The cryptocurrency sector faced one of its most significant security breaches this year as stablecoin banking platform @0xinfini fell victim to a sophisticated cyberattack.
Cryptocurrency is controlled by speculators looking to make money from rug pulls.
If you stick to established coins and don’t venture into new coins, they’re not really controlled by anyone in particular, but instead operate on consensus. As long as it’s infeasible to control a majority of the consensus, nobody can control the money supply.
That has value.
With a fiat currency, governments can manipulate the money supply, and if you get a bad actor in charge, you’re screwed. High inflation also kills loans, since they don’t adjust to inflation, which is why we see insane loan rates when inflation gets out of control.
You buy a product, you’ve completed the transaction, trading labour for a product.
That’s a really weird way to think about money. Debt generally needs to be backed by an asset (car, house, contract, etc), but fiat currency isn’t backed by anything, only market demand.
Money isn’t debt, it’s a store of value that can be exchanged for goods or services. That value can evaporate if confidence in the currency disappears. If it was debt, it would always have value from the issuer (i.e. I could exchange it directly for a different form of value), but that hasn’t been true since we abandoned the gold standard.
When I give you money in exchange for your labor, the transaction is complete. I don’t owe you anything, the government doesn’t owe you anything, and the store doesn’t owe you anything. You can make a new transaction and exchange that value for something more immediately useful, but the store is also completely allowed to refuse to transact with you. There’s no debt, you already have something that you value (the money) in exchange for something you value the same or less (your labor).
A cryptocurrency works the same way, but instead of trusting a central bank to manage the money supply, you’re trusting an algorithm. If you agree to X units of some currency in exchange for your labor, you’ll always have X units of that currency until you spend it or lose it. If you get a loan with that currency, the terms will be denominated in that currency. Just because people change their mind about the value of a currency doesn’t change that. The more volatile a currency is, the crazier the terms will be to account for that risk.
The main reason for a currency to have crazy fluctuations is because people can’t agree on its worth. The more transactions done in that currency, the more predictable it is. But if currency is mostly used to trade for other currencies, you just get speculative prices from people looking for arbitrage opportunities. This happens with fiat currencies all the time, it’s just that the volume of transactions in that currency vastly exceeds transactions between currencies.
If everyone suddenly switched to using cryptocurrencies for transactions, the value would stabilize and speculators would leave for more attractive arbitrage opportunities, because arbitrage is more effective when volume is low. For evidence of this, look at the stock market, very small companies have a lot of fluctuation in their stock price vs larger companies that can’t really be explained by business strategy changes. Larger cap stocks can absorb more of that because they have more volume of “real” investing vs speculation. Higher liquidity tends to temper speculation.
There is no benefit to crypto other than for illegal activities like money laundering and for scamming people.
That’s just not true. Most crypto currencies are actually pretty bad for illegal transactions due to their open ledger, which is why they go through a lot of trouble to obfuscate transactions. Cash is easier for in person deals, and is still king for illegal transactions. In fact, that’s precisely why large denominations of bills don’t exist, governments want to make cash harder to hide.
That said, I reject the premise that blocking illegal transactions is a valuable goal, because in order to do that, you need to be able to surveil anyone. That means anyone the government doesn’t like can be tracked and harassed. We certainly need more effective enforcement of the law, but that doesn’t need to happen at the transaction level.
I actually find little value in the big crypto currencies, like BTC, because transaction fees are too high and everything is public. I much prefer privacy coins like Monero, which are functionally untraceable and have low transaction costs. They are very suitable for illegal transactions, which I think shows how effective they are as a cash replacement. Also, since mining isn’t profitable at scale and it’s less popular among speculators, the value stays more stable. I keep very little cash in crypto though, because I only need a little to cover my purchases, and I have a higher expected return elsewhere.
Your business example makes no sense. I work for a company based outside my country, and it’s not publicly traded on my country’s exchanges. So it’s funding comes from another currency and gets exchanged to pay me. There’s nothing stopping a company from using multiple currencies.
the libertarian concept of money that has increasing value
That’s not a libertarian concept. In fact, libertarianism says nothing about how currencies should be managed, only that people shouldn’t be forced to use a given currency.
Many libertarians like the gold standard because it takes power away from the government, bit because it increases in value. The main complaint about fiat is that inflation is a hidden tax and a grift that largely benefits banks. The ideal currency from a libertarian perspective is one that never changes in purchasing power and cannot be manipulated by anyone. That’s impossible, so libertarians tend to prefer the latter.
