
The Fallacy That Is Cryptocurrency - eaguyhn
https://hackernoon.com/the-fallacy-that-is-cryptocurrency-ya3u36q3
======
lisper
Wow, this is one of the most confused articles about cryptocurrencies that I
have ever read. He runs off the rails almost from the very beginning:

"currencies are systems of value exchange"

No, a currency is a _physical_ token issued by an institution that is a proxy
for money, usually bank notes and coins. Money is the system of exchange. The
dollars in your bank account are money, but they aren't currency. The dollars
in your wallet are both. Old Zimbabwean dollars are currency but not money.

It just goes downhill from there.

~~~
stillbourne
Currencies are systems of value exchange. It is the reason why the term is
derived from the word "current" as in a river's current because if you follow
the exchange of money over the domain of a given money, eg. the US Dollar, you
see its "current" or flow as units of money are traded between customers,
retailers, banks and exchanges. A currency is defined by the domain of its
value in relation to other currency and its exchange. Money is a "mostly"
static value, this dollar is worth this much bread. Currency is an algebra of
the domain of money measured over the economy of that money's exchanges
including the changes in inflation in relation to the money value of a dollar
in relation to bread.

~~~
lisper
> Currencies are systems of value exchange.

No. That's _money_. Not all currencies are money. Zimbabwean dollars, for
example, are a currency but they are not money. "Worthless currency" is not an
oxymoron, but "worthless money" is. Money has value _by definition_. Currency
doesn't.

> It is the reason why the term is derived from the word "current"

The etymology of a word has very little to do with its current meaning.
"Calculate" is derived from the latin word for "stone", but that doesn't mean
that calculating has anything to do with stones. (It did at one time, but not
any more.)

> Currency is an algebra of the domain of money measured over the economy of
> that money's exchanges including the changes in inflation in relation to the
> money value of a dollar in relation to bread.

That might be a useful definition, but it's not the one used by economists.
"Currency" is a proper subset of "money", which also comprises bank money [1],
cash-equivalent securities [2] and commodities [3], all of which are money and
none of which are currencies.

\---

[1] [https://www.merriam-
webster.com/dictionary/bank%20money](https://www.merriam-
webster.com/dictionary/bank%20money)

[2]
[https://www.investopedia.com/terms/c/cashequivalents.asp](https://www.investopedia.com/terms/c/cashequivalents.asp)

[3]
[https://en.wikipedia.org/wiki/Commodity_money](https://en.wikipedia.org/wiki/Commodity_money)

~~~
stillbourne
[https://en.wikipedia.org/wiki/Currency](https://en.wikipedia.org/wiki/Currency)

A currency (from Middle English: curraunt, "in circulation", from Latin:
currens, -entis), in the most specific sense is money in any form when in use
or circulation as a medium of exchange, especially circulating banknotes and
coins.[1][2] A more general definition is that a currency is a system of money
(monetary units) in common use, especially for people in a nation.[3] Under
this definition, U.S. dollars (US$), pounds sterling (£), Australian dollars
(A$), European euros (€), Russian rubles (₽) and Indian rupees (₹) are
examples of currencies. These various currencies are recognized as stores of
value and are traded between nations in foreign exchange markets, which
determine the relative values of the different currencies.[4] Currencies in
this sense are defined by governments, and each type has limited boundaries of
acceptance.

------
SI_Rob
A guy who advocates blockchain solutions yet dismisses cryptocurrency surely
misunderstands both.

Also whatever main "fallacy" (to use author's word) is at work in both of
these is ultimately rooted in confused and ambiguous notions of
decentralization.

It's really not the tech that's the problem, it's the assumptions and premises
it is derived from, which is why every year blockchain tech spirals into
greater and more layered complications in the hopeless pursuit of resolving
this impossible conflict; very much a modern day geocentrism-epicycles
disciplinary failure mode.

------
westoque
I used to be a believer in cryptocurrency, and I still it think it has
practical applications, but not as currency. When my credit card got skimmed
and the thief started to make unauthorized transactions, I was immediately
informed of this, called my bank and eventually got my money back. This is the
moment where I realized if I have my all my money in crypto, when it gets
stolen or otherwise, I will never get it back.

