good number of them have already been tried and tested throughout history and they're badly needed now.
     
    #2 stan.distortion, Nov 20, 2017
    Last edited: Nov 20, 2017
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