That is an odd way to redefine fiat.   Under that definition, a commodity-backed currency becomes fiat if the government proclaims it so.

 

The reason that libertarian bitcoiners like to use the word fiat as a dirty word is that they feel that taking the dollar off the gold standard was an egregious act by government.    In my opinion, it was inevitable, because at a moment of crisis, a government would always choose to steal the gold rather than let the economy crash.  There was no way they would have let dollar holders run the bank and redeem their dollars for gold.   This is a flaw of centralized banking.

Representative commodity currencies also have a flaw in that the commodity must be guarded, and eventually, the commodity ends up in the hands of the guards or is stolen.   The gold backing Liberty Dollars was stolen by the government, thus it failed as a money system.

I think bitcoin can prove itself to be a superior form of money to either a government-issued fiat currency or a representative commodity currency, since it will be immune to direct government manipulation, and immune to theft from government or otherwise, if properly handled, because it is a better form of fiat currency.

I don't think it is necessary for money to have intrinsic value for it to work.  Obviously, US dollars currently dominate the global economy, and bitcoin is slowing gaining acceptance as a means of payment.

I just find it colloquial for libertarians to continue using the term "fiat" to differentiate bitcoin from government-issued fiat, when the original use was to differentiate gold-backed dollars from fiat dollars.

If the sender is sending from a shared walled (like an account on an exchange) it would be difficult to comply with such a request.   If I were asked for my originating address(es) before sending a payment, I would take a pass for turning the transaction into a hassle.   As bitcoin starts being adopted by the masses, I really doubt that the average non-technical bitcoin user could even figure out how to find the originating addresses about to be used in a transaction.

When case law eventually determines if bitcoin is fungible or not, in the case of "not fungible", bitcoin will likely fail as a convenient method of exchange, since it can be legally seized if it was ever used as part of criminal activity.   If the law considers bitcoin fungible, your only legal obligation will be to prove that you acquired it in good faith and not as part of some criminal activity. 

New coins "come into existence" according to a mathematical protocol invented by humans, rather than by decisions by a government of humans.

When classifying the types of currency there is:

commodity currency:  eg.  gold coins, which have an intrinsic value, that is, they have a use outside of a medium of exchange
representative currency: eg. casino chips, convertible by the issuing authority into government fiat currency at a fixed rate, or gold certificates, convertible by the issuing authority into a specified amount of physical gold.
fiat currency:  an object or record that is declared to be money with no intrinsic value.

Unless you add a new classification to the types of currency there are, bitcoin clearly is a fiat currency.  "Government" is closely associated with fiat currency, because before the invention of a decentralized currency like bitcoin, it was hard to imagine how a fiat currency would work without a central government to regulate or issue it.

I think the problem is that some people think that bitcoin mining, while requiring real resources to do, is creating something with an intrinsic value.  It may model mining of a scarce physical resource, but mining bitcoins makes you a commodity miner like playing "Call of Duty" makes you an experienced combat war veteran.

Again, I think bitcoin is a great invention, but pretending it is not something that it is does it a disservice.

From the wikipedia entry for "Fiat money":
In monetary economics, fiat money is an intrinsically useless object or record, that is widely accepted as a means of payment. [Walsh, Carl E. (2003). Monetary Theory and Policy. The MIT Press. ISBN 978-0-262-23231-9]  In some micro-founded models of money, fiat money is created internally in a community making feasible trades that would not otherwise be possible, either because producers and consumers may not anonymously write IOUs, or because of physical constraints. [Kiyotaki, Nobuhiro & Wright, Randall (1989). "On Money as a Medium of Exchange". Journal of Political Economy 97 (4): 927–954. doi:10.1086/261634][Lagos, Ricardo & Wright, Randall (2005). "A Unified Framework for Monetary Theory and Policy Analysis". Journal of Political Economy 113 (3): 463–484. doi:10.1086/429804]

Not alone in my perspective among academia.  Perhaps I'm alone in the pluralistic ignorance environment of bitcointalk.

And economists debate the issue because of the low intrinsic value, but shell money had its roots as a commodity. 

Credit cards may appear "safe" and without additional charges compared to cash from the perspective of the consumer.

The cost of this system is directly paid for by the merchant, and indirectly passed on to non credit-card-using customers, due to the way that merchant contracts are written.  Losses from fraud are socialized and passed on this way.

The act of using a credit card requires that you hand over your personal information to the merchant.   The number of data breaches of merchants by hackers for the purposes of identity theft simply dwarfs the hackings of bitcoin services.   Bitcoin is still in its infancy, and solutions will develop to secure personal bitcoins that involve securing private keys away from platforms like general purpose PCs that can be targeted by a hackers.

Just curious, how do you think the social protocol would work before you do a transaction?   

"Excuse me, before I give you a bitcoin address to send your payment to, I would like to examine all the addresses in your wallet that the payment may be sent from?"

Those are all good arguments as to why bitcoin can become a better fiat currency than government-issued fiat currency, but it does not give bitcoin an non-trivial intrinsic value (a value that comes from a purpose other than its use as money) or make it a commodity currency.

