Fiat is typically contrasted with commodity or representational currencies. The key element is that fiat has no intrinsic value. It's usually issued by a government, but need not be. The value comes from faith.
Bitcoin meets all the qualifications save government issuance. The bits themselves have no value. The currency's value is based on faith in both the underlying computations and in the existence of a market for trading bitcoin.
Wikipedia gives the definition "often by government regulation" (implying not necessarily) citing Goldberg, Dror (2005). "Famous Myths of "Fiat Money"". Journal of Money, Credit and Banking. 37 (5): 957–967. doi:10.1353/mcb.2005.0052. JSTOR 3839155. S2CID 54713138.
technically they didn't say that bitcoin wasn't fiat, but that it hedged against massive fiat printing, presumably referring to the fixed issuance schedule.
the idea being that the schedule is known, and therefore, in comparison to something that can change and have large issuance, you can be confident that the particular cause of "because a whole bunch got printed unexpectedly" won't cause it to become devalued, as opposed to other options.
Doesn't mean that other things couldn't cause it to be devalued.
(and, of course, if the network consensus shifts in a way that changes the issuance rate... though perhaps it wouldn't really "be bitcoin" if that happened.)
It seems that you think I'm arguing in favor of BTC being successful in the long term. That's not what I'm doing. I'm explaining the idea of it being a hedge against the printing. I'm not advocating for buying it on that basis, or on any basis.
All I'm doing, is explaining as best I can, why someone might see it as a "hedge" against large amounts of money printing.
If it is valued by people at some time (it has a price that people are buying and selling it at, whether in exchange for some currency like USD or for pizzas), and the value for the USD (in the sense of "how many pizzas / market-basket-of-goods does it buy?") is going down as a result of the quantity of money being printed-and-introduced-into-the-economy being unexpectedly very large, if that sort of event isn't positively correlated (as in, in the probabilities that people assign to future outcomes) with the value (in the same sense of number of pizzas) of btc going down, that could be something people see as merit-worthy in it.
People conceivably could want to hold something which is both easily exchangable, and highly subdivisible, and which has such a property, .... provided that they didn't expect the number of pizzas it buys to rapidly decrease.
I do wonder though, why there isn't simply a common financial instrument which pays out with the price of some market basket of goods at a designated time? It seems like such an instrument would serve much the same appeal.
Perhaps the issue is that, in order for people to be willing to issue such an asset, one would have to pay them a large amount to account for the risk that they are taking on?
There's also the issue that one would presumably have to keep actively buying more of such an instrument if one wanted to hold large portions of it over time.
Right, it’s more like being backed by a derivative of energy; based on local power prices, seasonal variation and political climate. It’s a strange concept. Redefines “backed”. Backed means ‘security of value’ and this in bitcoin comes from mathematics of cryptography and energy in proof of work.
I've heard this before and tbh I think it's like issuing receipts for 1 (one) barrel of oil that has already been consumed. Like, yeah, someone spent effort making it, but what does that do for me?
From a mathematical crypto standpoint it's sorta good, but again what value has been created? It's not like the blockchain is now saving us time and effort in factorization that can be applied to real world problems that would otherwise need to be recalculated regularly, which is a pity.
Of course you can truthfully say fiat currencies are totally notional, but as a practical matter the value of a fiat currency reposes economic stability and security offered by whatever government issues it (which may or may not be valued by other people).
A backed currency means another entity is willing to guarantee they will trade the currency for something else. In the example of the gold standard, this means the government would exchange dollars for a certain fixed amount of gold. This meant that dollars could be worth more than gold, but theoretically wouldn’t fall below their fixed value in gold, because at that point people would trade them in for the gold.
You can’t just redefine backed to mean something that is expensive to produce. If something is expensive to produce it also doesn’t mean it has any intrinsic value.
(I’m also not arguing that modern fiat currencies are backed - in fact they are not backed by definition! I just get frustrated by all the fake economic mumbo-jumbo about Bitcoin).
This expands the definition of "backed by" into meaninglessness.
I used to be able to trade dollars for gold and vice versa, at a fixed price, guaranteed.
I can't trade bitcoin for 'math'. No-one is storing energy reserves in case there's a run on people converting bitcoin to energy. Bitcoin is not backed by anything.
You're arguing semantics, switching between a strict definition of "backed" and thinking of value as it suits you.
And if you want to be that picky, Bitcoin is backed by math and energy (or at least heat). You can exchange bitcoin at any time by doing a 1 satoshi transaction and pay the transaction fees. As a result, you will redeem the answer to a very specific math problem and some heat that will be delivered to you at the rate of diffusion through the atmosphere.
> You're arguing semantics, switching between a strict definition of "backed" and thinking of value as it suits you.
Can you show me where I'm swapping? I don't think I am. It's not semantics anyway, its a fundamental definition of what a backed currency means! The value of my car isn't backed by all the petrol I have used in it, nor is bitcoin backed by the electricity used to produce it.
> You can exchange bitcoin at any time by doing a 1 satoshi transaction and pay the transaction fees. As a result, you will redeem the answer to a very specific math problem and some heat that will be delivered to you at the rate of diffusion through the atmosphere.
This is not what backing means - at all. Backing doesn't mean "is expensive to make", it means its value "has a direct correspondence to the cost of another commodity".
So a few questions to test if it is backed:
* Is the price of bitcoin directly linked to the cost of electricity? (No - there is a relationship between bitcoin price and the amount of energy used for bitcoin mining, but I can't track electricity and use that to guess what the cost of a bitcoin is and visa-versa). Meanwhile, Tether IS backed by USD so I can use the historic value of tether in BTC to act as a proxy to understand how much BTC cost in USD.
* Have we seen the cost of bitcoin track global electricity prices? (No!)
* If abundant cheap energy is discovered tomorrow, does bitcoin become valueless? (I believe no, it maintains value!)
Almost all modern currencies aren't backed, nor do they need to be, so this is a weird hill to fight for.
Given how electricity has pretty much become synonymous with labor. I would say Bitcoin is backed by electricity given how Iran and Venezuela are doing oil/gas etc trade with bitcoin seems like you actually can get commodities out of it.
Dollars used to be backed by gold and it was still fiat money.
Bitcoin is backed by its own scarcity.