Crypto following same evolution as fiat?

[tomwalsh]

As cryptocurrency gain more traction and 'normies' begin to become more accustomed to it, we will soon see it proliferating into mainstream usage.

There are many similarities between the evolution of crypto and fiat.

Before fiat gold was the currency of choice. It held value to people for a long time but had many problems as a currency, most importantly in liquidity. Fiat evolved to solve this problem, yet was originally set against a gold standard in order to convince people of its value. As fiat matured the FX markets allowed each currency to find a natural value and replace the gold standard. As the financial system matured other assets came into circulation including securities such as bonds and shares.

However fiat was from the outset a physical store of value, and had a very hard time adjusting to the instant, widespread and annonymous nature of the digital world.

Enter bitcoin. In the crypto world bitcoin has held the role of gold, a speculative commodity and the standard at which other cryptos are valued. As it grew in use people began to believe in its value, giving it merit. However there are many problems within its network, like gold, which prevent liquidity and use as a widespread currency. Just as fiat did altcoins emerged to solve this problem. Set against the value of BTC they attempt to solve liquidity issues. Bitcoin, as with gold, has began to transition to a commodity asset, allowing altcoins to take the role of highly liquid currency. Exchanges have yet to stop using what i call the 'bitcoin standard', but efforts are being made which will allow the value of altcoins to be positioned against each other much like the FX markets. In the place of securities we see tokens emerging, each with their own unique monetary benefits.

Cryptocurrency has democratized currency. It has opened up the financial system to anyone and everyone across the world.
What i would love to see soon is a new state formed with no fiat in place, instead allowing its economy to develop with cryptocurrency.
Im not sure that cryptocurrency is mature enough for it yet, but it would be an interesting experiment in use case.

[shark69]

talking about evolution in the crypto world. at this time crypto has evolved almost the same as fiat money. which distinguishes, bitcoin is limited and can not be affected by anything, while fiat can be taxed by the government

[tomwalsh]

Cryptocurrency is a modern version of fiat. There were good foundational theories paved by fiat which allowed cryto to evolve quickly. However it is by no means 'fully evolved'.

This is easily evident by the low volumes and high volatility throughout the entire crypto ecosystem. Although crypto is out of the control of a central government this means we are in uncharted grounds. With no central body to adjust interest rates/money the effects on inflation and market reaction to price volatility will be unkown.

[Rajamuda]

Nope I guess.. because for crypto itself is more of a natural deflation that the price grows naturally influenced by demand and supply factors also is not influenced by the government at all. Likewise with the development or evolution that will occurring, of course since from the more natural grows., I think it obviously would be different with fiat.

[dlhezter]

i guess so, fiat is the evolution of gold from the past history to use as payment transaction globally, but after more decade fiats are made more as much as country can,  indication that every country has some gold that equivalent to their rolling fiat in their country but we cannot seen, but in bitcoin this limited stocks can seen on some other data that proves that bitcoin can cost over fiat/gold. indication that bitcoin cannot evolve like fiat because this what bitcoin is, bitcoin is decentralize and more productive from its own volality. sooner or later most of the countries will accept this bitcoin as a legal crypto currency that can be use globally without evolution like fiats.

[tomwalsh]

i guess so, fiat is the evolution of gold from the past history to use as payment transaction globally, but after more decade fiats are made more as much as country can,  indication that every country has some gold that equivalent to their rolling fiat in their country but we cannot seen, but in bitcoin this limited stocks can seen on some other data that proves that bitcoin can cost over fiat/gold. indication that bitcoin cannot evolve like fiat because this what bitcoin is, bitcoin is decentralize and more productive from its own volality. sooner or later most of the countries will accept this bitcoin as a legal crypto currency that can be use globally without evolution like fiats.

I think you are mistaken.
1. countries can and do print/remove money from circulation through the central bank in order to adjust inflation. This can be done to make a countries exports more profitable or to reduce cost of imports. However all countries do this so a market equilibrium is met.
2. not every country holds gold reserves, like any commodity many speculate on it as a commodity and hold it in a sovereign wealth fund with the hopes it appreciates in value, just like many countries now hold btc in sovereign wealth funds for the same interests.
3.You say bitcoin an 'cost over bitcoin/gold', i'm not 100% what this means but i presume you mean the hard capped supply means that BTC is guaranteed to hold its value. Again this isn't necessarily true. The value of any asset only holds true if everyone agrees on the price, the price doesn't just magically rise on its own.
3.You say its productive from its own volatility yet in the same breath claim it will be used globally as a currency. Your understanding of currency is flawed. Volatility is the enemy of liquidity. Take bitcoin as a perfect example. Everyone loves it because of its volatility, it has made them a lot of money, however it can never become a standardized currency, why?
Take for example the story of the guy who bought a pizza for 10,000 bitcoin when it was just getting started. Nobody wants to make that mistake and loss out on those kind of potential profits, its called opportunity risk. So no one in their right mind if the think bitcoin price will rise, which you do, would use bitcoin to buy something. Instead they use their stabilized fiat currency, which they know will be roughly the same value now as a few years down the road.