~~~
tathougies
You are advocating for crypto insurance. With regard to banks, if a thief
withdraws cash from your ATM card, that money is gone. The bank has lost it.
An outside insurer (or, if a large enough bank, self insurance) pays out the
bank the amount they lost. Same is true if a thief is able to do a wire. ACH
transfers may be a bit easier because typically the receiving bank won't allow
withdrawals before the sending bank's chargeback period, but if they do, then
their insurance will compensate for the loss.

I agree that crypto doesn't have a solid financial system backing it and that
is necessary to be a replacement for the current one.

I'm not a huge crypto-believer, but I do think your criticism here is
ultimately not really a criticism of crypto itself, but the financial system
around it. Plenty of real-world currency suffers from the same lack of solid
financial system. For example, I imagine you would be hard-pressed to find the
same guarantees from banks dealing with venezuelan bolivars.

That being said, I think the best use case for crypto is still not one where
every single person runs their own wallet. Rather, most people would use
depository institutions who could run settlement on the blockchain. The main
contribution and innovation is removal of red tape that is typically incurred
when one wants to become a depository institution (mainly obtuse technical
interfaces, slow clearing houses, etc).

~~~
slg
I think you are focusing on the specifics of that complaint and not the
general reasoning behind it. It is a problem if cryptocurrencies need a mature
financial system built around them to be usable when one of the primary
selling points that people were hyping about cryptocurrencies was the ability
to circumvent the current financial system.

~~~
qes
> one of the primary selling points that people were hyping about
> cryptocurrencies was the ability to circumvent the current financial system

Perhaps you primarily heard relatively uninformed people. "circumvent the
current financial system" would probably be called some out of touch with
reality woo-woo by many.

Many would instead say decentralization is the primary selling point.

Specifically, the inability of a small group to affect monetary policy,
particularly the inflation rate, or to prevent access to the system.

------
otakucode
My concern with fiat money and the benefits that cryptocurrency provides align
very well. My concern with fiat currency is that it is entirely possible that
tomorrow we will wake up to discover that the digital systems banks use to
trace and account for money, systems we know are antiquated and maintained and
expanded with the least effort and expense physically possible, are
meaningless. The discovery of a persistent system of exploitation which has
made the balance numbers held by all banks into nonsense is entirely possible.
If it is discovered that large economic players or criminals have EVER
manipulated the values recorded as an 'account balance' to represent instead
pure fiction - game over. I would expect this observation to be announced
first by a nation foreign to the US, followed by that nation no longer
accepting digital transfers of any kind in US dollar denominations, as their
basis for value, solely trust in the digital accounting systems of US banks,
evaporated overnight.

There is no possible way for a bank to 'prove' that the billion-dollar balance
of a Walmart account represents anything of value. They can show that their
systems reflect it, but it ends there. They can not prove that, say, $500
million of that balance is invented 'funny money' that represents absolutely
nothing. Cryptocurrencies can not have this happen, as they manage their
reliance on trust. I can prove a bitcoin is legitimate mathematically, and I
need ask nothing of the other party for them to be able to verify it
themselves. I can not prove a dollar displayed as part of my account balance
at a bank is legitimate. And, as far as I understand matters, neither can
anyone else. I must ask the other party to trust my bank, or trust the FDIC,
or trust the US governments computer systems, or something along those lines.

The ideal situation, of course, would be a government-backed cryptocurrency
with the government guaranteeing that the cryptocurrency would be honored as
legal tender. But the political clout of banks makes such a thing very
difficult. It would place banks in a position of actually earning their
profits through the lending and borrowing of money, rather than actually
profiting from garnering nearly every single monetary transaction which occurs
(solely those which are conducted purely in cash exempted) in the economy in
an act of cryptotaxation (the crypto prefix here meaning 'hidden', not related
to cryptography).

