if fiat money is bad, we could escape them easily even before bitcoin

[zhangweiwu]

Bitcoin intended to address an inherent problem of fiat money: fiat money can be created out of thin air, resulting inflation.

Is bitcoin the only solution to this? No, there are lots of alternative solutions, so why the bitcoin heat?

- If you don't like fiat money to store value, you can use securities backed by gold. At least gold certificate is easy to buy here in China, i.e. you have certain amount of gold; the bank holds it for you. Although you cannot buy things with gold certificates, you can easily convert gold certificates to cash and back. There is no storage fee (you can take the gold physically home if you own more than 1 kilo) and the exchange fee isn't too much (my impression is 2.8%, I could be wrong but not too wrong). Besides, banks here competes fiercely for customer to purchase gold, some bank even do it for free for new customers (there is such an ad right before my window). I feel in other places in the world gold certificates are not hard to buy neither.

- If you don't like long time contracts signed with fiat money, you can write it in a way requesting transactions be done in fiat money of the market value of certain amount of gold agreed beforehand. A few people already do that kind of contract, and I presume it is legal.

- If you like, you can manually link your salary account with your gold reserve in the same bank. When you receive salary, convert them to gold in 1 minute with a few mouse clicks.

- I read newspaper report saying in the U.S. autonomy government are allowed create their own currency. It's apparently illegal here in China, but U.S. people can do that. Why not some cities controlled by wise leaders issue their currency pegged to gold, and compete with USD, even in a smaller scale? That's the solution suggested by Hayek in 1976 in his "Denationalisation of Money", what stops this from happening? According to Hayek, if competition is allowed, the more stable currency would easily win.

Somehow I feel all these alternative are not happening because people don't realize the problem with fiat money -- if this is the case, it won't easily change because of bitcoin -- people's minds are slow to change. Had people realized the problem and distrust fiat money, there should haven been rushes to buy gold like it is happening in Asia.

[biskup123]

Isn't gold price crashing at the moment or I can't understand the news?

http://www.bbc.co.uk/news/business-22151474

Man, whom are you going to fool?

[zhangweiwu]

The fact gold price is falling in the recent days is irreverent to this discussion. The question I am asking, is, if people hold bitcoin in order to combat/compete/avoid fiat money - which is a popular idea among bloggers - why people didn't do it before bitcoin. This question is to test if there is a bubble, a false faith in bitcoin, that people buy bitcoin because they thought the believe the value of alternative of fiat money, when they actually don't.

Even in discussion of gold price, it appears there are multiple views too:

Asians Snap Up Bargain Gold, 16th, April.
[Suspicious link removed]j.com/article/SB10001424127887324030704578426254272013188.html

[libertine]

there is only so much gold and there are only so many BTC, the difference is BTC is easy to transport and trade. gold is heavy and has to be shipped.

[vivalabitcoin]

Counter-party risk.  If gold were like cash in your pocket, you would have Bitcoin.

[TiagoTiago]

there is only so much gold and there are only so many BTC, the difference is BTC is easy to transport and trade. gold is heavy and has to be shipped.

We actually know for certain how many BTC there is, while with gold it's only a guess; and people are already talking about plans to mine space rocks for even more than that guess...

[mechanikalk]

The question that I would pose with all of the recent volatility in price, is this volatility hurting the bitcoin as a fungable unit of commerce.  The whole point of having bitcoin is to replace fiat currencies.  This will not happen until:

1) the price is stable enough that goods can actually be priced in bitcoin
2) the stability of fiat money decreases such that bitcoin becomes a reasonable alternative

One of the things that I think was overlooked was that every currency that has been successful in the passed that is fiat has done so by having some mechanism by which to initially peg a value to that currency.  In the case of the dollar it was gold and silver and in the case of post WWII europe it was the dollar.  Only in the seventies did the currencies begin to float with nothing backing them at all.  I am wondering how price stability will be achieved for bitcoin overtime.

[zhangweiwu]

One of the things that I think was overlooked was that every currency that has been successful in the passed that is fiat has done so by having some mechanism by which to initially peg a value to that currency.  In the case of the dollar it was gold and silver and in the case of post WWII europe it was the dollar.  Only in the seventies did the currencies begin to float with nothing backing them at all.  I am wondering how price stability will be achieved for bitcoin overtime.

Oh, this is very important to know. This means, although U.S. allows autonomy government to issue their own currency, that money need to peg its value to gold or USD, and if it succeeds competing with USD, it eventually would begin to float.

A few other posters explained gold is not easy to carry. At the moment, Gold is not any harder to carry than bitcoin. A gold certificate is just paper. few are stupid enough to take the gold out of the bank and carry with him - think about the anti-fraud validating process to go through when you store the gold back to the bank. It is not harder to trade neither, because it is easier to find someone who would accept a piece of gold certificate than someone to accept bitcoin. You may say in the future this may change, but it as well can be changed by having a bank issuing gold certificate as a currency - the condition for this to happen has been met long before.

