Yes. A diamond is just a rock somebody found. Same for gold. They have value because they are scarce and people think they are pretty (up until the last couple of centuries when we developed industrial uses for both).
Nobody has ever needed a diamond or a hunk of gold to survive, yet they have value because we say that they are valuable.
The paradox of value (also known as the diamond–water paradox) is the contradiction that, although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market.
Yup. One of the original tokens people used as money was kaori shells. They held value because they were considered pretty decorations, were limited in the number that entered society and were easy to serve as a intermediary trade good. All you need for a currency is for people to treat it as a currency. The other bit that usually ends up being a factor is scarcity. You can either create scarcity artificially for things like coins or bills where you make replicating them a crime or you choose a natural resource where new stuff coming in does slowly enough it doesn’t destabilize the system. If ever there is a sudden glut of new currency stuff entering the system the currency gets devalued because you are tying it to stuff you need to survive like food, shelter and tools which are finite and have actual concrete value.
Gold for instance historically was not particularly super useful but it doesn’t corrode, can be infinitely reused, enters the system at a trickle and is nice and shiny so people like it. It is functionally just like trading seashells.
There is a difference. For instance let’s say UK rejoins EU and has to adopt the Euro. The pound gets depreciated as people switch currencies. It’s the responsibility of the government to make sure people can exchanges their pounds for euros at a fair rate.
You can’t do that with crypto currencies because there’s no authoritative body who will be willing to take the worthless currency and exchange it for another currency without any initial value being lost.
There are plenty more example where the lack of an authoritative body (which is what people consider the benefit of crypto) is actually not good for the user.
You’re saying if the GBP starts to lose value the UK government will start exchanging the now-worthless currency for another more valuable currency like USD or EUR to keep its value up? Where do you think the UK government will get all this foreign currency? Wouldn’t they run out of money and go bankrupt at some point?
No. I said that if the country is going to switch currency, from example pound to euro, then the government will facilitate that switch even though the pound is going to become worthless. But you are kinda hitting the nail on the head. The government will make sure they have Euros to exchange to and they will “take a loss” when people bring their pounds for exchange (I won’t get much into the will they go bankrupt question because the US has 32? trillion in debt and the US hasn’t gone bankrupt so I’m not sure if countries even can go bankrupt).
Now apply those two question to crypto and answer them. Let’s say one day people want to switch from bitcoin to something more viable (which is a very realistic thing to happen because the underlying tech can depreciate) who is going to facilitate that currency exchange? Who is going to stock up on this new currency and who is going to buy the now worthless currency?
I am sorry but I sense that you are speaking out of ignorance of how markets work, I do not mean to be condescending at all, I wanted to meet your points but it would have been a wild goose chase of squaring out the faulty premises and conclusions. Here’s an article on bankrupted nations in recent times: https://www.tbsnews.net/world/6-major-countries-went-bankrupt-recent-times-453426
Neither do I but nothing about your comment comes even close to my point was making. The bankruptcy aspect is just a minor detail that can be easily dismissed by common sense, no government is going to change currency if it bankrupts them. If it does then it’s just bad governance.
Well, one thing is taxes, which are payable in the local government’s fiat currency, which ensures that there’s always demand for the fiat currency, assuming a responsible monetary policy.
So basically, the more people who believe in the value of some thing, the more that thing holds actual value?
There’s literally no difference. We could be trading with sea shells if we found utility in it.
Yes. A diamond is just a rock somebody found. Same for gold. They have value because they are scarce and people think they are pretty (up until the last couple of centuries when we developed industrial uses for both). Nobody has ever needed a diamond or a hunk of gold to survive, yet they have value because we say that they are valuable.
Yes. That’s how value works.
https://en.wikipedia.org/wiki/Paradox_of_value
Water doesn’t command a higher price in the market than diamonds so far!
Yes the physical form it takes doesn’t matter but the back end does
Care to expand on your thought?
The USD could be crypto, it could be paper, it could be a rock
It wouldn’t change it’s meaning
Pretty much.
Yup. One of the original tokens people used as money was kaori shells. They held value because they were considered pretty decorations, were limited in the number that entered society and were easy to serve as a intermediary trade good. All you need for a currency is for people to treat it as a currency. The other bit that usually ends up being a factor is scarcity. You can either create scarcity artificially for things like coins or bills where you make replicating them a crime or you choose a natural resource where new stuff coming in does slowly enough it doesn’t destabilize the system. If ever there is a sudden glut of new currency stuff entering the system the currency gets devalued because you are tying it to stuff you need to survive like food, shelter and tools which are finite and have actual concrete value.
Gold for instance historically was not particularly super useful but it doesn’t corrode, can be infinitely reused, enters the system at a trickle and is nice and shiny so people like it. It is functionally just like trading seashells.
There is a difference. For instance let’s say UK rejoins EU and has to adopt the Euro. The pound gets depreciated as people switch currencies. It’s the responsibility of the government to make sure people can exchanges their pounds for euros at a fair rate.
You can’t do that with crypto currencies because there’s no authoritative body who will be willing to take the worthless currency and exchange it for another currency without any initial value being lost.
There are plenty more example where the lack of an authoritative body (which is what people consider the benefit of crypto) is actually not good for the user.
Uh, I mean, I can exchange BTC for USD all day, not sure why you’re not able to
You’re saying if the GBP starts to lose value the UK government will start exchanging the now-worthless currency for another more valuable currency like USD or EUR to keep its value up? Where do you think the UK government will get all this foreign currency? Wouldn’t they run out of money and go bankrupt at some point?
No. I said that if the country is going to switch currency, from example pound to euro, then the government will facilitate that switch even though the pound is going to become worthless. But you are kinda hitting the nail on the head. The government will make sure they have Euros to exchange to and they will “take a loss” when people bring their pounds for exchange (I won’t get much into the will they go bankrupt question because the US has 32? trillion in debt and the US hasn’t gone bankrupt so I’m not sure if countries even can go bankrupt).
Now apply those two question to crypto and answer them. Let’s say one day people want to switch from bitcoin to something more viable (which is a very realistic thing to happen because the underlying tech can depreciate) who is going to facilitate that currency exchange? Who is going to stock up on this new currency and who is going to buy the now worthless currency?
I am sorry but I sense that you are speaking out of ignorance of how markets work, I do not mean to be condescending at all, I wanted to meet your points but it would have been a wild goose chase of squaring out the faulty premises and conclusions. Here’s an article on bankrupted nations in recent times: https://www.tbsnews.net/world/6-major-countries-went-bankrupt-recent-times-453426
Neither do I but nothing about your comment comes even close to my point was making. The bankruptcy aspect is just a minor detail that can be easily dismissed by common sense, no government is going to change currency if it bankrupts them. If it does then it’s just bad governance.
That’s all I’m going to say on that topic.
I think you need more schooling.
Well, one thing is taxes, which are payable in the local government’s fiat currency, which ensures that there’s always demand for the fiat currency, assuming a responsible monetary policy.