Semantics of "fiat"

[aantonopoulis]

The defining characteristic of fiat is zero (or effectively zero) cost of production.  Hence, bitcoin is not fiat.  "Commodity money" is a redundancy, as any tradeable good, including money, and yes proof of hash work, is a commodity.  In particular, money is an exchange commodity.  

I'm not arguing that bitcoin is not modeled after a commodity, but the "value" is virtual.  If I hand you a paper wallet with an address and a private key on it, you can't use it for anything else other than scanning the key and spending it on something with a seller that will give you something for it in trade.   With gold you can use it in building electronics that need non-corrosive conductors, oil can be used to run your car, rice can be eaten.  Bitcoin's only value is that it can be traded for something of value which started when the first person ordered someone else a pizza for bitcoin.

You seem to be saying that there is no difference between a fiat currency and a commodity.  That is one way to look at things, because you could argue that a post-Nixon US dollar has value as a commodity because the US government accepts it to pay your taxes and keep you out of jail.

You are right that both public coins and fiat currencies only have value as exchange commodities, nothing else.  The difference is that the latter has zero cost of production while the former takes energy to produce.  Fiat currencies can be issued "by fiat" in any quantity.  Public coins are issued through an energy intensive and publcly monitored manner. 

Personally I call everything a commodity that is traded for, but I'm not sure on the etymology of that word. 

Cheers! 

[thelibertycap]

bitcoin is not issued by government/not legal tender by government order (thinking government can be equated with mining consensus is laughable)
+
bitcoin cannot be created out of thin air and requires actual work (creating floating point numbers in bank computers is not work)

i think regulators are already thinking about bitcoin as a commodity so... i think we are more or less done here

[amspir]

bitcoin is not issued by government/not legal tender by government order (thinking government can be equated with mining consensus is laughable)

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.

bitcoin cannot be created out of thin air and requires actual work (creating floating point numbers in bank computers is not work)

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.

i think regulators are already thinking about bitcoin as a commodity

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. 

so... i think we are more or less done here

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.

[twiifm]

I'm the long run USD is based on work.  Its backed by bonds which are debt to be paid by future earnings of the tax base.

The only way the issuer (US govt) can make good is if the USA has an adequate GDP when the bonds are due.  That's real work!

However, work in itself doesn't define whether something is fiat or not.  You have to look for intrinsic value.

  

[R2D221]

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 can't just say that while ignoring the evidence I've presented you. Where's your evidence that I'm wrong? You need to cite sources.

[teukon]

The process of bitcoin mining involves having a machine to do virtual work.

A Bitcoin miner does real work.  Real resources are consumed in the process.

[twiifm]

The process of bitcoin mining involves having a machine to do virtual work.

A Bitcoin miner does real work.  Real resources are consumed in the process.

So do World of Warcraft gold miners.  The point is that "work" hold little value to majority of people.  Who freaking cares if some computer can solve a math problem faster than another computer.

[R2D221]

The process of bitcoin mining involves having a machine to do virtual work.

A Bitcoin miner does real work.  Real resources are consumed in the process.

So do World of Warcraft gold miners.  The point is that "work" hold little value to majority of people.  Who freaking cares if some computer can solve a math problem faster than another computer.

It depends on which math problem it is solving.

[amspir]

The process of bitcoin mining involves having a machine to do virtual work.

A Bitcoin miner does real work.  Real resources are consumed in the process.

So do World of Warcraft gold miners.  The point is that "work" hold little value to majority of people.  Who freaking cares if some computer can solve a math problem faster than another computer.

It depends on which math problem it is solving.

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.

[thelibertycap]

The process of bitcoin mining involves having a machine to do virtual work.

A Bitcoin miner does real work.  Real resources are consumed in the process.

So do World of Warcraft gold miners.  The point is that "work" hold little value to majority of people.  Who freaking cares if some computer can solve a math problem faster than another computer.

LOL, you seem to have a 19th century mindset, difficult to say where to start explaining the world but it would take a long time and need a paradigm shift to get the 21st century.
You remind me of the recent movie about Turing: The imitation game - they also laughed at his worthless machine.
Apparently your math, engineering and programming background is nonexistent.
How did you end up on bitcointalk and WHY?
Btw, mining physical gold is also virtual because machines are used in the process?
Mining WoW gold takes resources of a tiny computer cluster running the application - HW worth of thousands and electricity costs of peanuts.
Bitcoin mining work creates a worldwide decentralized payment platform. This is the value you are missing.

[aantonopoulis]

I'm the long run USD is based on work.  Its backed by ...
  

Sorry but you have been fooled.  Virtual and physical USD are both issued by fiat.  You will never get your work, which is why nobody holds large quantities of either physical or virtual USD unless absolutely forced to.   

Paper never can be "backed" by anything other than promises which will eventually be broken.   

[superresistant]

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.

[superresistant]

It seems to me that many bitcoin proponents use the word "fiat" to describe central bank issued fiat currency, but don't use the word to describe Bitcoin.
In my opinion, Bitcoin is the ultimate fiat currency, since it has no inherent value (you can can't use it for anything other than paying someone else bitcoin).  It is a currency issued by "decree" through a protocol enforcing a consensus of users and miners.
If bitcoin is not fiat, can you really call it a commodity currency?   If the argument is that is a commodity in the sense that it valuable a currency, one could also say that USD has commodity value in that its only guaranteed value is that it can be used to pay taxes and keep an American taxpayer out of jail for failure to do so.

The value of any money or commodity is affected by offer/demand. The use of a commodity is just a parameter in offer/demand among many others.

Both USD and BTC are backed by the economy around it (=people using it to exchange things).

The supply of USD is strongly affected by a group of people (government) but not in Bitcoin. The number of miners doesn't affect the emission curve, no miner can change the max number of units.

Miners do not create Bitcoin, they work for the network and get a reward.

[amspir]

LOL, you seem to have a 19th century mindset, difficult to say where to start explaining the world but it would take a long time and need a paradigm shift to get the 21st century.
You remind me of the recent movie about Turing: The imitation game - they also laughed at his worthless machine.

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. 

Apparently your math, engineering and programming background is nonexistent.

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

How did you end up on bitcointalk and WHY?

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

Btw, mining physical gold is also virtual because machines are used in the process?

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.
 

Bitcoin mining work creates a worldwide decentralized payment platform. This is the value you are missing.

<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.

[R2D221]

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.

Gold does not have “intrinsic value”. Whatever gold can be useful as a periodic element has nothing to do with gold being used as money throughout human history. People have gold in vaults not because they are planning to build circuits with it, I can assure you.

[amspir]

Gold does not have “intrinsic value”.

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.

[R2D221]

Gold does not have “intrinsic value”.

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.

We value gold because we value gold. I don't understand your speechlessness.

[amspir]

Gold does not have “intrinsic value”.

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.

We value gold because we value gold. I don't understand your speechlessness.

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.

[superresistant]

I speechless "intrinsic value" means.

See:

The value of any money or commodity is affected by offer/demand. The use of a commodity is just a parameter in offer/demand among many others.

It means that  :
Intrinsic value doesn't make the market value.

[amspir]

I speechless "intrinsic value" means.

See:

The value of any money or commodity is affected by offer/demand. The use of a commodity is just a parameter in offer/demand among many others.

It means that  :
Intrinsic value doesn't make the market value.

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.