Guess I have to put a bold statement to inspire some really meaningful argument. So here is one:

Bitcoin is invented to replace fiat money, but if people don't trust fiat money, they don't have to wait for the invention of bitcoin to start replacing it. Thus:

Not true: The popularity of bitcoin is because: People distrust fit money always, now they finally have a tool to fight fiat money.

Perhaps true: The popularity of bitcoin is because: people speculate without knowing fiat money is a bad thing. Some others think they are fighting fiat money and sing praise of them.

The difference is non-trivial. Whether or not people consider alternative to fiat money is good, is going to be tested when bitcoin value plummet. Only those who believes in its value would keep trading them, preventing a sudden death of bitcoin. Speculators don't believe in value of anything.

[CobaltIndium]

From the US Constitution Article I. Sec. 10:

No State shall [...] coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; [...]

I think that means that the States can't create their own currency.  If I remember my history correctly, one of the problems after independence was that all of the States issued their own currencies, making the central government's treasury and interstate trade difficult.

[mechanikalk]

Bitcoin is invented to replace fiat money, but if people don't trust fiat money, they don't have to wait for the invention of bitcoin to start replacing it. Thus:

Not true: The popularity of bitcoin is because: People distrust fit money always, now they finally have a tool to fight fiat money.

Perhaps true: The popularity of bitcoin is because: people speculate without knowing fiat money is a bad thing. Some others think they are fighting fiat money and sing praise of them.

I don't think that people have previously had a choice when it has come to money.  The best options were gold and silver but you could not actually trade it in daily life. For example see <a href="http://www.duffminster.com/times/node/255">this article</a> about the liberty dollar which the US attorney made the following comment "Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism," U.S. Attorney Anne Tompkins said in a statement.  Therefore, we have not previously had the tools because the government knows that with its current degree of inefficiency and socialistic policies very few of the tax paying public would pay taxes if it could be avoided without punishment.  The only reason Bitcoin or any of the cryptos have lasted this long is the government hasn't found a way to stop it.

[WishIboughtearlier]

And what is fiat to you??

[Luno]

Bitcoin was invented to democratize money, fiat or otherwise.

Bitcoin exposes and teach a lot of people about what money is used for by governments and global banking, by not needing either.

Before I knew about Bitcoin, I really believed that currencies served a mere practical purpose. How important they are as a political and financial weapon for governments and others globally really escaped me.

Thank you for that Bitcoin. So you are right, we could have done all that before Bitcoin and some countries do have a tradition for  stuffing gold in their mattresses not trusting either their government or bank on that matter.

[mechanikalk]

And what is fiat to you??

It means that it is a currency whose use is imposed on the population by force.  That is the whole story of Bernard Von Nothaus.  He tried to make a currency to compete and the government threw him in jail.  Hence they are making you use the currency by force...  Trying to use a non-federal currency see this article, http://www.newswithviews.com/Ryter/jon120.htm  Again the only reason bitcoin has worked so far is the government is too impotent to stop it, go cryptos!

[freigeist]

And what is fiat to you??

It means that it is a currency whose use is imposed on the population by force.  That is the whole story of Bernard Von Nothaus.  He tried to make a currency to compete and the government threw him in jail.  Hence they are making you use the currency by force...  Trying to use a non-federal currency see this article, http://www.newswithviews.com/Ryter/jon120.htm  Again the only reason bitcoin has worked so far is the government is too impotent to stop it, go cryptos!

Isn't the bitcoin network and clients running on TCP port 8333?
You think is not possible for them to create a law that will impose to all ISP
companies in USA to close the ports used by bitcoin protocol
and put bitcoin out of use in this way?!

[Pzi4nk]

Bitcoin is fiat money, just not a government controlled fiat money.

[drakahn]

Bitcoin is fiat money, just not a government controlled fiat money.

who is forced to use bitcoin?

[Pzi4nk]

Bitcoin is fiat money, just not a government controlled fiat money.

who is forced to use bitcoin?

Fiat money=money without intrinsic value.

[Miner_Willy]

Bitcoin is invented to replace fiat money

No, bitcoin was invented to work alongside fiat money. Anyone who wants to keep using fiat, can. This is about choice.

[nullbitspectre1848]

Considering the nature of Bitcoin, I am absolutely stunned that not a single person has spoken about the history of money and the tactics used to force people to use "their" fiat currency, hence "Satoshi Nakamoto".  Bitcoin is FAR from the first alternative currency in history.

[Miner_Willy]

Fiat money=money without intrinsic value.

Dictionary alert: as bitcoin is a very different class of instrument than paper money, it's useful to distinguish between the two. Many now use 'fiat' to refer to that second type. You might be right according to the dictionary, you may be wrong according to developing use