Gold can be good as well. Though it's not as easy to carry around or dividable as crypto is, it can be useful, especially if the power and internet networks go out.
There really are two "golds". Physical gold, which is great if the power and/or Internet goes down. But it's weak because it's so valuable that it's best for large purchases. One ounce of gold = one bespoke suit. Buying carrots? Hah... gold isn't great for that.
The other form is a gold backed card. So you use the card with all the convenience of any other card, but you are spending gold instead of dollars. This is great for normal life, but not great for "end of the world" scenarios.
Thus I recommend both. (They are nicely interchangeable too)
The gold sits in a vault in Switzerland. You can request delivery of the gold whenever you wish if you want to convert it to "in your hands". It's not a perfect system, but overall it's working well (it's not just an idea, it's real and an option anyone could choose to do but it's amazing how many people prefer "dollars").
Crypto currency isn't "in your hands" either. With Crypto you have to trust the "system" and be connected to the Internet.
I think crypto is pretty "in your hands" because you could have a cold storage wallet and trade keys with someone (even if the power went out). But, yes, you would need the system to continue to work for anyone to want to take the crypto that way.
Hmm... you are out of my knowledge for crypto here. I'm not aware of any method of exchanging / transferring crypto with someone else using ONLY cold storage wallets.
The whole concept of trusting a "blockchain" is that it's recorded and replicated around the world.
Hmm... only five states so far with a few businesses accepting them. Let's hope this grows.
I'd be a bit concerned this runs afoul of USA law as it seems to close to someone printing "money".
One problem I see is that even though they contain a microscopic amount of gold, there doesn't seem to be any support to cashing them in (it's a one way exchange - you can buy them but you can't sell them).
Great article. I am a novice with crypto. Just beginning to learn.
I couldn't agree more that people shun responsibility. But you only become truly free when you absolutely embrace full responsibility.
I did this with my finances over the last ten years. I had shied away for years and avoided. I accepted the standard wisdom about the inevitability of debt. I decided to clear it all. I even changed jobs, becoming self employed so I could devote more resources to clearing my debt. It was liberating to do and I'd advise anyone to do so.
Crypto is something I struggle to understand but I am determined to get to grips with it. Our fiat currencies cannot last. The US has $171T in unpaid debts. An absurdity.
Thanks for responding to let me know you enjoyed the article. It felt like a very different post for this Substack, but the Drama Triangle is all about responsibility shifting. I compared it to the game hot potato in an article once. No one wants to be the one left holding the responsibility for something but it is SO empowering!
There are lots of videos and articles to help understand crypto, but sometimes you will find scammers there too. I believe it was God who led me to study it out in the big picture and I just pray to be led to what I need to know, pray not to be deceived, and pray about letting go of my worries to Him at the end of the day.
I think the article is in keeping with your material. This kind of unusual angle is exactly what is needed. I also suspect you are a trusted source for many, especially women who may read all about the drama triangle. I think that is important and perhaps will encourage people to look into crypto.
As is the call for people to remember they are responsible for their own lives, even in this era of mass hysteria, government gaslighting and all the rest.
It is good to remind people even with something as inescapable as fiat currency there is an alternative, and one their financial health may eventually depend upon.
Right. I keep forgetting there are not many women in the crypto world compared to men. I was also into math and computer programming in college, but supposedly that's mostly men as well. I am always the odd girl in respect to my interests. I went to an all girls college so I didn't notice any disparity while studying that lol.
Maybe it will increase some interest. I hope I didn't scare people off, lol.
There are some side events at the major Bitcoin Conference each year geared towards women. Lyn Alden, Natalie Brunell, and Anita Posch are key players in that space.
Fascinating! I had no idea you were into to cryptocurrencies! I’ve been visiting El Salvador annually, partially due to their whole Bitcoin legal tender bill for years now.
Benjamin J. Dichter who was involved in the Canadian Trucker Enjoy and is author of Honking for Freedom might be able to help answer questions about that topic. He writes here on Substack.
At least with Bitcoin and to some extent some of the stablecoins, their use is a whole other ball game in places with capital controls and unstable currencies. Alex Gladstein wrote an entire book about it called (personally I hate the name) “Check Your Financial Privilege”
I hope my article can better describe why I think it's important (on a freedom & responsibility note) for people to take responsibility for their wealth rather than leaving it in someone else's wallet (like the banks, etc). I think it's probably clear why I would gravitate toward it for that reason as well.
