Why Fixed Supply Tokens Can't Become True Currencies

[Fatunad]

The second big challenge is the cryptocurrency community itself. We often talk about how we’d like to see Bitcoin or Litecoin become a medium of exchange, but we haven’t put our money where our mouths are.

The part where you said that a lot of people talk about how they want bitcoin to become a currency, but at the same time they are not doing something that shows that they really want that to be the case; that is just the truth.

You will see so many saying that bitcoin is going to replace banks, but instead of them to do according to what they believe and make use of Bitcoin as a steady means of transaction, they would still continue making use of Fiat for transactions, while they keep their bitcoins in their wallets and speculate on prices reaching millions of dollars so they can cash out to the same Fiat lol. When you look at situations like that you would see that we are really heading nowhere with that.

The sad truth is that most people here are just speculators. They are in it for the money and they really don't care what happens as long as they can make some money.

You are precisely on point on this one which is actually true that majority is really in for the money and doesnt really mind off when it comes  to future aspects.
Whether it would really be  a currency or not then they dont  really care with that kind of vision as long they could benefit out then they wont
really care at all. About having fixed supply then this is  something which cant really be the main reason or point on why a certain coin
wont be  a currency., Come to think on what El Salvador had done when it comes to this one.

[paxmao]

The major problem with the tokens are not related to government but rather to users and confidence. But let's be honest, in sociological terms, who wants to actually invest money on a currency? The answer is nobody - people want assets with potential for increasing in value and tokens are ill suited for that if they have to be at the same time a currency. Nope, a deflationary currency is technically not good for trading, as there is a strong incentive to keep it rather than to spend it.

[odolvlobo]

Nope, a deflationary currency is technically not good for trading, as there is a strong incentive to keep it rather than to spend it.

The strength of the incentive to save vs. spend depends on the the level of deflation. If deflation is low, then it will have little effect on saving vs. spending. Just as low inflation has little effect on saving vs. spending.

[inashed]

Nobody says that deflationary currencies cannot work as a medium of exchange.

In theory, maybe yes. In reality, most people are reluctant to use deflationary assets for daily spendings.

This can be tested with el salvador, since they use bitcoin.

[sana54210]

The major problem with the tokens are not related to government but rather to users and confidence. But let's be honest, in sociological terms, who wants to actually invest money on a currency? The answer is nobody - people want assets with potential for increasing in value and tokens are ill suited for that if they have to be at the same time a currency. Nope, a deflationary currency is technically not good for trading, as there is a strong incentive to keep it rather than to spend it.

You may consider bitcoin as a currency but there are a lot of people who consider it as asset as well. Which means that they may not want to invest their money into a currency but according to them when they buy bitcoin they are actually not doing it anyway, they are buying assets according to them.

I would say that even buying a currency is a good investment for many people all over the world. Like assuming your fiat is a weak one that gets devalued, holding dollars or euros as an investment is a valid option as well. Turkish Lira for example dropped a lot as far as I know, if they held bitcoin or dollars even as a currency, they would have earned a good amount. That is the type of investment bitcoin is, it is hedged against currency itself and that would mean that we are talking about making a lot of money in this case without having to hold fiat in our wallets.

[Mahanton]

Nobody says that deflationary currencies cannot work as a medium of exchange.

In theory, maybe yes. In reality, most people are reluctant to use deflationary assets for daily spendings.

This can be tested with el salvador, since they use bitcoin.

And people should realize on how its been done and now been applied.! Are they blind?

Doesnt matter if its a fixed supply or does have unlimited.It all matters with recognition and adoption because it wont really be recognized if it was shit on the first place.

We do already have fiat and its not necessary but we do have at least some option to take.

[inashed]

Nobody says that deflationary currencies cannot work as a medium of exchange.

In theory, maybe yes. In reality, most people are reluctant to use deflationary assets for daily spendings.

This can be tested with el salvador, since they use bitcoin.

And people should realize on how its been done and now been applied.! Are they blind?

Are you talking about the fact their chivo wallet is fractional reserve banking? The fact, they use bitcoin they dont have to give those starter 30 dollars to people?

