Your example about why the gift card stopped having value was that a specific institution stopped backing it. Your example about why prison script lost value was the supply was increased causing inflation.
Both these things are why Bitcoin works. Bitcoin doesn't require any institution to back it, it's backed by the population. The supply also cannot be increased.
I regularly use it for international transactions, it is much faster and easier than transacting in fiat.
Investment aside, I'd switch today to all crypto currency for my transactions and dump the banks entirely. We are seeing the final barriers to adoption come down, and we will see large numbers of people begin to be happy to get paid in crypto instead of fiat.
I'm not arguing which is better for mankind, in just stating this is what is happening. The people who don't see this shift happening will be the ones who thought the internet was a fad.
In a future state the line between stock, cryptocurrency/tokens, and money will blur and stop being clear. It will all be liquid and you will be able to buy a cheeseburger with a fraction of your Tesla stock.
That still doesn’t answer my question about its inherent value and what happens when the power is shut off or the internet isn’t available. Those are both forms of “institutional backing.”
Can you carry a Bitcoin in your pocket? Can you hand it to somebody independent of a digital wallet and computerized device? Further institutional backing that is required to make it work.
I can walk over to my neighbor’s house during a power or internet outage and offer him a basket of apples in exchange for a few jugs of water. In a far flung rural area with no internet, I can exchange a box of ammo for a car part. These exchanges aren’t reliant upon an institutional infrastructure being in place because the items exchanged are autonomous and exhibit value.
Crypto has none of the hallmarks of legitimate currency, and may even be less so than government issued fiat at present due simply to the fact that US dollars are still capable of translation to physical bills. It’s extremely volatile, isn’t autonomous, requires verification by a third party when transactions occur, and has limited portability. If or when the US dollar goes fully digital, it will feature the same problems. I’ve yet to have the “intrinsic value” of Crypto explained, so that may or may not eventually be satisfied.
What crypto is, is another form of investment like stocks and bonds. It can go up and down rapidly, it requires a broker for trading, it will soon have capital gains taxes assessed and reported to the IRS by the brokerage firms, and can make or lose you a lot of money as you buy and sell shares. It isn’t a “bad” investment or a “good” investment because I can’t predict the future and don’t give financial advice.
Buy it, hold it, sell it, make your transactions with it, use it as a short term hedge against inflation, print pictures of it and frame them on your wall, but understand that its entire value could be decimated by one well-organized attack by a government with limitless fiat printing power. For the long term, I would suggest canned goods, water, boxes of ammo, or physical precious metals if you want something with genuine stability and more universal, decentralized value.
Both these things are why Bitcoin works. Bitcoin doesn't require any institution to back it, it's backed by the population.
Agreed, that's one of its biggest strengths, no counter-party risk. But that's its downside as well, its value is entirely determined by people choosing it as their crypto, as opposed to one of the hundreds of other cryptos. That is, its value is mostly historical rather than inherent. This is fine for shorter-term use but long-term its value is unreliable.
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