Thanks. I subscribed to him and asked him to check the article out.
I understood how helpful cryptocurrencies could be against inflation back in 2015. But I haven't read much about it recently. I don't know if I would have the time to get into it all now. But I do check out random crypto things from time to time. I like the idea of NFTs for musicians and artists as well and though, not for much, I did sell a couple of art pieces on NFT Showroom. I've also played some cryptogames with NFTs.
A lot has changed over the few years and it continues to evolve at such a pace that’s it’s hard to keep up with.
Bitcoin has seen what are called “layer 2” solutions that address some of the issues with transactions sent over the blockchain (privacy, fees, long wait time for confirmations, etc) such as Lightning, Cashu, and Fedimint.
I honestly don’t follow NFTs too much but did notice they have some popularity and appeal with musicians, artists, and gamers.
Crypto has a lot of future potential. It’s certainly a place to keep a transferable reserve outside of banks.
But I, and many other people, do not live in a world where we can get by on it or live it as an everyday thing.
I’m reasonably smart and tech savvy and the process of converting fiat to bitcoin/etc. is hardly transparent. Even if you move it to your own wallet(s), you still need a way to extract it through bottlenecks to use it most places I walk into, as again, most places rely on fiat. That doesn’t get into the question of gas and transaction fees. And a scant handful of my clients will be in a position to pay in crypto anytime soon.
It is also nowhere near as anonymous as originally hoped.
Pricing 99% of the time is in fiat. Even if they also give you a price in crypto, there’s the question if you have funds in that crypto, and is the exchange rate fair compared to paying in fiat. Even without crypto you can go to a Mexican tourist town and see that the prices in USD are much lower than the prices in pesos after you check the exchange rate (and if you use a credit card you’re paying in pesos)
Also, at least at this time, how many dollars for a gallon of milk, and so forth, is relatively stable. It’s not just my mental map of the value of etherium, cardano, bitcoin, or such, the store has to track these values as well, and mark them, and they can change hour by hour.
The problem with cryptocurrency is that people don't actually buy anything with it. Not really.
With the typical crypto backed debit card, crypto is converted into fiat currency for the purchase. The parties to the transaction are not actually exchanging crypto.
But even vendors which do accept direct payment in crypto are still pricing their goods and services using fiat currency. Example: airBaltic, which offers air travel to Latvia, accepts crypto but prices the tickets in euros. In other words, what they are doing is accepting the currency risk of performing the currency exchange into euros instead of imposing that currency risk on the customer.
This is what happens when Saudi Arabia accepts payments from China in yuan rather than dollars for oil purchases. The Saudis are simply agreeing to absorb the currency risk rather than demanding the Chinese absorb it. Oil is still being priced in dollars.
Because cryptocurrencies are not being used to price goods and services natively, ultimately one party or the other to a transaction has to exchange the cryptocurrency into the fiat currency (mainly dollars or euros, or local currency).
In the former Soviet bloc, when the official currency became disconnected from economic reality, people used cigarettes as currency: they were fungible, portable, and easily exchangeable. More importantly, however, they could exist outside the fiat currency regime.
Current implementations of cryptocurrency are inseparable from the fiat currency regime, as evidenced by the ability of Canadian authorities to disrupt crypto payments to the Freedom Convoy.
This, incidentally, is why I have described the FedNow service as being a far worse problem than the bogeyman of a digital dollar. By extending the SWIFT system into personal transactions, FedNow asserts control over the exchange channels needed to carry on business in a fiat currency regime. Central banks don't need a CBDC to control you. They just need to control the exchange of your currency holdings for other things. Just ask Russia.
Bitcoin and existing cryptocurrencies don't get you outside of these exchange channels. At best they have been a means for individuals to subvert national currency controls and export money abroad.
Returning to the cigarettes example from the former Soviet bloc, we have to understand that people turned to cigarettes because the official currency became unacceptable. This is not an example of Gordon's Law, which holds that bad money displaces good money in a currency regime, but an expression of the need to get completely outside the currency regime.
Cryptocurrency, in its quest for legitimacy, remains very much within the fiat currency regime. It is used less as a currency than as a commodity asset--less a true medium of exchange and more as a store of value. Bitcoin afficionados tout it as a superior store of value over gold, although that claim is routinely exploded by Bitcoin's volatility.