What i want people to understand is that bitcoin is and will never be a currency, its a commodity. Fighting this fact will only cause destruction of a beautiful thing. Instead we need to turn to other altcoins as our daily currency. Something can can handle huge volumes and that will remain in low volatility. In order for this to happen they will need to stop being backed against bitcoin, just like we had to move away from the gold standard to an equilibrium market.

Once this happens cryptos will truly take over the world.

Bitcoin is a commodity, not a currency.

[tomwalsh]

Nope I guess.. because for crypto itself is more of a natural deflation that the price grows naturally influenced by demand and supply factors also is not influenced by the government at all. Likewise with the development or evolution that will occurring, of course since from the more natural grows., I think it obviously would be different with fiat.

Deflation is actually far worse than inflation. If prices constantly increase then people prefer to hold onto their money rather than spend it, as it will be worth more in the short future, as with bitcoin. This causes the economy to slow down and to fall into a recession.
This is another reason why bitcoin can never become a useful currency.

[Shendy23]

I dont think crypto is following same evolution as fiat. As you can see Crypto currency is having a greater value if you will convert it into a fiat. I can see a crypto currency as just like a some of the commodity like gold, silver, or electricity. It could be exchange for greater value of fiat or less. Depending on the supply and demand. That's why i dont see the  crypto currency is following same evolution as fiat.

[audaciousbeing]

I must appreciate the conciseness and thought put in this write-up which shows a deep understanding of the historical information of how currency we use today evolved in the past. However, based on this historical study, it shows that bitcoin is following the same pattern but a deeper look into the way things are going shows that bitcoin is surpassing those previous invention that have happened over the years. Before gold or fiat, became what it is today, it took centuries and you will agree with me, that the managers of the economy are even yet to get it right but bitcoin has come to reach the point others reached in a matter of years.

Another factor as a plus for bitcoin is that while the people who controls the others comparison are people of high social class and the privileged in the society, bitcoin does not discriminate even if you are guy from far east Asia or the inner most part of Africa or even the poorest nation in South America, your path to financial freedom is guaranteed if you manage to have access to the information and act on it.

[tomwalsh]

I dont think crypto is following same evolution as fiat. As you can see Crypto currency is having a greater value if you will convert it into a fiat. I can see a crypto currency as just like a some of the commodity like gold, silver, or electricity. It could be exchange for greater value of fiat or less. Depending on the supply and demand. That's why i dont see the  crypto currency is following same evolution as fiat.

Interesting.
I agree most cryptos have seen volatility classing them as more of commodity than a currency.

However from my knowledge of fiat the same thing (maybe to a less volatile degree, bu then again financial markets were in their early days back then) happened when currencies such as the dollar were held against the gold standard, as gold prices fluctuated as a result of liquidity changes so the did the price of gold standard currencies.
My belief is the same thing is happening with cryptos. Most if not all are values against commodity coins such as BTC and ETH in the eyes of many investors. As these prices fluctuate so does the entire crypto market.

Do you no think the distinction of currency from commodity coins and a multi-pair market, pricing cryptocurrencies against themselves and other fiats, would allow for the equilibrium and creation of a true crypto-'currency'?
I don't know if it is feasible but i would like for it to be.

Or do you think that without central regulation they can never stabilize and will always be traded as a commodity?

[cellard]

We aren't going to see mainstream usage of bitcoin in a long, long time. Most people that talk about bitcoin, it's because they heard it once on the news, but have no idea what it is. A tiny percentage actually own some, and it's mostly left on exchanges because they are idiots. Then from that percentage, only a smart amount know how to withdraw it and set their own full nodes and cold storages.

Conclusion: amount of people that actually own BTC is TINY.

BTC or any other crypto is not going to be viable for mainstream usage until second layer solutions are delivered. BTC just got LN on mainnet so I expect 2019 to be the year where we start seeing websites all over the world accepting BTC through LN.

[Coffee135]

I dont think crypto is following same evolution as fiat. As you can see Crypto currency is having a greater value if you will convert it into a fiat. I can see a crypto currency as just like a some of the commodity like gold, silver, or electricity. It could be exchange for greater value of fiat or less. Depending on the supply and demand. That's why i dont see the  crypto currency is following same evolution as fiat.