My concern is the pluralistic ignorance regarding the term "fiat" among some bitcoiners, as in claiming bitcoin is not a fiat currency.
You could also ask me to explain the difference between water and heavy water without using the word "isotope".   


You couldn't even explain your cut and paste research yourself, don't ask me to do it for you.

I've got no problem with that statement.   That does not mean that bitcoin has an intrinsic value.

The US Government could go down and stay down, and if it does, the value of the US Dollar will go to zero since it has no intrinsic value.
The Internet could go down and stay down, and if it does, the value of bitcoin will go to zero since it has no intrinsic value.
This is the weakness of a fiat currency.  It doesn't mean that a fiat currency has no value, it will have value as money as long as people are willing to trade it for something else of value.

If I physically possess a gold coin, it will still have a non-trivial value even if the government that minted it no longer exists, because there is demand for it beyond its purpose as currency.

I speechless because you simply do not understand what the phrase "intrinsic value" means.   When defining what intrinsic value is, gold is the most widely used example to support the definition, because people both use it as a form of currency, and for other non-monetary purposes: it can be made into pretty shiny jewelry, or used in electronics as non-corrosive conductor.  If you don't understand, then you just don't understand.

Declaring that gold holds no intrinsic value is a rather unique viewpoint.

You really just said that gold does not have intrinsic value.  Gold is the widely used example of a commodity currency that has intrinsic value.  I am speechless.

I have read biographies on Turing in things called "books" because of his contributions to the field of computer science, long before a dramatized version of his story came out as a movie in 2014. 

I suppose.  I make a living using and writing with my non-existent skills.  I sure fooled 'em.


Apparently I like to argue with crazy people.  I also use bitcoin, and I think it's a revolutionary invention.


PHYSICAL gold has intrinsic value because it can be used for other purposes in the real world other than as a currency.
You cannot make the same statement about a crypto-currency.
 

<sigh>  Bitcoin has value because other people perceive it as having value.   You can trade it for something for something else of value, but you can't do anything useful with it other than to spend it.  The same thing can be said for any fiat currency that people use in trade.

A commodity currency has the additional property it can be used for something other than money.

Read your last statement.  If you are trying to say that a fiat currency is a commodity because it has value as a fiat currency, then you fundamentally do not understand the difference between a fiat and a commodity currency.

I personally think the bitcoin eventually become a better form of money than other fiat currencies (once it has a history of price stability), but I'm not going to pretend that it is a physical commodity.

Book suggestion:  "The Emperor's New Clothes" by Hans Christian Anderson.

Here is the problem.   If someone is unable to separate reality from a virtual reality, they can't make the distinction between a virtual commodity and a real commodity.   I believe this is an actual documented psychiatric disorder.  There is no point in debating further, It would be as pointless as continuing to argue with a delusional religious fanatic.

You don't find it useful that if some asshole down the street uses a spark gap generator to disrupt communications over your wi-fi or cell phone won't face some consequences?

 

The meaning of the latin word "fiat" in no way implies government control.  Some bitcoiners seem to use the word "fiat" as shorthand to mean "government-issued fiat currency", which is my point.   Bitcoin is novel in that it creates a fiat currency without a conventional government.


You realize that you just called the act of plugging in a bitcoin miner into an electrical outlet and turning it on "actual work".  That must be one of those hyper-ironic millennial figures of speech, like using the word "literal" in an exaggeration.   

The process of bitcoin mining involves having a machine to do virtual work.  The whole point of doing virtual work is to regulate the issuance of bitcoin's fiat currency and to cryptographically secure the block chain.


A commodity is something with intrinsic value.  You can treat something like a commodity, that really is not, which would be called virtual commodity.  That doesn't make it a real commodity. 


I think you meant to say "I am" instead of "we are", unless you actually meant to be condescending, or believe yourself to be royalty.

It is, and I think the definition should derive from the translation of the word, not what is currently listed in Wikipedia.   I think that millennials have like, completely changed the meanings of LITERALLY MILLIONS of words.

Safety deposit box?   Where did they first start looking for gold to confiscate during '33?

Completely wrong.   Governments can regulate commodities and tell you how much they are worth, but it doesn't make it a fiat currency.


Legal tender, meaning that you can pay a government debit with it.   A generally accepted definition of fiat currency, in that it is not backed by a commodity.


That makes no sense.  Misquote?


Sounds close.



Here is the rub:  If you classify currency as EITHER fiat OR a commodity or commodity-backed currency (USD before Nixon),  then I think bitcoin is a fiat, with the "government" being the consensus of miners regulating the issuance of bitcoin.   You just can't go back to the miner and ask for some electricity and hardware in exchange for the bitcoin they mined that you currently hold.

The term "government" in relation to fiat currency is vague.   US dollars are issued by a private bank AKA the Federal Reserve that is not really controlled by the US government.   Euros are not issued by one government, but rather a cartel of governments.

That definition would be wrong.   The value of a currency is determined by what other people are willing to trade for it.   The government may try to regulate the value by pegging a currency to another government fiat currency, forbidding non-government exchanges, or fixing prices on goods, but inevitable black markets and black market currency exchanges will give you the true value.