Fiat currency exists because currency exists. Currency exists because that which makes for a good store of value (gold and real estate especially) rarely makes for a convenient medium of exchange. Even when metallic coin was the prevailing form of currency, copper and silver--both less precious than gold--were far more common than gold in transactions among artisans.
Cryptocurrency is considerably less convenient than fiat currency for transactions, and considerably less effective than gold as a store of value. Even the subversive claim of stepping outside the fiat currency regime is easily debunked (as the FTX scandal proves all too well).
For cryptocurrency to become a dominant currency and displace existing fiat currency it has to accomplish at least some of the following:
1. Prices need to be denominated in crypto.
2. It has to be at least as stable as gold and precious metals as a store of value.
3. It has to exist outside the exchange channels which are the infrastructure of the fiat currency regime.
Until these things happen on a broad basis, cryptocurrency will not displace fiat currency.
"Cryptocurrency, in its quest for legitimacy, remains very much within the fiat currency regime. It is used less as a currency than as a commodity asset--less a true medium of exchange and more as a store of value. "
I have worked in exchange for crypto. And I have purchased with crypto. Most people do not. So I do understand your point and agree about that. The question is whether or not people will turn to crypto to make it the currency people go with.
I think they should (or use some other deflationary currency (not tied to a government). But it wouldn't happen until people are willing to be responsible for themselves.
It is important to understand that one of the unequivocal powers granted to Congress by the Constitution was the power to coin money. Even the Articles of Confederation, with its emphasis on decentralized government, ceded to the United States the power to coin money.
Not for nothing was one of the primary objectives of the Maastrich Treaty establishing the European Union the creation and adoption of the euro--and not for nothing have a number of European countries declined to adopt the euro, preferring instead to retain their own sovereign currencies.
Not for nothing was Maastricht thus a necessary precursor to the Treaty of Lisbon, designed to bring the EU member states into closer political alignment.
We should not expect governments, of their own volition, to cede control over the currency. The only time they do is when they are forming a supranational government such as the European Union. (Side note: this is why claims of BRICS that they will soon be forming an alternative "reserve currency" are laughable on their face, as BRICS has nowhere near the political comity the EU does).
The notion that we can have government and not have government in control of the currency is, I submit, not viable. It might be desirable, but the interest of government entities in preserving and enlarging their power, and the reality that we institute government not to secure our personal autonomy but our personal safety makes that seigniorage an eternal point of contention.
Cryptocurrencies are an intriguing response to government abuse of seigniorage. That they have endured says much about the debased state of sovereign currencies.
However, I suspect they may be the wrong response. The chief evils of fiat currency are less a consequence of the currency itself and more a consequence of the central banking regime that supports a fiat currency. We would be less concerned about fractional reserve banking and the growth of the circulation of the dollar were it not for the Fed's insane money printing in the century-plus of its existence. We would be less concerned about fiat currencies globally were it not for central banks globally.
At the same time, we would not see naked flexing of economic muscle like Russia's summary ejection from SWIFT in the wake of its invasion of Ukraine--naked power that makes the extension of SWIFT into individual-level real-time payments via FedNow not just problematic but downright terrifying.
If crypto currencies and exchanges adopt the ISO 20022 messaging standard (the SWIFT standard) in order to interface with the rest of the financial world, crypto will never stand apart from the fiat currency regime.
There are at present 8 crypto currencies already in compliance with ISO 20022. The assimilation has already begun.
Yet the takeaway from this should be that such assimilation is inevitable. Alternative currency mechanisms like cigarettes emerge when the currency regime breaks down at a fundamental level, as it did in the Soviet block in its latter years. That is always going to be the key--not whether a currency is crypto or gold-based or even commodities-based, but whether it is willing and able to exist outside the existing fiat currency regime (we need perhaps not a cryptocurrency but rather a currency version of "Atlas Shrugged").
Cryptocurrencies as they stand today are not willing or able to do so. Short of a massive breakdown in the fiat currency regime, I suspect they will never be willing or able to do so.
Thanks for the comment. You wrote, "the reality that we institute government not to secure our personal autonomy but our personal safety makes that seigniorage an eternal point of contention."
