Some Conversation

Why yes, I am making the title purposefully vague so that (hopefully) the thread can evolve without getting closed. To start out, though: mediums of exchange.

Description: Two humanoid figures are standing side by side. The right-side figure is holding a rock in its hand. Right side figure: Let's agree that this shiny rock is worth 2 sheep. Left side figure: Sounds fake but ok.

Here's my understanding of it. For any medium of exchange to work, there is a single basic requirement:

• Everybody involved has to agree on the value of the medium (whether it's shiny rocks, pieces of metal, pieces of paper, code in a computer, etc).

Everything else needed is needed because it supports this.

For instance, a limit on how many tokens are available. If the medium is shiny rocks, and all you have to do to get a shiny rock is go outside and pick one up... well, are you likely to exchange two sheep for a shiny rock? Even if that shiny rock would get you three goats? I mean. So would each of the million shiny rocks by the road on the way to the goatherd's place. "Nah," you say, "I think I'll keep my sheep and carry on making my own clothes from their wool, occasionally eating them, etc."—and Requirement One collapses.

Or a limit on value fluctuation: nobody wants to give up a whole rock for a cup of coffee only to discover that if they'd waited a day it would've bought them ten cups, nor to give up ten cups of coffee for a shiny rock when yesterday they would've gotten ten! This leads to arguments... and Requirement One collapses.

Money is the name we give a medium of exchange with widely agreed-upon value (like precious metals... or numbers in a computerized bank account).

Currency is what we call the things that are actually exchanged (like coins made of or representing precious metals... or numbers in a computerized bank account).

Fiat currency is things that are exchanged but aren't money (like coins neither made of nor representing precious metals, or numbers in a computer that aren't part of the financial system).

Forgeries are things that look like they're precious metals, or coins made of precious metals, or coins (or bills) representing precious metals, or numbers in a computerized bank account—but aren't.

And cryptocurrency....

Well, cryptocurrency is an attempted medium of exchange; it's supposed to be money.

To get your metaphorical hands on a piece of cryptocurrency, you can either buy a whole lot of expensive computer equipment (using standard currency) and pour electricity into it (paying for that with standard currency) until it solves a fancy computer problem and spits out your very own cryptocurrency token—or you can find someone who already has a token and give them something they'll agree to take for it (usually standard currency).

Now you have a piece of cryptocurrency! But what it's worth varies from person to person, location to location, day to day. There could be a better bargain across the street, or two years down the line, or even five minutes from now. In every exchange, the same question on both sides: "Have I been cheated?"

...And so Requirement One collapses.

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Comments

  • [Deleted User]Zundar (deleted user)
    edited June 2022

    I think mediums of exchange could be a fun name for a psychedelic rock band with songs explaining economic principles in ways involving stories of prophecies and various magic shenanigans. There’s a killer song called “future trading” in there somewhere.

  • @Zundar: You are so right. I'd listen the heck out of that.

  • During the Vietnam war, for reasons that I've never fully understood, our government didn't want a lot of dollars floating around, so we got paid in script, instead of in U.S. dollars. The script was denominated in dollars. The exchange rate was fixed. One dollar of script, = one dollar U.S. In theory, the script was good only at the PX. The government didn't want a lot of script floating around either, so there was a rule against spending it off base. For obvious reasons, that couldn't possibly work.

    I could go into a bar in the town just outside of our base, and buy either a bottle of Ba Muoi Ba (local beer) or the bar girl. Of course, I paid in script, which was (almost) the only currency available to me. In theory, the script had absolutely zero value to the Vietnamese civilians. They weren't allowed in the PX. In fact, it had precisely the same value as real dollars. They could walk into any store, and but things with it. It was an alternate form of currency to the official Vietnamese currency. I'm quite certain that many civilians had no idea that this wasn't "real" money. That didn't make a bit of difference. It worked as if it was real money.

    From time to time, in their infinite wisdom, our government would decide that there was too much script in circulation. They would then print and issue new script. We would have to trade in all of our old script for the new script. One would think that the old script would immediately become valueless. One would be wrong. The Vietnamese civilians continued to use a mix of old and new scripts. Why not? Officially, neither one of them had any value off of a U.S. military base. Gradually, the old script would begin to vanish. It wasn't printed on very sturdy paper.

