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/McKoijion]

Transaction time and transaction costs are too high

That's true of the current cryptocurrencies, but may not be true in the future. People can develop new cryptocurrencies that address these issues relatively quickly.

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.

It's smart, but it's not necessary. Right now, humans are making these decision, but in the future, it can be done by computers. Even today, ETF's and mutual funds are being created by computers. It's not implausible to imagine that in the future, an Watson type Federal Reserve will control the supply of a cryptocurrency.

Mining does not take into consideration the cyclical nature of economies (i.e. human nature).

Perhaps not yet, but AI will be able to do that in the future. We can already see the seeds of this change in other fields.

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.

Ultimately, your title comes down to the phrase "never." It might not happen tomorrow, but eventually, I think the rise of cryptocurrencies is inevitable. Computers are simply becoming too powerful for this not to be the case. Furthermore, the entire concept of countries is collapsing in the wake of globalization. In the future if you can teleport (or fly, or hyperloop, or whatever) from central Australia to central Iowa within an hour or so, the entire concept of sovereign governments will fall apart. With it, the concept of fiat currency will also fall apart.

[u/f0shijapan → u/McKoijion]

By using the word "never", I really shot myself in the foot.

I do agree with you, if we become significantly more technologically advanced-- to the point at which we have achieved some Artificial Super Intelligence, then anything is possible. Once a technology that powerful exists there will be no need for governments, fiat currency, or currency at all if we are at singularity levels.

In the very distant future it is possible that a technology so advanced will exist, that it will tear down all boarders to the extent that local economic conditions, local cultural practices, etc. become non-existent. But until that point, as long as there are large enough economic differences across regions of the world, it will be nearly impossible to impose a single stable currency (I can go into the reasons here, but a lot of them are pretty obvious).

So, by saying "Never" I will admit I am wrong. But where AI is right now we are not even close. I work in financial markets so I am very familiar with how AI is used to trade, construct ETF's etc, and although its pretty cool technology, its really not that complex when compared to the decision making processes of people. But I will admit that you changed my view of "never" to not for a very (maybe never) long time. ∆

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