We really do institute the government to secure our autonomy, not our personal safety though. That's what the US government was supposed to be. We are supposed to be free to do as we please, with the government protecting our rights to do that (such as the right to make crypto and use it). The government is supposed to work for us, not against us, and not us working for it.
It's only that so many people haven't studied our history and have simply been brainwashed to think the government's job is to "protect" us from things like lack of health care, or lack of housing, etc. It's just not true.
Certainly the foundational premise of the United States Constitution is that "We The People" are crafting the government to secure the blessings of Liberty.
Certainly Thomas Jefferson said that governments were instituted among men to secure our inalienable rights.
Yet even Jefferson conceded that governmnet could (and arguably would) over time become hostile to those same rights.
When we look at such monstrosities as the Patriot Act, or the demonization of "muh Russia" as the Democrats preferred counter to Donald Trump, or the adaptation of that same bogeyman to justify attritional warfare in Ukraine--the chief component of which is that if NATO does not "attrit" Russia's forces in Ukraine, NATO will have to fight them in Poland, the safety argument time and again is the one that lands with the greatest emotive punch.
Ted Kennedy's concession speech at the 1980 Democratic Convention is an interesting read, because it contained an impassioned defense of the proposition that government needed to secure for people jobs and housing and a litany of other economic rights.
Such concerns are an ironic counterpoint to the government's willingness to destroy those same jobs and upend housing arrangements during the COVID Pandemic Panic, because safety/security is the animating logic of both.
Why do the Democrats always argue that their brand of authoritarianism is necessary to "protect democracy"? Simple: that's teaspoon of sugar that makes their political medicine go down.
Yes, we are taught in civics class that our governent stands as a bulwark for liberty and freedom. If the last quarter century have taught us anything at all, however, is that our government is nothing of the sort and never has been.
When you look at the long expanse of history, the animating impulse for government, and even for changing government, has been more about the preservation of self and the preservation of a social order than anything else.
Government is far more a reflection of our viciousness than it is our virtue.
“Credit card transactions are processed instantly, whereas some cryptocurrency transactions can take longer to confirm, depending on the network congestion and the cryptocurrency used. With crypto, you’d have to know to plan ahead, which is more work.”
These aren’t actually the same processes and it has to do with final settlement.
A credit card transaction takes a few days to post, then eventually you pay your bill, but that money from your account doesn’t move into the account of the merchant until well after the transaction. ACH transfers operate similarly.
Bitcoin and crypto payments provided they’re made in a way where the record is available on the blockchain is settled on the spot once the transaction is confirmed. That makes their transactions similar to cash. Once person A has transferred the asset to Person B, it’s only Person B who can spend that asset by using their private key to prove ownership.
There are some passages that explain this well in Saifedean Ammous’ book The Fiat Standard. I’ll try to find them and add them here.
A transaction being confirmed (while you're paying for something) for a credit card is far faster than some cryptocurrencies. I know that some cryptocurrencies try to solve this confirmation lag time, but Bitcoin has had some very long wait periods unless you want to pay larger fees so miners will pick you and do yours first. One of the selling points of cryptocurrency is that there are not large transaction fees, but in actual use that can be a variable if you don't want to wait around. I've had to wait hours for a transaction to be confirmed multiple times (so that the company knew I wasn't trying to double spend my Bitcoin).
If you don't have the funds to pay for something a credit card company can keep billing you, so they don't mind skimping on how long a transaction takes FOR YOU (while taking a longer time on the sidelines as you describe).
But a company may have no resources to get that crypto-money from you if you double spend it because they gave it to you before it was confirmed enough times (in their opinion). I am glad they don't wait for it to have 6+ confirmations...it's usually about 3. But it CAN take longer. I've been there, done that.
At least in the Bitcoin world, these problems are being solved with Layer 2 solutions such as Lightning, Fediments, and Cashu or sidechains such as Liquid.
Excellent article on the challenges of crypto. We certainly need a change in our monetary system. I'm still in favor of gold.
Gold can be good as well. Though it's not as easy to carry around or dividable as crypto is, it can be useful, especially if the power and internet networks go out.
There really are two "golds". Physical gold, which is great if the power and/or Internet goes down. But it's weak because it's so valuable that it's best for large purchases. One ounce of gold = one bespoke suit. Buying carrots? Hah... gold isn't great for that.