    Once a year, each G.I. could go off for R&R. I chose to go to skiing in Japan. When I left Vietnam, I would exchange my script for dollars. Upon landing in Japan, I exchanged my dollars for (thousands of) Yen. Imagine, trying to play poker with Yen. I was constantly doing mental conversions, How much is ¥2500 in real money?

    Earlier, I mentioned that script, was (almost) the only currency available to us. In fact, there were also two other forms of currency available. We could go to the PX and purchase bars of hand soap, or tubes of lipstick. Either one could be used to buy either quite a bit of beer, or the bar girl. Since there was no obvious exchange rate for soap or lipstick, it needed to be negotiated for each transaction. It wasn't very convenient, but they were always worth far more than they cost us. I doubt that either of them circulated very far from a military base. Rather, they would get used up.

    After the fall of Saigon, all of the U.S. script, immediately lost all "official" value. However, for the Vietnamese civilians, it never had any "official" value to begin with. I don't know for certain, but I suspect that it continued to circulate for some time.

    Now, consider that. bars of soap and lipstick both had some intrinsic value. They would get used up, which actually increased their value as currency. Neither the dollar nor the yen have any intrinsic value, but al least they had the backing of the U.S. or Japanese government. Actually, while I was in Vietnam, the dollar had no value to me. There was no place where I could spend it without risking a court martial. To the Vietnamese, our script had no intrinsic value, and also had nothing backing it.

    So, what is "real" currency? What gives it value?

  • @GreatHornedOwl: I'd say "real" currency is whatever tokens are actually exchanged for goods and services.

    And it all falls apart when one or more people involved in a trade stop agreeing it has (or is backed by) value.

    In short: money is a social construct.

  • @DaringSprinter - You presented an interesting discussion of money and currency, but you failed to ask one fundamental question. Why do precious metals have value? Neither gold nor silver have very much intrinsic value. Bronze, which is not a precious metal was forged into weapons or tools. Gold and silver are far to soft for that. Neither, could they be eaten or burned as fuel. They do have some some use in electronics, but not at all enough to account for their perceived value.

    In ancient times both of them (as well as copper) were thought to be sort of magical properties. All three of them could be found in a native state, as opposed to in an ore. As a matter of fact, ores weren't even recognized as being metals. Gold and silver had what were then unique properties. They were both ductile and malleable. Thus, they were capable of being transformed in shape with only a hammer. They could be made into either useful or decorative objects. They had an intrinsic value. Gold had an additional "magical" property. It didn't corrode.

    Today, iron, which can be made into steel, is a far more useful material. Yes, neither gold nor silver are even close to the usefulness of iron. Why should we care if they are less plentiful, if they aren't good for as much?

  • edited June 2022

    @GreatHornedOwl: Why everyone agrees on the value of the medium doesn't matter much to the definition of money. So—frankly—I left it out to keep the post shorter. Dang thing's long enough for a starter post, if it turned into an academic paper no one would read it at all.

    I like your additions, though! By all means, carry on.

    Personally, I'm guessing it's a matter of chance: humans just happened to run across shiny rocks (gold) and started using them because they were shiny and didn't line the road to the goatherd's place.

    Kind of like magpies, a little bit.

  • What about diamonds that is nothing more than a shiny rock that does absolutely nothing?

  • [Deleted User]Moxytocin (deleted user)

    @Mike403 The jewelry industry invented diamond engagement rings and convinced people they were a necessary and expensive symbol of love.

  • @Moxytocin - I believe it's wise to save the money and put it towards fixing up the house or something rather than waste it on an expensive piece of jewelry because it looks pretty.

  • @Mike403: Agreed. The only diamonds I own are powdered and embedded in a (really nice) knife-sharpening stone.

  • [Deleted User]Moxytocin (deleted user)

    @Mike403 Yep lots of things I'd rather have (or do) than expensive jewelry.

  • If you're rich enough that you're using $100 bills as toilet paper, then go ahead and spoil your significant other. It's just not smart to be spending any measurable percentage of your income on a diamond. That's just my opinion.