Now do this situation but you forget that cryptocurrencies are only in the beginning of his career. Bitcoin accumulate capital and therefore has not yet become a full-fledged currency. Hold coins now more profitable strategy than buy goods with bitcoin. Therefore, we do not see the development of trade. In the future this situation will change and then we can talk about what is better in everyday life, bitcoin or Fiat.

[aftab.436]

I dont think crypto is following same evolution as fiat. As you can see Crypto currency is having a greater value if you will convert it into a fiat. I can see a crypto currency as just like a some of the commodity like gold, silver, or electricity. It could be exchange for greater value of fiat or less. Depending on the supply and demand. That's why i dont see the  crypto currency is following same evolution as fiat.

the Evolution of the bitcoin is more than fiat. before there was gold and silver for buying. When the fiat currencies are introduced it was consider a paper only and by the passage of the time people start trust and make buying and selling in fiat. but the rate of trust in fiat was very slow , while the trust rate of the people in the bitcoin is very high. And we hope bitcoin will rise in short time and it will be the main currency for buying and selling.

[tomwalsh]

I must appreciate the conciseness and thought put in this write-up which shows a deep understanding of the historical information of how currency we use today evolved in the past. However, based on this historical study, it shows that bitcoin is following the same pattern but a deeper look into the way things are going shows that bitcoin is surpassing those previous invention that have happened over the years. Before gold or fiat, became what it is today, it took centuries and you will agree with me, that the managers of the economy are even yet to get it right but bitcoin has come to reach the point others reached in a matter of years.

Another factor as a plus for bitcoin is that while the people who controls the others comparison are people of high social class and the privileged in the society, bitcoin does not discriminate even if you are guy from far east Asia or the inner most part of Africa or even the poorest nation in South America, your path to financial freedom is guaranteed if you manage to have access to the information and act on it.

Thank you!

Bitcoin and cryptocurrencies are a reinvention of financial instruments for the new world of instantaneous digital transfer and a complaint to the decentralized nature of the internet protocol.

I believe the accelerated rate of progress can be attributed to the general acceleration of human technological progress over the years, not to mention the parallel to gold and fiat which gave a fundamental theoretical foundation for concepts such as exchange markets etc.

I am not sure if i am being misunderstood, I am not trying to downplay the importance of bitcoin or badmouth it in any way.
I am merely trying to adjust peoples perception of its use case so we can evolve the cryptocurrency ecosystem so as to improve its usefulness in the real world.

My view:
Bitcoin = commodidity
Why? Highly volatile, significant and consistant deflation, bottlekneck on transaction capacity (I know this will be fixed), scalability issue with mining

Solution:
1.Leave bitcoin as it is. (still improve problems), as a commodity.  As you say it shows no discrimination and a decentralised commodity has so many uses for value generation through mining, trading, speculating, storing wealth etc.
(Ether could also be classed as a commodity, as it too is highly speculative and it serves an important function supporting may Dapps.

2.Begin to trade other altcoins as pairs of themselves (and maybe of fiat in an effort to speed up market stabilisation). This will allow a real life use case for altcoins as a form of everyday currency. You can happily buy with and be paid in a currency which you are confident will more or less hold its same value, has little to no fees, and can scale efficiently. These altcoins will also be decentralised, and offer no discrimination or bias into who owns or controls them, they will also be internationaly accepted.

In order to stabalise these 'currency' altcoins i propose an 'altcoin foreign echange market'.
I have idea on how to incentivise holding of unstable coins in order to prevent market collapse and maintain stable equilibrium price, but i am still in the early stages of developing the concept myself.

[tomwalsh]

We aren't going to see mainstream usage of bitcoin in a long, long time. Most people that talk about bitcoin, it's because they heard it once on the news, but have no idea what it is. A tiny percentage actually own some, and it's mostly left on exchanges because they are idiots. Then from that percentage, only a smart amount know how to withdraw it and set their own full nodes and cold storages.

Conclusion: amount of people that actually own BTC is TINY.

BTC or any other crypto is not going to be viable for mainstream usage until second layer solutions are delivered. BTC just got LN on mainnet so I expect 2019 to be the year where we start seeing websites all over the world accepting BTC through LN.

That's another reason why i draw the comparison with gold. When gold was the standard currency of empires centuries ago everyone knew its value but not many people actually had any and even fewer still used it as day to day currency. (only the elite of the elite such as kings paying their armies)

[tomwalsh]

I dont think crypto is following same evolution as fiat. As you can see Crypto currency is having a greater value if you will convert it into a fiat. I can see a crypto currency as just like a some of the commodity like gold, silver, or electricity. It could be exchange for greater value of fiat or less. Depending on the supply and demand. That's why i dont see the  crypto currency is following same evolution as fiat.

