You need something to regulate a currency. It's more than getting the math right-- it's building a package and community that people trust.
We know the following work to at least a modest degree:
* A functional state that can manufacture demand by requiring its use in trade and/or tax payments (fiat)
* Basing the currency on a natural resource with widely recognized scarcity (gold and silver)
* Using an asset with actual utility as a currency (salt, grain)
* Putting the currency in the hands of perceived-trustworthy adults (countries who replace their own currency with the USD)
We know some things don't work:
* A free market regulating on reputation and news alone (see pre-Civil War "wildcat banking")
* A state with nothing to lose (see the Weimar Republic)
* Blatantly speculative ventures packaged as a currency (like the Russian MMM scandal)
There's also an interesting trust relationship in currency.
With conventional currencies, the trust usually begins with the issuing institution or materials, and that's leveraged into support for the currency. If you believe Ottawa won't be sucked into a black hole tomorrow, you'll trust a 10CAD note. If you expect gold to be desirable in 2025, you'll take a sovereign for your Christmas bonus.
In the crypto world, the currency itself is the most trustworthy component, and it's more necessary to build trust and credibility around its community instead. (Noun)coin may be technically bulletproof, but if it's surrounded by pump-and-dump traders, dark-web drug dealers, and people who blame the Federal Reserve for their kidney stones, Grandma won't touch it.
We know the following work to at least a modest degree:
* A functional state that can manufacture demand by requiring its use in trade and/or tax payments (fiat) * Basing the currency on a natural resource with widely recognized scarcity (gold and silver) * Using an asset with actual utility as a currency (salt, grain) * Putting the currency in the hands of perceived-trustworthy adults (countries who replace their own currency with the USD)
We know some things don't work:
* A free market regulating on reputation and news alone (see pre-Civil War "wildcat banking") * A state with nothing to lose (see the Weimar Republic) * Blatantly speculative ventures packaged as a currency (like the Russian MMM scandal)
We're still deciding if some things work:
* Mathematical algorithms * Hard-coded economic policy decisions * Smart contracts
There's also an interesting trust relationship in currency.
With conventional currencies, the trust usually begins with the issuing institution or materials, and that's leveraged into support for the currency. If you believe Ottawa won't be sucked into a black hole tomorrow, you'll trust a 10CAD note. If you expect gold to be desirable in 2025, you'll take a sovereign for your Christmas bonus.
In the crypto world, the currency itself is the most trustworthy component, and it's more necessary to build trust and credibility around its community instead. (Noun)coin may be technically bulletproof, but if it's surrounded by pump-and-dump traders, dark-web drug dealers, and people who blame the Federal Reserve for their kidney stones, Grandma won't touch it.