| Ok, but why would you want to prevent consenting adults from making promises to each other? The credit nature of money has become extremely natural to me to the point that I cannot imagine how any other system could possibly make sense. I've been playing a game where you can create BUY and SELL contracts with a deadline for payment and delivery. If I set the deadline to 20 days and I sell something for 100k the buyer has a 100k liability and the item he bought as an asset and I have a 100k asset and the item I sold as a liability. Now that I am certain I will receive 100k some time in the future I can buy something for 100k the exact same way. The GDP rose by 200k even though neither of us had any money. Ultimately money only acted as a mechanism that lets us settle the contracts. When you think about it, promising things to each other is completely natural but just like barter it only works between two people and the 100k have to be paid in a single batch (a limitation of the game). As soon as you introduce a third party things get complicated. A owes B but C does not trust A so he does not let B "pay". There has to be a sort of centralized entity that keeps track of the creditworthiness of everyone. That's a bank. A promises to sell X widgets for Y. The bank takes that promise and grants liquid credit (money) in accordance to A's creditworthiness. A receives the liquid credit and can give it to B. B can use the liquid credit to pay C who trusts the bank but not A. The reason they ultimately accept the bank's money is quite simple. The bank owes the creditors products and the debtors owe the bank products. When debtors receive money by selling products they simply pay their debt off which also gets rid of the liquid credit. The reason why banks print endless amounts of fiat is therefore quite simple. People are so good at business, they keep making an exponentially growing amount of promises to each other. They are so good at keeping their promises that inflation has been incredibly low despite record low interest rates. Now Bitcoin. I don't know what to tell you. It's extremely speculative because nobody knows how much it is supposed to be worth. Nobody knows how much it is supposed to be worth because people haven't even done something as simple as promise to work to create the Bitcoin. If nobody promises to accept your Bitcoin then what is the point? It's an asset without a liability on the other side. Money isn't supposed to have any inherent value. It's not supposed to have a net worth in itself. The dollar as a unit of account isn't worth anything, the debt and credit that are measured in dollars are. Add up all debt and credit and you end up with 0. |