The other form is a gold backed card. So you use the card with all the convenience of any other card, but you are spending gold instead of dollars. This is great for normal life, but not great for "end of the world" scenarios.
Thus I recommend both. (They are nicely interchangeable too)
The idea of a gold-backed card is interesting, but it seems like the gold would not be in your hands (or "wallet") if that's the case, right?
The gold sits in a vault in Switzerland. You can request delivery of the gold whenever you wish if you want to convert it to "in your hands". It's not a perfect system, but overall it's working well (it's not just an idea, it's real and an option anyone could choose to do but it's amazing how many people prefer "dollars").
Crypto currency isn't "in your hands" either. With Crypto you have to trust the "system" and be connected to the Internet.
I think crypto is pretty "in your hands" because you could have a cold storage wallet and trade keys with someone (even if the power went out). But, yes, you would need the system to continue to work for anyone to want to take the crypto that way.
Hmm... you are out of my knowledge for crypto here. I'm not aware of any method of exchanging / transferring crypto with someone else using ONLY cold storage wallets.
The whole concept of trusting a "blockchain" is that it's recorded and replicated around the world.
Do you have an experience with Goldbacks?
https://www.goldback.com/
Hmm... only five states so far with a few businesses accepting them. Let's hope this grows.
I'd be a bit concerned this runs afoul of USA law as it seems to close to someone printing "money".
One problem I see is that even though they contain a microscopic amount of gold, there doesn't seem to be any support to cashing them in (it's a one way exchange - you can buy them but you can't sell them).
Great article. I am a novice with crypto. Just beginning to learn.
I couldn't agree more that people shun responsibility. But you only become truly free when you absolutely embrace full responsibility.
I did this with my finances over the last ten years. I had shied away for years and avoided. I accepted the standard wisdom about the inevitability of debt. I decided to clear it all. I even changed jobs, becoming self employed so I could devote more resources to clearing my debt. It was liberating to do and I'd advise anyone to do so.
Crypto is something I struggle to understand but I am determined to get to grips with it. Our fiat currencies cannot last. The US has $171T in unpaid debts. An absurdity.
Thanks for responding to let me know you enjoyed the article. It felt like a very different post for this Substack, but the Drama Triangle is all about responsibility shifting. I compared it to the game hot potato in an article once. No one wants to be the one left holding the responsibility for something but it is SO empowering!
There are lots of videos and articles to help understand crypto, but sometimes you will find scammers there too. I believe it was God who led me to study it out in the big picture and I just pray to be led to what I need to know, pray not to be deceived, and pray about letting go of my worries to Him at the end of the day.
I think the article is in keeping with your material. This kind of unusual angle is exactly what is needed. I also suspect you are a trusted source for many, especially women who may read all about the drama triangle. I think that is important and perhaps will encourage people to look into crypto.
As is the call for people to remember they are responsible for their own lives, even in this era of mass hysteria, government gaslighting and all the rest.
It is good to remind people even with something as inescapable as fiat currency there is an alternative, and one their financial health may eventually depend upon.
Right. I keep forgetting there are not many women in the crypto world compared to men. I was also into math and computer programming in college, but supposedly that's mostly men as well. I am always the odd girl in respect to my interests. I went to an all girls college so I didn't notice any disparity while studying that lol.
Maybe it will increase some interest. I hope I didn't scare people off, lol.
I have never known any women to show an interest in crypto. So it will no doubt introduce others to the idea.
There are some side events at the major Bitcoin Conference each year geared towards women. Lyn Alden, Natalie Brunell, and Anita Posch are key players in that space.
But women are so few, they feel the need to gear a section for them. That's weird to me.
Fascinating! I had no idea you were into to cryptocurrencies! I’ve been visiting El Salvador annually, partially due to their whole Bitcoin legal tender bill for years now.
Benjamin J. Dichter who was involved in the Canadian Trucker Enjoy and is author of Honking for Freedom might be able to help answer questions about that topic. He writes here on Substack.
https://substack.com/@bjdichter
At least with Bitcoin and to some extent some of the stablecoins, their use is a whole other ball game in places with capital controls and unstable currencies. Alex Gladstein wrote an entire book about it called (personally I hate the name) “Check Your Financial Privilege”
https://bitcoinmagazine.com/culture/check-your-financial-privilege
https://bitcoinmagazine.com/culture/bitcoin-a-currency-of-decolonization
https://bitcoinmagazine.com/culture/bitcoin-financial-freedom-in-afghanistan
https://bitcoinmagazine.com/culture/cubas-bitcoin-revolution
I hope my article can better describe why I think it's important (on a freedom & responsibility note) for people to take responsibility for their wealth rather than leaving it in someone else's wallet (like the banks, etc). I think it's probably clear why I would gravitate toward it for that reason as well.