Now do this situation but you forget that cryptocurrencies are only in the beginning of his career. Bitcoin accumulate capital and therefore has not yet become a full-fledged currency. Hold coins now more profitable strategy than buy goods with bitcoin. Therefore, we do not see the development of trade. In the future this situation will change and then we can talk about what is better in everyday life, bitcoin or Fiat.

My point exactly, hold coins now more profitable. This is chronic deflation in action. I do not think this perception of bitcoin will ever change.

[Koadharber]

Nope I guess.. because for crypto itself is more of a natural deflation that the price grows naturally influenced by demand and supply factors also is not influenced by the government at all. Likewise with the development or evolution that will occurring, of course since from the more natural grows., I think it obviously would be different with fiat.

Deflation is actually far worse than inflation. If prices constantly increase then people prefer to hold onto their money rather than spend it, as it will be worth more in the short future, as with bitcoin. This causes the economy to slow down and to fall into a recession.
This is another reason why bitcoin can never become a useful currency.

Agree on your points which is the sad reality on Bitcoin why it cant really be considered to become a useful currency the same as fiat. They do have different  system or field that they are focusing into. Price volatility would really be the main issue on here together with decentralized thing not only on Bitcoin but on most cryptocurrencies in the market. There are might some centralized but I don't see a reason that it would really come to a point on where those local fiat currencies are being placed on. Crypto would really still remain on their field that they got used to be.

[aoluain]

The OP is set in the "past tense" crypto is still evolving!

Bitcoin will never be adopted by any country as its currency
because its decentralised, volatile and unregulated! No country
can benefit from it.

There is a limited supply of BItcoin 21,000,000, we cant just
"print" more like FIAT currency.

You may see a country in the near future adopting crypto
currency as its official currency but it will be created and
regulated by that country, not the same as bitcoin.

[dancingnancy]

As cryptocurrency gain more traction and 'normies' begin to become more accustomed to it, we will soon see it proliferating into mainstream usage.

There are many similarities between the evolution of crypto and fiat.

Before fiat gold was the currency of choice. It held value to people for a long time but had many problems as a currency, most importantly in liquidity. Fiat evolved to solve this problem, yet was originally set against a gold standard in order to convince people of its value. As fiat matured the FX markets allowed each currency to find a natural value and replace the gold standard. As the financial system matured other assets came into circulation including securities such as bonds and shares.

However fiat was from the outset a physical store of value, and had a very hard time adjusting to the instant, widespread and annonymous nature of the digital world.

Enter bitcoin. In the crypto world bitcoin has held the role of gold, a speculative commodity and the standard at which other cryptos are valued. As it grew in use people began to believe in its value, giving it merit. However there are many problems within its network, like gold, which prevent liquidity and use as a widespread currency. Just as fiat did altcoins emerged to solve this problem. Set against the value of BTC they attempt to solve liquidity issues. Bitcoin, as with gold, has began to transition to a commodity asset, allowing altcoins to take the role of highly liquid currency. Exchanges have yet to stop using what i call the 'bitcoin standard', but efforts are being made which will allow the value of altcoins to be positioned against each other much like the FX markets. In the place of securities we see tokens emerging, each with their own unique monetary benefits.

Cryptocurrency has democratized currency. It has opened up the financial system to anyone and everyone across the world.
What i would love to see soon is a new state formed with no fiat in place, instead allowing its economy to develop with cryptocurrency.
Im not sure that cryptocurrency is mature enough for it yet, but it would be an interesting experiment in use case.

Fiat will continue for a very long time. However, btc will cease once it's completely mined out. Crypto is different from fiat it started digitally without much market cap whereas fiat is controlled by the government which makes it so powerful when compared to alts and btc.

[tomwalsh]

The OP is set in the "past tense" crypto is still evolving!

Bitcoin will never be adopted by any country as its currency
because its decentralised, volatile and unregulated! No country
can benefit from it.

There is a limited supply of BItcoin 21,000,000, we cant just
"print" more like FIAT currency.

You may see a country in the near future adopting crypto
currency as its official currency but it will be created and
regulated by that country, not the same as bitcoin.

I never suggested or expect a country to adopt cryptocurrency.

In fact I never expect anyone period to use bitcoin as a currency for the reasons you explained(read previous posts)

What I am suggesting is that altcoins need to stop being traded against bitcoin.

If we want a decentralised financial system free from jurisdiction of any country we need stabilized coins to act as a highly liquid medium of exchange. Bitcoin is too speculative and volatile so if we continue valueing other altcoins against it the entire crypto market will remain speculative and volatile.

These new 'true currency' altcoins will need a new parameter for baseline valuation in order to find an equilibrium price level.

This whole threrad has been about what the future of crypto needs to be, I have merely used the past for reference and baseline analysis.