The problem I see with those who promote cryptocurrencies is that they don't appreciate the subtlety of the issue. Their argument is usually grounded as such: <Money is an arbitrary means of exchange; therefore no medium of exchange is better than any other; therefore blockchain is as good as anything else>. As soon as that premise is established they merely attempt to show why blockchain is better than a government-backed currency, for example, and that's the end of it. Not intrinsically better (in terms of worth) but extrinsically better.

World history is the corrective. What medium of exchange is better than blockchain? Precious metals. In order to function, money needs to have worth. Fiat currency involves a jury rigging where what has no worth is accorded worth, is given pseudo-worth. Here is the more accurate argument from the promoter of cryptocurrency:

1. All fiat currencies are arbitrary means of exchange
2. Therefore, no fiat currency is in se better than any other
3. Therefore, blockchain is, prima facie, as good as any other fiat currency

That's a sound argument, but the response is that we don't need to use fiat currency. We could have a monetary standard of precious metals (or else a standard akin to precious metals), and this would be better than both government notes and blockchain. We already have the electronic technology to allow us to avoid carrying physical money, and this could be applied to any relatively transferrable monetary standard.

More simply, here is the argument of the proponent of cryptocurrency:

1. We must either use government-backed currency or cryptocurrency
2. Cryptocurrency is better than government-backed currency
3. Therefore we should use cryptocurrency

And the problem is that (1) is a false dichotomy which overlooks the superior approach which has been used all throughout human history, and which was only truly abandoned within the last century.

If there is a demand for pipyruses and they serve as a store of value, how can they be worthless? The value of other assets and currencies, influences the demand for pipyruses and so it is with cryptocurrencies. So far cryptocurrencies are the 'most volatile assets in modern finance' and as such they don't really resemble stable currencies.

They are still subject to capital gains taxation.

If you have to trade cryptocurrencies for fiat currency to actually buy stuff then inflation does actually affect the price of what you seek to buy in the future.

These programmers loan the money from each other more honestly, than the banks do. — Linkey

What recourse do those that loan cryptocurrencies have to insure that their investment is returned to them? How do you minimize the risk of lending cryptocurrency in its current form? Sounds complicated to say the least.

I can see crypto being useful in an authoritarian society with high inflation. For me, I'll just buy gold and silver as hedges against inflation. They're also more useful than crypto SHTF scenarios.

If there is a demand for pipyruses and they serve as a store of value, how can they be worthless? — Nils Loc

The gold if an example of such pipyruses - it is nearly worthless in regard of its current price.

↪Linkey I can see crypto being useful in an authoritarian society with high inflation. For me, I'll just buy gold and silver as hedges against inflation. They're also more useful than crypto SHTF scenarios. — RogueAI

Do you deny that there is a big dollar inflation in the world? By the way, the price of gold has increased twice in last 5 years...

The gold if an example of such pipyruses - it is nearly worthless in regard of its current price. — Linkey

I guess I missed your point, that gold like crypto, and many other assets, are limited in their inherent use value, so they share that in common. I can do more with a sack of onions or a gold coin than lines of code in a crypto wallet. Market supply and demand for assets/currencies makes it all moot however.

Speaking of gold, I have one more question. Bitcoins are analogous to gold; both gold and bitcoins are limited in total amount, making them an effective way to store money without paying the "inflation tax". However, there are currently many problems with cryptocurrencies, such as the division into "pure" and "dirty" crypto, and I am not sure that cryptocurrencies are more convenient to use than gold. And this leads to a new question: why the gold is not growing as fast as bitcoins? Maybe buying gold is illegal in the US/Europe?

why the gold is not growing as fast as bitcoins? — Linkey

No physical asset backs bitcoin which makes trading it easier than gold. Am not sure how crypto backed by gold works really but I'd assume some work needs to be done to secure gold reserves through another company. The limit of that reserve would in theory limit the ability of a company to sell tokens representing it. This might substantially slow the speed at which it can be traded.

The speed at which bitcoin can gain or lose value probably is part of its appeal, allowing folks to try to make substantial return by gambling on its volatility (buy lows, sell highs).

Bitcoins are analogous to gold; both gold and bitcoins are limited in total amount, making them an effective way to store money without paying the "inflation tax" — Linkey

Bitcoin is useless after an EMP attack or Carrington Event.