Thanks. I subscribed to him and asked him to check the article out.
I understood how helpful cryptocurrencies could be against inflation back in 2015. But I haven't read much about it recently. I don't know if I would have the time to get into it all now. But I do check out random crypto things from time to time. I like the idea of NFTs for musicians and artists as well and though, not for much, I did sell a couple of art pieces on NFT Showroom. I've also played some cryptogames with NFTs.
A lot has changed over the few years and it continues to evolve at such a pace that’s it’s hard to keep up with.
Bitcoin has seen what are called “layer 2” solutions that address some of the issues with transactions sent over the blockchain (privacy, fees, long wait time for confirmations, etc) such as Lightning, Cashu, and Fedimint.
I honestly don’t follow NFTs too much but did notice they have some popularity and appeal with musicians, artists, and gamers.
Crypto has a lot of future potential. It’s certainly a place to keep a transferable reserve outside of banks.
But I, and many other people, do not live in a world where we can get by on it or live it as an everyday thing.
I’m reasonably smart and tech savvy and the process of converting fiat to bitcoin/etc. is hardly transparent. Even if you move it to your own wallet(s), you still need a way to extract it through bottlenecks to use it most places I walk into, as again, most places rely on fiat. That doesn’t get into the question of gas and transaction fees. And a scant handful of my clients will be in a position to pay in crypto anytime soon.
It is also nowhere near as anonymous as originally hoped.
Pricing 99% of the time is in fiat. Even if they also give you a price in crypto, there’s the question if you have funds in that crypto, and is the exchange rate fair compared to paying in fiat. Even without crypto you can go to a Mexican tourist town and see that the prices in USD are much lower than the prices in pesos after you check the exchange rate (and if you use a credit card you’re paying in pesos)
Also, at least at this time, how many dollars for a gallon of milk, and so forth, is relatively stable. It’s not just my mental map of the value of etherium, cardano, bitcoin, or such, the store has to track these values as well, and mark them, and they can change hour by hour.
The problem with cryptocurrency is that people don't actually buy anything with it. Not really.
With the typical crypto backed debit card, crypto is converted into fiat currency for the purchase. The parties to the transaction are not actually exchanging crypto.
But even vendors which do accept direct payment in crypto are still pricing their goods and services using fiat currency. Example: airBaltic, which offers air travel to Latvia, accepts crypto but prices the tickets in euros. In other words, what they are doing is accepting the currency risk of performing the currency exchange into euros instead of imposing that currency risk on the customer.
This is what happens when Saudi Arabia accepts payments from China in yuan rather than dollars for oil purchases. The Saudis are simply agreeing to absorb the currency risk rather than demanding the Chinese absorb it. Oil is still being priced in dollars.
Because cryptocurrencies are not being used to price goods and services natively, ultimately one party or the other to a transaction has to exchange the cryptocurrency into the fiat currency (mainly dollars or euros, or local currency).
In the former Soviet bloc, when the official currency became disconnected from economic reality, people used cigarettes as currency: they were fungible, portable, and easily exchangeable. More importantly, however, they could exist outside the fiat currency regime.
Current implementations of cryptocurrency are inseparable from the fiat currency regime, as evidenced by the ability of Canadian authorities to disrupt crypto payments to the Freedom Convoy.
This, incidentally, is why I have described the FedNow service as being a far worse problem than the bogeyman of a digital dollar. By extending the SWIFT system into personal transactions, FedNow asserts control over the exchange channels needed to carry on business in a fiat currency regime. Central banks don't need a CBDC to control you. They just need to control the exchange of your currency holdings for other things. Just ask Russia.
https://newsletter.allfactsmatter.us/p/fednow-digital-dollar-by-stealth
Bitcoin and existing cryptocurrencies don't get you outside of these exchange channels. At best they have been a means for individuals to subvert national currency controls and export money abroad.
