[jstanley]

I hear what you're saying, but I personally think you're wrong.

I think fiat currency will disappear in favour of bitcoin (or similar), and I think it will happen within only a small number of generations.

It will happen because bitcoin (or similar) is a superior form of money.

[charlesdm]

Maybe. I don’t know. I can see fiat currencies ending up being completely digital within the next 50 years or so, in a continued effort to combat tax evasion.

But I’m pretty sure central banks (or well, the elected politicians behind them) can’t and won’t give up control of their respective currency, because they use it as a way to adjust and regulate the economy.

If you look at what is happening in the Eurozone with the ECB and the previous discussions about Eurobonds, it's a one approach fits all solution, but it doesn't work for all. What is great for Germany sucks for Greece, and that is because goals are not aligned. If you have, say, one "global" cryptocurrency, then I think there are some inherent flaws to that approach.

And if you go the full currency route, you essentially end up with a digital equivalent of fiat?

Look: honestly, I want to believe, but no one has managed to convince me with proper arguments what would drive it to that outcome. Most people that I've met are just excited because they've turned $10k into $1M (or more) and now think they're the best investors in the world.

So, why would it happen? You need to give me more than its a superior form of money. I'm not saying it's not. I just don't see how we can get there from where we are now.

[jstanley]

My theory is that Fiat currencies and their central banks are beneficial only to the state, and not to individuals. And that for any system to be viable in the long-term, it needs to benefit individuals else they won't use it.

1.) To a first approximation, central bank policy consists of creating lots more money, all the time.

That is a bad thing for anybody holding the currency (everyone). Therefore these people (everyone) are incentivised not to hold the currency, and instead to hold a currency that can not be inflated away from them. For example, bitcoin.

2.) We're heading towards a cashless society. If the manifestation of a cashless society is one based on fiat currency, that means every single transaction and all money are subject to surveillance, censorship, and even seizure. By the state and by private companies.

Anybody who doesn't want those things to happen to them (everyone) is therefore incentivised to use a currency which is not subject to those things. For example, bitcoin.

[charlesdm]

What you're saying makes sense to some extent and I don't necessarily disagree. But instead of holding currencies, why not hold assets? Any asset, for that matter. Whether it's property, one or multiple businesses, royalty generating IP rights, etc.

You describe Bitcoin as a currency. To me, while it looks like a currency, it's not actually a currency. It seems more like a pure asset class.

I mean, maybe I'm a minority here, but who holds significant cash in a checking account these days -- especially with the market booming during the last few years like it has?

If you look at what happened with QE in the last few years, asset holders (i.e. mostly the upper classes) essentially made bank, because debt got extremely cheap and the value of the currency declined. The average saver lost money, or at least yield, because it didn't make any sense to save money.

The reason why I can't see fiat disappearing is because the government is in control and makes laws as they see fit. I don't agree with all levied taxes yet will still pay them. Even if I didn't want to pay them, my only alternative is to relocate to a different country.

Useful PoV though, thanks!

[codingmyway]

"asset holders (i.e. mostly the upper classes) essentially made bank, because debt got extremely cheap and the value of the currency declined. The average saver lost money, or at least yield, because it didn't make any sense to save money"

So if you're a saver, this is the problem that bitcoin solves. A way for savers to protect themselves from being robbed by central bankers to bail out asset speculators.

Bitcoin is also easier to take with you when you relocate. Bitcoin is a weapon is the battle of savers vs debtors.

[charlesdm]

But Bitcoin is an asset as well. And savers don't generally like buying assets, especially not if they're very (very, very) volatile. The average joe could've bought stocks, in 2009, yet mostly didn't. And for those that didn't, then they probably wouldn't have bought Bitcoin either.