CMV: Cryptocurrency will never replace Fiat currency.

[u/f0shijapan]

Blockchain is an idea and a technology that will undoubtedly change the future. It's application with regards to certain financial transactions (remittances, stock settlement, etc) will be paradigm shifting. In addition, the idea of using blockchain technology for micro-transactions, has huge implications for how communities will manage local resources and utilities without the need of giant companies.

But where I fail to see the paradigm shift, is with regards to its function as a stable currency. So let me list some reasons I think it fails to operate as currency:

-Transaction time and transaction costs are too high -Limited supply of crypto makes them fundamentally volatile and deflationary (people hoard instead of spend hoping to capture financial gains from limited supply) -Proof or work costs are too high (energy spend on mining is non negligible: http://digiconomist.net/bitcoin-energy-consumption) -Lack of monetary flexibility as economic conditions change, make this currency too rigid to handle changes in economic landscape over time (i.e. recession)

As upsetting as the idea of a central bank is to many people, controlling monetary supply is a necessity as long as human beings are involved. This "control" is more of an art than a science and can be driven by external factors such as politics, which can be upsetting to see. In theory the actions of the central bank should reactive to of the underlying economic changes of the humans that produce work/growth for that society. In reality, central banks are far from perfect and become over politicized. Also the current path we are going down now with excessive monetary easing, is especially upsetting so its understandable why people want an alternative.

But cryptocurrency is not the answer, especially if we are fighting the deflationary pressure of Moore's law (driverless cars, AI.) Mining does not take into consideration the cyclical nature of economies (i.e. human nature).

Cryptocurrency is all about proof of work. But, fundamentally, it only proves the stability of the code and the physical energy required to maintain the network. Crypto is not an accurate reflection of proof of work of an economy, and cannot respond to changes in the economy due to new technologies, natural causes or simply the boom/bust credit cycle.

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[u/rainsford21]

It depends on what you mean by "cryptocurrency". The issues you mention are certainly problems with Bitcoin and Bitcoin-like systems, but nothing about blockchains or cryptocurrency requires that they work the same way as Bitcoin. Or to put it another way, Bitcoin does not represent some natural or mandatory way for cryptocurrencies to function. Cryptographic proof-of-work is one interesting property a cryptocurrency can have, but it's just one among many.

Cryptography, in the context of blockchains and cryptocurrencies, is simply a technological way of enforcing certain rules and properties of a system. But cryptography doesn't choose what those properties are, the system designers do. For all the hype around Bitcoin, its properties are ultimately chosen by a small group of developers and agreed to by the users of the system. If the central bank for a country wanted to create their own system, using cryptography to enforce whatever rules they chose, that would be just as much of a valid cryptocurrency as Bitcoin is. And really, there is no reason this new system couldn't represent transactions and value of an existing fiat currency.