At least that’s my understanding as someone who claims to be libertarian (not the US Libertarian Party, they’re just socially liberal conservatives). But libertarianism is a huge tent unified by distrust in centralized authority, so I’m sure there’s a lot of disagreement here.
If you stick to established coins and don’t venture into new coins, they’re not really controlled by anyone in particular, but instead operate on consensus. As long as it’s infeasible to control a majority of the consensus, nobody can control the money supply.
That has value.
With a fiat currency, governments can manipulate the money supply, and if you get a bad actor in charge, you’re screwed. High inflation also kills loans, since they don’t adjust to inflation, which is why we see insane loan rates when inflation gets out of control.
That’s a really weird way to think about money. Debt generally needs to be backed by an asset (car, house, contract, etc), but fiat currency isn’t backed by anything, only market demand.
Money isn’t debt, it’s a store of value that can be exchanged for goods or services. That value can evaporate if confidence in the currency disappears. If it was debt, it would always have value from the issuer (i.e. I could exchange it directly for a different form of value), but that hasn’t been true since we abandoned the gold standard.
When I give you money in exchange for your labor, the transaction is complete. I don’t owe you anything, the government doesn’t owe you anything, and the store doesn’t owe you anything. You can make a new transaction and exchange that value for something more immediately useful, but the store is also completely allowed to refuse to transact with you. There’s no debt, you already have something that you value (the money) in exchange for something you value the same or less (your labor).
A cryptocurrency works the same way, but instead of trusting a central bank to manage the money supply, you’re trusting an algorithm. If you agree to X units of some currency in exchange for your labor, you’ll always have X units of that currency until you spend it or lose it. If you get a loan with that currency, the terms will be denominated in that currency. Just because people change their mind about the value of a currency doesn’t change that. The more volatile a currency is, the crazier the terms will be to account for that risk.
The main reason for a currency to have crazy fluctuations is because people can’t agree on its worth. The more transactions done in that currency, the more predictable it is. But if currency is mostly used to trade for other currencies, you just get speculative prices from people looking for arbitrage opportunities. This happens with fiat currencies all the time, it’s just that the volume of transactions in that currency vastly exceeds transactions between currencies.
If everyone suddenly switched to using cryptocurrencies for transactions, the value would stabilize and speculators would leave for more attractive arbitrage opportunities, because arbitrage is more effective when volume is low. For evidence of this, look at the stock market, very small companies have a lot of fluctuation in their stock price vs larger companies that can’t really be explained by business strategy changes. Larger cap stocks can absorb more of that because they have more volume of “real” investing vs speculation. Higher liquidity tends to temper speculation.
That’s just not true. Most crypto currencies are actually pretty bad for illegal transactions due to their open ledger, which is why they go through a lot of trouble to obfuscate transactions. Cash is easier for in person deals, and is still king for illegal transactions. In fact, that’s precisely why large denominations of bills don’t exist, governments want to make cash harder to hide.
That said, I reject the premise that blocking illegal transactions is a valuable goal, because in order to do that, you need to be able to surveil anyone. That means anyone the government doesn’t like can be tracked and harassed. We certainly need more effective enforcement of the law, but that doesn’t need to happen at the transaction level.
I actually find little value in the big crypto currencies, like BTC, because transaction fees are too high and everything is public. I much prefer privacy coins like Monero, which are functionally untraceable and have low transaction costs. They are very suitable for illegal transactions, which I think shows how effective they are as a cash replacement. Also, since mining isn’t profitable at scale and it’s less popular among speculators, the value stays more stable. I keep very little cash in crypto though, because I only need a little to cover my purchases, and I have a higher expected return elsewhere.
Your business example makes no sense. I work for a company based outside my country, and it’s not publicly traded on my country’s exchanges. So it’s funding comes from another currency and gets exchanged to pay me. There’s nothing stopping a company from using multiple currencies.
That’s not a libertarian concept. In fact, libertarianism says nothing about how currencies should be managed, only that people shouldn’t be forced to use a given currency.
Many libertarians like the gold standard because it takes power away from the government, bit because it increases in value. The main complaint about fiat is that inflation is a hidden tax and a grift that largely benefits banks. The ideal currency from a libertarian perspective is one that never changes in purchasing power and cannot be manipulated by anyone. That’s impossible, so libertarians tend to prefer the latter.
At least that’s my understanding as someone who claims to be libertarian (not the US Libertarian Party, they’re just socially liberal conservatives). But libertarianism is a huge tent unified by distrust in centralized authority, so I’m sure there’s a lot of disagreement here.