posted by gut
Well, even Krugman said the dollar has value and large demand created by the US govt because of taxes, among other reasons. Gold and silver still have value because of real demand for actual productive use. Cryptocurrencies are none of those things.
The cryptocurrencies themselves provide the token infrastructure for a blockchain (decentralized, shared ledger or database for transactional recording) to exist. Without the cryptocurrencies themselves, there are no tokens associated with the ledger. And given that one of the touted advantages of blockchain is that it's both shared and decentralized, you'd need a collection that offer both incentive and ability to be easily dispersed. Cryptocurrencies offer precisely that.
As such, they do, themselves, have functional value, aside from any use as a currency, which has been what has caused them to become "commodities" as much as they might otherwise be used as currencies.
posted by gut
The other big problem with cryptocurrencies is most of the demand is coming from investors, which means the buy & hold isn't facilitating transactions. But then if the investors go away, where's the demand to transact and exchange?
I very much agree with this, though the more I look into the uses of blockchain, the less this bothers me. What you've references here is exactly why the values of so many are so inflated (aside from the "fad" of it). Buying and holding a particular crypto is essentially buying and holding a share of a ledger system.
Still, for it to be truly decentralized, it would be ideal for it to pass hands more often ... something I think should happen once these cryptos fall to a more realistic value.
posted by gut
A number of economists have talked about competing currencies...I think in the long-run that is what we will see happening, with your major banks issuing their own cryptocurrencies. I'd expect those to be more stable in value, and quicker and cheaper to transact with.
Well, "cheaper" is probably not the case. Certainly, if you transact through an intermediary, a fee usually occurs. However, it is possible to transact without such an intermediary. As such, it can theoretically be "free" without anyone's permissions to transact using crypto.
Banks issuing their own will potentially defeat two of the advantages of blockchain as a whole: (1) They can essentially act as a middleman and control the price of transaction, and (2) it centralizes the currency to a larger degree, which nullifies the security advantage (see what has happened with compromised crypto exchanges, with both whatever value the coins represent stolen, but also the information that they contain, the protection of which is part of why decentralization is important).
posted by gut
Ultimately, I can't see more than a couple cryptocurrencies surviving. So this retailer accepts Bitcoin but not Litecoin, and that retailer accepts Ethereum but not Bitcoin or Litecoin. You're going to say "of course they could and would accept them all", but that will never happen in the real world, the same way you can't go to the corner 7/11 and buy milk with MXN or EUR, or any currency other than USD. I could see one or two cyrptocurrencies surviving as a sort of alternative to debit cards. Pick the wrong one and the bottom will fall out fast when it does happen, and you'll be left holding a worthless bunch of code. Or one or two could survive to facilitate large international transactions, but again it's not practical to expect more than one or two to emerge as widely accepted for that to happen (the same way USD is pretty much the international reserve currency, despite efforts to make JPY or EUR a significant and viable alternative).
Eh, I wouldn't say they could and would accept them all. That would be daunting, and with the sheer number of minor ones, it's just not practical.
However, if you're sticking to a few major ones, sure. Why not? The ability to do this is actually already in place, so if the tech is there, why wouldn't you?
The Exodus wallet, for example, has the ability to accept and keep eighteen different ones.
As for the idea that only a few will survive, I disagree. I think there will probably be one for each major blockchain. Now, how many of them actually get used like currency on a wide scale? Your guess could certainly be more accurate then, though I still think it would be more than one or two.
I don't think we're going to have a single international reserve currency in the way we have had up to this point, and I think that the ability for each unit to be an actual piece of an industry's transaction ledger essentially adds more intrinsic value to the unit itself than our current financial system.
Now, there's obviously benefit to being first to the party for something like this. Just as BTC has benefitted from being the first more-widely circulated cryptocurrency despite being less efficient than some of its predecessors, the current currency system would as well. It's established, while any alternative, whether or not it would be a better mousetrap, is still a "Johnny-come-lately." As such, I don't think the current system is going away entirely any time soon. Certainly not in my lifetime. Even still, I think we'll see almost competing markets, as well as competing currencies, as a result of blockchain-backed crypto.
Having said all of this, I'm not saying the crypto market in its current iteration is what we'll end up with, but I do think that it has been innovative enough that it won't ever phase out, and it'll change the currency system and financial systems we've had up to this point, both in the addition of competing currencies and (more importantly) the introduction and common implementation of blockchain technology for recording any transactional history, financial or otherwise.
