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Bitcoin: Difference between revisions
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Currencies do fluctuate in value, of course — the theory being these reflect the changing values of underlying goods, and economies, rather than the currency itself, but an element of that is clearly tied up with the performance and activity of the central bank which has issued it. Each has supreme executive power, bounded only by the awesome power of the market. A bank which prints too much money risks inflation — in essence, the systematic ''de''valuation of its mandated token of exchange. Should this get out of control the currency itself, and the state which issues it, may not be long for this world. | Currencies do fluctuate in value, of course — the theory being these reflect the changing values of underlying goods, and economies, rather than the currency itself, but an element of that is clearly tied up with the performance and activity of the central bank which has issued it. Each has supreme executive power, bounded only by the awesome power of the market. A bank which prints too much money risks inflation — in essence, the systematic ''de''valuation of its mandated token of exchange. Should this get out of control the currency itself, and the state which issues it, may not be long for this world. | ||
There was once a time where, nominally, a banknote was a receipt for something, albeit a something — gold — that was already itself an abstract store of value. (Gold has many of the features of a currency: it is transportable, small (if heavy), it doesn’t go off and, for all the best efforts over the centuries of alchemistry, there is a limited supply of the stuff. | |||
But gold, and fiat currency, has something else that sets it apart: ''history''. Money was not created following the publication of an anonymous white paper, and released fully formed onto an unsuspecting world, creating instant gazillionaires of the people who were smart — or lucky —enough to hoard it while the going was good. invented it. Money ''evolved''. You can, and anthropologists do, argue about the emergence of markets and the significance — or even existence — of [[barter]]<ref>[[David Graeber]]’s magnificent {{br|Debt: The First 5000 Years}} is very good on this.</ref> but it is hard to credit that money arise other than gradually, as a token representing the worth of a given merchant’s assets. It naturally self-allocated according to existing ''wealth''. You can see how a common token reliably reflecting the distribution of tradable goods and services in a community — which would obviate the practical drawbacks of [[barter]] — and through which people could then create and represent their indebtedness and creditworthiness to each other — would be a good evolutionary trick. | |||
The creator of a brand new fiat currency, out of nothing, not superceding an existing currency, would have that initial problem: what is the currency’s initial value? Necessarily, zero. This is why you can't buy groceries with monopoly money.<ref>But you ''can'' buy Mayfair, or buy your way out of jail.</ref> | |||
How does one move beyond that initial value? How to allocate that new token to participants in the market other than by exchange, and who will ''knowingly'' exchange an goat, a barrel of oil of for a token worth zero? How to bootstrap nothing into something, that can then be used to stably store and exchange value? | |||
===It isn’t an asset=== | ===It isn’t an asset=== | ||