[davis196]

Here's some info about the "bullion famine" in 15th century Europe.
According to Wikipedia:

The Great Bullion Famine was a shortage of precious metals that struck Europe in the 15th century, with the worst years of the Famine lasting from 1457 to 1464. During the Middle Ages, gold and silver coins saw widespread use as currency in Europe, and facilitated trade with the Middle East and Asia; the shortage of these metals therefore became a problem for European economies. The main cause for the bullion famine was outflow of silver to the East unequaled by European mining output, although 15th century contemporaries believed the bullion famine to be caused by hoarding.

The discovery of the Americas with its silver and gold, along with innovations in mining techniques, and the Portuguese gaining access to African gold ended the bullion famine.

The colonization of America leads to increased supply of gold and silver,which caused the first case of high inflation in the medieval European economy.
More gold means more inflation,but that's just the medieval economy.
Anyway,this article is criticizing Bitcoin for something that we already know.
Being a good store of value is better than being a good medium of exchange,if you ask me.
Bitcoin can be both,but nobody says that Bitcoin is totally perfect.
I wonder why are you comparing Bitcoin to fixed supply tokens.
Scarcity itself isn't enough to give value to some asset.
You could create some centralized token with a fixed supply of 1 million tokens,but that doesn't mean that this token will become better and more valuable than Bitcoin.
Security and utility are what gives the value of an asset.Scarcity can only increase that value even further.

 

[witcher_sense]

For Bitcoin – or any other cryptocurrency, for that matter – to become usable as a day-to-day asset, it needs to be stable.

In other words, there must be someone powerful enough to be able to control the purchasing power of money and ensure its stability via price controls, central planning, quantitative easing, and other similar measures aimed at the managing of the available supply of money in the economy. In short, it must be fiat money.

How the price of money is determined? Like the prices of any other goods on the market, the price of money depends on the supply of it and the demand for it. However, the difference is whereas an increase in the amount of consumer and capital goods is beneficial for society, the increase in the money supply doesn't bring about anything useful except for an illusionary and temporary sense of increased wealth. When you print more money trying to accommodate the stability of its purchasing power, you don't create automatically more goods and services. The latters' quantity remains exactly the same, which means you only increased their price artificially. It also follows that by trying to achieve stability you made money even less stable than it had been before your intervention.

[fiulpro]

What if there is someone who actually prefers using bitcoins as a currency, since the governmental issues are a bit too much to deal with?
- International transactions are much easier with Bitcoins
- Transactions beyond a certain amount actually does take a while and ofcourse there are so many steps before as well, using cryptocurrencies like bitcoins, excludes the concept of third parties making it easier.

I understand there are people who prefer using Bitcoins as an investment, but that does not change the fact that, cryptocurrencies like bitcoins can also be used as a currency, something that can be taken as a *world currency*, with the collapse of US, surge of Omicron we might desperately need the bitcoins.

[sana54210]

And people should realize on how its been done and now been applied.! Are they blind?

Doesnt matter if its a fixed supply or does have unlimited.It all matters with recognition and adoption because it wont really be recognized if it was shit on the first place.

We do already have fiat and its not necessary but we do have at least some option to take.

I do not get why we are talking about something that has been done already. I get that the amount is not huge right now but the reality is that bitcoin and some other crypto already found themselves being a medium of exchange. I have been working for crypto for nearly 5 years or even maybe longer these days, I remember that it might be 2016 or something when I first found a job that paid in crypto, and I have been doing that ever since.

I can't explain how difficult it was at first but we made it work and it is a lot better these days, and I mean A LOT better. So, if anyone thinks that we do can't have bitcoin as medium of exchange, they haven't paid attention to what already happened so far.

[dezoel]

First of all, what kind of currency are you talking about? When you use the word currency do you mean by bitcoin replacing fiat currency and being used as the main? I don’t think that is going to be so. And if you ask yourself, was that even why or the purpose of having Bitcoin; to serve as a replacement? The whole world won’t be making use of the same currency.

So, having a fixed supply doesn’t really matter that much, that’s what makes it deflationary, the value will keep on increasing. And before we get to that fractional part of everything, it’s going to take a really long time before we arrive to that point. Just check how many Satoshi it takes to make bitcoin, that’s a lot. And the market value will also keep increasing to match that amount.