Returning to the cigarettes example from the former Soviet bloc, we have to understand that people turned to cigarettes because the official currency became unacceptable. This is not an example of Gordon's Law, which holds that bad money displaces good money in a currency regime, but an expression of the need to get completely outside the currency regime.
Cryptocurrency, in its quest for legitimacy, remains very much within the fiat currency regime. It is used less as a currency than as a commodity asset--less a true medium of exchange and more as a store of value. Bitcoin afficionados tout it as a superior store of value over gold, although that claim is routinely exploded by Bitcoin's volatility.
Fiat currency exists because currency exists. Currency exists because that which makes for a good store of value (gold and real estate especially) rarely makes for a convenient medium of exchange. Even when metallic coin was the prevailing form of currency, copper and silver--both less precious than gold--were far more common than gold in transactions among artisans.
Cryptocurrency is considerably less convenient than fiat currency for transactions, and considerably less effective than gold as a store of value. Even the subversive claim of stepping outside the fiat currency regime is easily debunked (as the FTX scandal proves all too well).
For cryptocurrency to become a dominant currency and displace existing fiat currency it has to accomplish at least some of the following:
1. Prices need to be denominated in crypto.
2. It has to be at least as stable as gold and precious metals as a store of value.
3. It has to exist outside the exchange channels which are the infrastructure of the fiat currency regime.
Until these things happen on a broad basis, cryptocurrency will not displace fiat currency.
"Cryptocurrency, in its quest for legitimacy, remains very much within the fiat currency regime. It is used less as a currency than as a commodity asset--less a true medium of exchange and more as a store of value. "
I have worked in exchange for crypto. And I have purchased with crypto. Most people do not. So I do understand your point and agree about that. The question is whether or not people will turn to crypto to make it the currency people go with.
I think they should (or use some other deflationary currency (not tied to a government). But it wouldn't happen until people are willing to be responsible for themselves.
It is important to understand that one of the unequivocal powers granted to Congress by the Constitution was the power to coin money. Even the Articles of Confederation, with its emphasis on decentralized government, ceded to the United States the power to coin money.
Not for nothing was one of the primary objectives of the Maastrich Treaty establishing the European Union the creation and adoption of the euro--and not for nothing have a number of European countries declined to adopt the euro, preferring instead to retain their own sovereign currencies.
Not for nothing was Maastricht thus a necessary precursor to the Treaty of Lisbon, designed to bring the EU member states into closer political alignment.
We should not expect governments, of their own volition, to cede control over the currency. The only time they do is when they are forming a supranational government such as the European Union. (Side note: this is why claims of BRICS that they will soon be forming an alternative "reserve currency" are laughable on their face, as BRICS has nowhere near the political comity the EU does).
The notion that we can have government and not have government in control of the currency is, I submit, not viable. It might be desirable, but the interest of government entities in preserving and enlarging their power, and the reality that we institute government not to secure our personal autonomy but our personal safety makes that seigniorage an eternal point of contention.
Cryptocurrencies are an intriguing response to government abuse of seigniorage. That they have endured says much about the debased state of sovereign currencies.
However, I suspect they may be the wrong response. The chief evils of fiat currency are less a consequence of the currency itself and more a consequence of the central banking regime that supports a fiat currency. We would be less concerned about fractional reserve banking and the growth of the circulation of the dollar were it not for the Fed's insane money printing in the century-plus of its existence. We would be less concerned about fiat currencies globally were it not for central banks globally.
At the same time, we would not see naked flexing of economic muscle like Russia's summary ejection from SWIFT in the wake of its invasion of Ukraine--naked power that makes the extension of SWIFT into individual-level real-time payments via FedNow not just problematic but downright terrifying.
If crypto currencies and exchanges adopt the ISO 20022 messaging standard (the SWIFT standard) in order to interface with the rest of the financial world, crypto will never stand apart from the fiat currency regime.
There are at present 8 crypto currencies already in compliance with ISO 20022. The assimilation has already begun.
https://coincodex.com/article/27964/iso-20022-crypto/
Yet the takeaway from this should be that such assimilation is inevitable. Alternative currency mechanisms like cigarettes emerge when the currency regime breaks down at a fundamental level, as it did in the Soviet block in its latter years. That is always going to be the key--not whether a currency is crypto or gold-based or even commodities-based, but whether it is willing and able to exist outside the existing fiat currency regime (we need perhaps not a cryptocurrency but rather a currency version of "Atlas Shrugged").