They're also more useful than crypto SHTF scenarios. — RogueAI

Indeed. I wonder what they will do if all the electrics crumbles but then, won't precious metals also be useless?

Won't actual goods for day to day living become currency as has been the case through history? Wheat is one example I believe or whatever is a valuable commodity for survival, not a token to exchange for it.

Don't any of these tokens preclude a stable enough society that everyone can agree on a 'valueless' item to have value to just make trade easier?

On the other hand wheat would still have value to almost anyone if food is scarce unless they were gluten intolerant. :lol:

And this leads to a new question: why the gold is not growing as fast as bitcoins? — Linkey

Because it was already a stable holding long before cryptocurrencies arrived. Therefore the gross investment in gold is presumably much higher than cryptocurrencies, even though a few cryptocurrencies are increasing at a faster pace. When you have millions of cryptocurrencies, each of which starts from scratch, some of them will begin to grow at a fast pace. But the growth factor is a very limited metric.

Beyond that, interest in cryptocurrency is currently a form of speculation, which is why one sees more growth and general variance in that area.

Is this the same idea that the old time stock market moguls say that crypto is a bubble?

I do find it hard to wrap my head around stock market and economic discussion, how all these theories are put forward for these ethereal (pun) tokens of value.

Some points:

- Cryptosceptics aren't in authoritarian countries, on the contrary, authoritarian countries are prone to have problems of inflation and severe limitations on holding wealth in other assets / foreign currencies than the fiat currency of the state. Hence many authoritarian countries people are far more aware of the perils of a fiat currency and love cryptocurrencies.

- The primary argument of cryptosceptics is that there's no actual difference between the fiat currency and a cryptocurrency in the trust in the value of the currency. That there's an finite amount of bitcoin... can you be sure about that? How would a normal person notice a "fake" or "excess" crypto? There has been a collection of swindlers operation in the crypto sphere already.

- Notice the difference for example to gold. The crypto believers argue that actually gold is similar, that it's priced so valuable only because people think it's rare and valuable. Let's think about this for a moment. Let's assume that a kilo of gold (now worth about 106 000 USD) would be priced let's say 10 cents per kilo and hence gold would be far cheaper than copper (which is priced about 9 USD per kg). If so, you bet the inert metal would be used everywhere, starting for example having your home plumbing made of plastic having a golden interior or even the plumbing been made of pure gold. Wouldn't have to renovated for I guess hundreds of years as it gold doesn't rust when in contact with water.

Yet since there isn't so much gold around for everybody to use in ordinary house construction gold, then it cannot be so cheap. The metal does have genuine uses, not just to be a wealth asset.

- And finally, many cryptosceptics are very pessimistic about the state of individual liberties in the present: governments can simply ban the use of cryptocurrencies and when this is made globally without any loopholes, it won't work. The idea of net being a bastion of liberty is extremely naive and even dangerous according to them. Just think if government would make a law saying that holding cryptocurrencies or use of cryptocurrency in any transaction will get you a minimum 10-year jail sentence, would you hold on to your "wealth"? Just change your holdings into the official safe cryptocurrency.

- Cryptosceptics aren't in authoritarian countries, on the contrary, authoritarian countries are prone to have problems of inflation and severe limitations on holding wealth in other assets / foreign currencies than the fiat currency of the state. Hence many authoritarian countries people are far more aware of the perils of a fiat currency and love cryptocurrencies. — ssu

I have made some polls in some forums, and it was revealed that people who value democracy and liberalism are more prone to agree that the bitcoins are not "ponzi schemes".

I have made some polls in some forums, and it was revealed that people who value democracy and liberalism are more prone to agree that the bitcoins are not "ponzi schemes". — Linkey

Notice that everything called to be a "ponzi scheme" isn't one. Social security systems aren't ponzi schemes, even if they will have problems if the younger generations are far smaller than older ones for a while. And governments having the ability to tax their citizens don't make the currency a ponzi scheme.

In a functioning democracy with liberalism is naturally good for cryptocurrencies. And so is when you have institutions that look out for swindlers and other criminals.

Yet we just have to remember that private currencies have been quite nasty earlier in history: think if your employer would give your salary in his made-up company currency, which would be accepted only in the company store and you could rent a place to live only in the company owned flats? How independent would you be? Transparency, convertibility and few legal foundations are what even a cryptocurrency needs. The ultra-libertarian view that no rules are needed and the market itself just works is only a theoretical (and ideological) idea which is has nothing to do with reality.