Bitcoin

[Undertoad]

Originally Posted by tw

Taxes do not define integrity of a currency. Dollar is controlled / defined by a Federal Reserve. World's most stable currencies all have equivalent to a Federal Reserve.

Rrright, obviously; their role is to maintain the scarcity; but scarce things don't always have value. The dollar *actually* has value because its biggest user, by far, accepts it as a form of payment. That's what actually defines the dollar. If it stopped doing that, the currency would not hold as much value. Other people would have to broadly accept it as a form of payment, and why would they? Only if there was a valid form of exchange, dollars for some other thing, would it hold value. The Fed may choose to issue quatloons but that does not give quatloons any value!

What we've seen so far is that government guaranteeing its value is a stronger form of backing than the government offering to exchange bills for actual gold or silver. But what's weird is, that can change, and we have seen currencies devalue from weak government backing. We just have faith that it'll never happen to us, and it's that faith that ACTUALLY maintains the dollar's value.

If the US Gov instead accepted potatoes instead of dollars as a form of payment, potatoes would have great value... except that the scarcity can't be controlled, so the value would drop. Without scarcity, there is inflation, and the value of each individual potato drops. The Fed determines the scarcity of dollars but merely issuing dollars does not give them value.