The root problem with conventional currency is all the trust that’s required to make it work.
And the root problem with cryptocurrencies is that they threw away all of the apparatus (convention, regulation, laws, and court precedents) that provides much of that trust, MUCH more cheaply than blockchains.
BTC and ETH are the best of them, and they’re good for payments that are difficult in regular currency (due to regulation, cross-border issues, etc.), and wild enough to be worth investing small amounts in. They’re NOT good as a primary currency.
Too volatile as a store of value. Worse than most currencies, but really any currency is a horrible store of value. For long-term value preservation, you need your assets to be in the form of working capital, not in a static form. And because it’s a bad store of value, it’s got more friction than most currencies for payment use—you have to convert to BTC before you can spend the BTC.
I won’t bother to argue against the newer, much scammier, exchanges, stablecoins, and the like. Basic crypto has a place, but it’s not all that big a place.
And the root problem with cryptocurrencies is that they threw away all of the apparatus (convention, regulation, laws, and court precedents) that provides much of that trust, MUCH more cheaply than blockchains.
BTC and ETH are the best of them, and they’re good for payments that are difficult in regular currency (due to regulation, cross-border issues, etc.), and wild enough to be worth investing small amounts in. They’re NOT good as a primary currency.
Too volatile as a store of value. Worse than most currencies, but really any currency is a horrible store of value. For long-term value preservation, you need your assets to be in the form of working capital, not in a static form. And because it’s a bad store of value, it’s got more friction than most currencies for payment use—you have to convert to BTC before you can spend the BTC.
I won’t bother to argue against the newer, much scammier, exchanges, stablecoins, and the like. Basic crypto has a place, but it’s not all that big a place.
Great point on trust. Here’s a recent paper by Eric Budish reflecting on the issue, via Tyler Cowen.