  • @GreatHornedOwl I love how the 'military environment' often leads to creative/adaptive economics. :lol:

    I was 'on a deployment to an austere and hostile location' when our supply chain became severely unreliable, and we found ourselves bartering with a mix of toiletries and cigarettes. High value was placed on the cigarettes, 'cos obviously smokers gotta smoke. I would trade shampoo, toothpaste, and deodorant with some of the locals for Russian cigarettes, which I would then trade for more toiletries. As they were all a consumable commodity, the value would fluctuate with availability, but there would always be a demand. The locals prized American toiletries, and the Russian cigarettes were the only reliable source of nicotine for hundreds of miles. It got to a point were economic success could be measured by lack of body odor. Ahh, good times... :lol:

  • @Moxytocin posted: "Yep lots of things I'd rather have (or do) than expensive jewelry."
    100% agree! I would rather travel with my boyfriend anywhere, any day, than be given jewelry of any value. Also not a flower kind of girl... If you want to give me a bouquet to prove your undying love, it had better be fuzzy unicorns! Just as useless, but they don't die, and they make me happy! :p

    ~ Sunset Snuggles

  • There’s a reason why Travala.com is accepting 60+ cryptos / why Every chipotle location now accepts cryptocurrency through flexa / why the U.S. AirForce will utilize blockchain technology for security / Gucci department store has now started accepting crypto …. None of them are in the business of losing money. There’s a reason why the brightest minds in Silicon Valley are moving over to web 3, why the staples center isn’t called the staples center anymore and why it is named after a crypto exchange … we’re still stuck on crypto being a medium of exchange , we haven’t discussed about the value blockchain brings / the benefits of consumers owning their data / decentralized applications - dApps - / decentralized finance - defi - if you guys only understood that many businesses are building on networks, heck even FIFA partnered with a blockchain , there is so much to blockchain and again I Guarantee! We will all utilize blockchain technology directly or indirectly … if one of your service providers decides to utilize it, but in your end you’re just transacting … you won’t see it or it won’t affect your everyday …. But you’re effectively utilizing it. And as far as banking, I rather have 100% full control & full custody of my money … a bank can freeze or seize your money - that’s one of the problems with centralization…. Yes there are many benefits to traditional banking, but when it comes to self custody your money goes with you no matter where you are in the world … I don’t worry about my money being frozen or seized, or that I’m covered by up to $250,000, nah, I have control of everything …. But I say this to say there is soooo much usecase, we’re still stuck on one. But again none of this is to convince , it is going to happen regardless, or in many peoples eyes it won’t (even though it’s already happening)

  • The current problem with widespread usage of Cryptocurrency and secure blockchain communications and information storage, is the processing power required to validate all of the blockchains. With such a high computing requirement comes a high price in power. For us to effectively switch to the decentralization that many want, we'd have to get away from the depleting fossil fuels and switch to a lower-power/faster form of computing (ie: photonic processors). As far as the value of Cryptocurrency, you can embed information into the blockchain itself, giving it value and providing a method of secure communication at the same time.

  • @jaswbrown that’s true … and that’s 1 of the problems with proof of work (but renewable energy for mining can be utilized ect, or like in El Salvador, they are tapping into their volcanos for 100% renewable energy) … Even the powerful & huge network Ethereum is making the switch to proof of stake.

  • @Mike403 @DaringSprinter I don't think buying diamonds just to have/wear is a good idea either. I would rather take that money and fix the house or put it in a retirement fund. And the only diamonds I have are tiny and embedded in a foot file. It works great and of course doesn't wear out.

  • I can barely explain or ask this. My understanding is there are stations in physical buildings to power? cryptocurrency and they are noisy. So there have to be negotiations with the people who live close to them cause they are that noisy. Can anyone elaborate?

  • @achetocuddle I love your curiosity and thirst for knowledge.

    ~ Sunset Snuggles

  • @achetocuddle i agree with @SunsetSnuggles 💯% … you remind me of me 1 year & 3 months ago, I had no idea about this space … I didn’t understand it, I kept an open mind and decided to learn, & I started learning from people who covered the good & bad, both sides, & I avoided maximalist , and every single body I follow in this space (to this day) are all smarter than me, … and I’ve gotten where even if a mentor of mines give a suggestion or idea I don’t just follow it, & I give my reasons why & I have changed the minds of some people who I look up to … This was meant to be decentralized, now you have many projects (even many I’m involved with) that are getting in bed with regulators , and that venture capitalist are putting money in, this wasn’t the purpose of this space but if I’m in it is because I see value … so you have projects that are completely decentralized & others who are regulatory friendly …. So much more to say.

