Quote:
Originally Posted by sobecash
I agree with the first quote, as well as the second. But with paper money, there is also the concept of being backed by a Central Bank (or a government). Money released by a government would have some verbiage saying that this piece of paper is proof that the government owes the holder money (or some such meaning). This is how governments control the supply and flow of money.
With Bitcoin, there is no authority or governing body which would be supporting the "currency", what Bitcoin is meant to do is stand on its own, without being backed by any real (intrinsic) value. Which means that unlike paper money from a Central Bank, Bitcoin is truly dependent on how many people think it is valuable, and by how much are they willing to pay for it.
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Governments control the value of fiat money by doing 2 of the following 3 things (not possible to do all 3):
controlling capital inflows and outflows from their country
maintaining stability of the exchange rate of their currency
monetary policy adjusting the money supply and interest rates
Whichever one of those 3 options a government does not take makes its economy vulnerable to different types of problems.
When the Quantum Fund tanked the baht, what do you think people got for that paper money?
I can spend Bitcoin in California a lot easier than I can spend Thai baht.