Quote from: johnyj on May 04, 2015, 07:22:50 PM

Quote from: Kluge on May 03, 2015, 02:40:59 PM

By this interpretation (which I don't disagree with), cash is effectively representative money with the caveat that cash is not guaranteed to be redeemable for any arbitrary amount, instead relying on market functions. Cash itself is worthless, but it represents X units of "anything and everything" (at least within the issuing country, dependent on their legal tender laws, if any!). Since "whatever we want" is basically the most maximally valuable commodity in the Universe, cash is maximally valuable to everyone (unlike, say, camels or silver nuggets), but only while it represents "whatever we want."

The real issue with the traditional definition of representative currency is that it MUST be legal tender for it to be maximally valuable -- I really don't give half a shit about being able to redeem it for a silver nugget because
1) I have no direct use for silver nuggets and don't want the clutter (there's no single item on Earth I want in such quantity that I'd want to be able to spend my net worth on owning... except maybe Tesla Powerwalls - those things are fucking amazing).
2) in the event of some monetary disaster where I'd actually consider redeeming cash for nuggets, I presume the chance of the nuggets actually being there is very low.

Combined, this makes representative currency (by traditional definition) a giant waste of resources. If the best use we can find for gold, silver, rhodium, and whatever is storing them in a warehouse, aliens should kill us all right now. Similarly, using useful items as a medium of exchange is terrible. -So we use relatively useless items. Cash is fantastic with regards to work efficiency because the paper, fabrics, and polymers we use to make fiat in the world has negligible value (not completely the case with all the semi-effective anti-counterfeiting shit built in these days, but the value's still very low). Who really gives a shit if a bank is storing $10,000,000,000 in nominal value using $291.50 in actual material costs (the actual cost of manufacturing the bills) -- I mean, that's pretty cool that we've been able to add what we were using as money back into the productive economy - but it left us open to policy abuse by the issuers, which turned out to be governments (which is probably far better than banks, at least), so I see bitcoin as the final evolution here and putting the final nail in the coffin of using otherwise-useful resources as something to keep in your pocket or a warehouse. "Redeemable" (if you trust the issuer... a LOT) crypto put a bit of a twist on that, but I don't honestly believe it has any place in the mainstream.

The problem is not about the cost, it is about the arbitraging behavior related to the money. This has already been observed on many alt-coins, especially POS coins

If a money unit cost $291.5 to make, but command a market price at 10 billion dollars, thus become a presentation of value, then what will happen? Everyone will try to produce this money and use its market value to purchase other things, because they can make a quick profit right away. This will raise the competition in money creation and raise its cost, at mean time anyone accepting this money will only be willing to exchange similar value of $291.5, no more

People will be forced to accept a market price of $10B if they are not allowed to produce this money, that's how fiat works today. And that's the reason it is called monopole money: Only banks allowed to make money at a cost of $291.5 and spend it like 10 billion. But for a money that everyone can make like bitcoin, its production cost will always be close to its market value, due to arbitraging

Agreed. I should've phrased that better. One of the coolest features of Bitcoin is that it can always be produced, but the amount of effort put into minting scaled up with price and we had a very low price for a long time In The Beginning - so most of our coins were mined for very little effort (relative to today's amount of work required). Well over half of the bitcoins are already staked, so we get the same arbitrage effect you describe without having had to pour many, many more $millions (billions?) into minting these coins as we would have if we started mining at the current difficulty.