  • [Deleted User]Zundar (deleted user)

    I'm gonna ask the major cryptocurrency question that I'm sure we're all thinking about deep down, we've seen a lot of the currency aspect of the name but not so much of the crypt aspect, why? where are the necromanceconmists raising the value of dead currencies?

  • [Deleted User]GoodRightHook (deleted user)

    If you can not eat it, if it does not keep you warm, if it will not keep you protected from harm, then that thing has no intrinsic value.

    So, where do things like computers fit in?

    At what point does the useful function of an abstract concept provide real value?

  • @jaswbrown I'm glad that you reminded me. Cigarettes were another form of currency that we had in Vietnam. Interestingly, a pack of mentholated cigarettes was worth 2 packs of the non-mentholated. Even more interesting is that Salems were worth 3 packs of non-mentholated cigarettes. "G.I. you got salum?"

  • @Zundar I am not capable of thinking of such a question, but now that you asked, I would be very interested in the answer, even a hypothetical one.

    @SunsetSnuggles I do love to learn, and learning here is different from reading nonfiction. Here I can learn from the more formally educated, people who have been to the School of Hard Knocks, those who have read some of the same things I have but understand them better, and those with their own strong and valuable opinions/viewpoints that are not published anywhere else. Also people who have had opportunities for good? experiences that I have not. There are a lot of people here who like to share what they know. My real life doesn't have much of this.

    @cuddles_ndream Right now I am Grasshopper :)

    @GreatHornedOwl Your stories are so interesting always. I'm sorry you had to go to Vietnam. It's very funny that mentholated cigarettes were more popular there.

    @GoodRightHook I've also wondered about this. Could there be a time when people say "Remember when everyone used computers and thought they would never be replaced?" But right now if you know your way around a computer well, the world is your oyster.

  • @DaringSprinter You have started the convo I've wanted to have and did not know how to even title. Great title!

  • @achetocuddle - In retrospect, I'm not at all sorry that I had to go to Vietnam. It was a fascinating experience that I wouldn't give up for anything. I'm actually one of the few people who actually liked Vietnam. I didn't much care for being shot at, but I liked the country, and I liked the people.

    There are two things that I am sorry for. I'm sorry that I didn't become a birder before I went to Vietnam. I have no idea how many species I missed out on. I'm also sorry for the way that I had to airlifted out, a mere 3 weeks before I was scheduled to leave.

  • @GreatHornedOwl I thought you might say you weren't sorry and I'm glad. This may be an odd way to look at things, but I feel annoyed with people who seem to think of Vietnam as merely a place where they had a good vacation. Even if I had the money, I would not go there because it seems insensitive to the people who went and did NOT have a vacation, especially like one of my friends who was drafted.

    I've heard Vietnam is pretty and the people are nice. I've liked the few Vietnamese I've met in Tennessee.

    I take it you were one of the people lying down when you were airlifted out?

    I've been trying to figure out how you take care of your wife, prepare or at least assemble 3 meals a day, post here so often (and not ballyhoo but thoughtful things) and do all the other stuff you do. You probably have hardly ever been inactive to be in the good shape you are in.

    I have to charge my Chromebook now. I think I'll have some ice cream. Lol.

  • @GreatHornedOwl Just the one tour in Nam? What year? My dad served two tours once as a pilot and one in Special OPs in MacVSog a branch off of the Phoenix project. I remember his second tour distinctly.

  • Actually, I was one of the lucky ones in one of the seats on the right side of the aisle. I was recovering from a concussion, fractured skull, and punctured ear drum. The bunker I was in took a hit from a rocket and collapsed. For years after I left Vietnam, I had wanted to take my canoe and paddle the Mekong River, but it would have been terribly expensive.

    How I find time for everything, is I don't sleep much.

    As for my wife, it is getting harder. She has been helping by doing little things like unloading the dish washer. Lately however, I've been spending more and more time, when in the middle of cooking, I have to go hunting for some utensil that isn't where it had been for the last 25 years. Soon, it will become faster to do everything myself, than with her help. Ihas probably reached that point already, but she likes to feel useful.

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