[odolvlobo]

In these cases, rich people will buy as much BTC as they can and took them out of circulation.

I think you are assuming the value will continue to increase, but it won't as much with full adoption. Rich people will have little incentive to hold bitcoins over other assets, just as they currently have little incentive to hold dollars.

Poor will have little chance to buy any BTC. When most of the BTC will be out of circulation price of it will go out of reach of normal people. The whole world will be in an economic crisis and violation of the law will be common because people will not have any BTC to buy food.

Why? Let's say that 99% of the bitcoins are removed from circulation by rich people. That still leaves 21 trillion satoshis for everyone else to use. There would be no shortage, and people would be paid in satoshis that they can use to buy food.

[RealMalatesta]

Okay, let's think of a scenario and analysis what will happen if we have a fixed supply token as a currency. Let's think BTC is the world currencies now. In these cases, rich people will buy as much BTC as they can and took them out of circulation. Poor will have little chance to buy any BTC. When most of the BTC will be out of circulation price of it will go out of reach of normal people. The whole world will be in an economic crisis and violation of the law will be common because people will not have any BTC to buy food.

But that doesn't mean crypto can not be one of the world currencies.

What you have in that case is a very very high price of bitcoin, people who could still buy a few satoshi at the very least (you can't have 1 satoshi equal to 1 dollar, that’s too much) and we are talking about other coins as well, which will mean people can get included due to altcoins. Most of those coins are either limited (like btc has 21 million cap) or they are unlimited and we get to mine or stake them as well so it’s not all rich people.

So, in the fiat world rich people have billions and more billions gets printed ended up in their pockets whereas our small investments all become worthless in the long run. I do not see that as a good way of making money to be fair, I believe that it is a very difficult way to make money for wealthy people, they would lose out in the long run. Imagine the fact that there are more than 21 million millionaires in the world, so not even all millionaires will have 1 bitcoin.

[inashed]

Rich people will have little incentive to hold bitcoins over other assets, just as they currently have little incentive to hold dollars.

Normal currencies are inflationary in a way there 100% chance of price inflation to happen, this is not true with bitcon.

[cafucafucafu]

The problem is that all the conventional economic wisdom has been built on a system of fiat currencies that have been inherently inflationary.

So if you try to take that and apply it to a completely different ecosystem of Decentralized Cryptocurrencies, you are going to see these critiques pop up.

I'm yet to see one transaction with BTC fail to go through because it is deflationary, let me just say this...

[The Sceptical Chymist]

For Bitcoin – or any other cryptocurrency, for that matter – to become usable as a day-to-day asset, it needs to be stable. However, most of us are using Bitcoin as a store of value, holding it, DCA-ing into it, and not spending it. There is nothing wrong with this, but it precludes BTC from being used as a real-world currency.

Those behaviors don't preclude anything of the sort--it's just what a lot of bitcoin owners choose to do with their coins, and they certainly could use it as a form of money.  It's not like there aren't a ton of merchants who accept it as payment. 

This article reads very much like the typical precious metal permabull propaganda that I've been seeing for over a decade (and it's been written for much longer than that).  It is true that a currency meant to be spent should either be stable or inflationary (to discourage hoarding), but my question is this: Most of us know this, and it isn't something that hasn't been discussed hundreds of times before across the internet.  What's the point of this article, exactly?  And by "point" I mean why even write it in 2021?

and we are talking about other coins as well, which will mean people can get included due to altcoins. Most of those coins are either limited (like btc has 21 million cap) or they are unlimited and we get to mine or stake them as well so it’s not all rich people.

Yeah but the problem with altcoins--and even the entire crypto market in general--is that there's absolutely no maximum supply of cryptocurrency.  Anyone can start up a coin based on an old one, slap a new label on it and hope people treat it as the next big thing.  And wouldn't you know, that's exactly what's been done over and over. 

Most altcoins make for better money than bitcoin since they're faster and cheaper to use, and that's fine by me.  Bitcoin can remain digital gold, something that people don't spend and invest in just like you would with gold.