Cryptocurrencies as they stand today are not willing or able to do so. Short of a massive breakdown in the fiat currency regime, I suspect they will never be willing or able to do so.
Thanks for the comment. You wrote, "the reality that we institute government not to secure our personal autonomy but our personal safety makes that seigniorage an eternal point of contention."
We really do institute the government to secure our autonomy, not our personal safety though. That's what the US government was supposed to be. We are supposed to be free to do as we please, with the government protecting our rights to do that (such as the right to make crypto and use it). The government is supposed to work for us, not against us, and not us working for it.
It's only that so many people haven't studied our history and have simply been brainwashed to think the government's job is to "protect" us from things like lack of health care, or lack of housing, etc. It's just not true.
Certainly the foundational premise of the United States Constitution is that "We The People" are crafting the government to secure the blessings of Liberty.
Certainly Thomas Jefferson said that governments were instituted among men to secure our inalienable rights.
Yet even Jefferson conceded that governmnet could (and arguably would) over time become hostile to those same rights.
When we look at such monstrosities as the Patriot Act, or the demonization of "muh Russia" as the Democrats preferred counter to Donald Trump, or the adaptation of that same bogeyman to justify attritional warfare in Ukraine--the chief component of which is that if NATO does not "attrit" Russia's forces in Ukraine, NATO will have to fight them in Poland, the safety argument time and again is the one that lands with the greatest emotive punch.
Ted Kennedy's concession speech at the 1980 Democratic Convention is an interesting read, because it contained an impassioned defense of the proposition that government needed to secure for people jobs and housing and a litany of other economic rights.
Such concerns are an ironic counterpoint to the government's willingness to destroy those same jobs and upend housing arrangements during the COVID Pandemic Panic, because safety/security is the animating logic of both.
Why do the Democrats always argue that their brand of authoritarianism is necessary to "protect democracy"? Simple: that's teaspoon of sugar that makes their political medicine go down.
Yes, we are taught in civics class that our governent stands as a bulwark for liberty and freedom. If the last quarter century have taught us anything at all, however, is that our government is nothing of the sort and never has been.
When you look at the long expanse of history, the animating impulse for government, and even for changing government, has been more about the preservation of self and the preservation of a social order than anything else.
Government is far more a reflection of our viciousness than it is our virtue.
Oh, I want to add on your item 3:
“Credit card transactions are processed instantly, whereas some cryptocurrency transactions can take longer to confirm, depending on the network congestion and the cryptocurrency used. With crypto, you’d have to know to plan ahead, which is more work.”
These aren’t actually the same processes and it has to do with final settlement.
A credit card transaction takes a few days to post, then eventually you pay your bill, but that money from your account doesn’t move into the account of the merchant until well after the transaction. ACH transfers operate similarly.
Bitcoin and crypto payments provided they’re made in a way where the record is available on the blockchain is settled on the spot once the transaction is confirmed. That makes their transactions similar to cash. Once person A has transferred the asset to Person B, it’s only Person B who can spend that asset by using their private key to prove ownership.
There are some passages that explain this well in Saifedean Ammous’ book The Fiat Standard. I’ll try to find them and add them here.
A transaction being confirmed (while you're paying for something) for a credit card is far faster than some cryptocurrencies. I know that some cryptocurrencies try to solve this confirmation lag time, but Bitcoin has had some very long wait periods unless you want to pay larger fees so miners will pick you and do yours first. One of the selling points of cryptocurrency is that there are not large transaction fees, but in actual use that can be a variable if you don't want to wait around. I've had to wait hours for a transaction to be confirmed multiple times (so that the company knew I wasn't trying to double spend my Bitcoin).
If you don't have the funds to pay for something a credit card company can keep billing you, so they don't mind skimping on how long a transaction takes FOR YOU (while taking a longer time on the sidelines as you describe).
But a company may have no resources to get that crypto-money from you if you double spend it because they gave it to you before it was confirmed enough times (in their opinion). I am glad they don't wait for it to have 6+ confirmations...it's usually about 3. But it CAN take longer. I've been there, done that.
At least in the Bitcoin world, these problems are being solved with Layer 2 solutions such as Lightning, Fediments, and Cashu or sidechains such as Liquid.