JamesNZ (OP)
Jr. Member
 Offline
Activity: 184
Merit: 1
|
 |
July 06, 2024, 05:33:17 AM
Last edit: July 11, 2024, 05:47:23 AM by JamesNZ |
|
In order to satisfy their needs and wants people need goods and services. They need food, clothing, energy, furniture, a roof over their heads, clean streets, medical services, etc. However, when they join a number-based payment system, such as banking, they give up goods and services for banknotes or deposits - something that cannot satisfy needs and wants. If you traded your house for banknotes or a deposit you gave up a good that can satisfy a lot of basic needs, and in return, you got just numbers on paper or on the screen. Something like this: "234,899.95 USD".
For that reason, if a payment system is legit it has to be able to protect people by ensuring they get goods and services back. Banking payment systems do have such a protection. The proposed alternatives to those systems, known as crypto payment systems such as Bitcoin, do not have it.
If a US bank issued a loan or if the Federal Reserve subscribed to a government bond that gave rise to dollars, that is numbers. For example. Granting a loan to a person means that a bank created numbers out of thin air and put them in a deposit account of that person. The person then goes to the market and trades the numbers for goods or services. Let's say they trade them for a house.
At first sight, this looks crazy. How a person who had nothing yesterday can have a house today just based on numbers issued by a bank? Why would anyone give up a house for a number? But it is not crazy because that number must be returned to the bank. Moreover, returning it is so important that in the case of default, the bank will foreclose the house.
Essentially, what that means is that the banking system forces loan beneficiaries to work for those that hold dollars, or to sell them goods and services. Only in this way can they get the dollars and return them to the banks. In other words, via the system of pledged collaterals, loan contracts, credit assessments, etc. the banks protect dollar holders and ensure they get goods and services back. For instance, if loan beneficiaries default on their loans and fail to return dollars to the banks, their property will be foreclosed and sold at auctions. Who will have access to those auctions? Well, the dollar holders. Banks issued dollars via loans and must accept them to liquidate unpaid loans. So if dollar holders don't get goods and services from loan beneficiaries on the market, they will get their foreclosed property at auctions. Of course, government bonds don't ensure getting back goods and services but they give the ability to fulfill a tax obligation. The government must accept dollars as a tax payment to be able to pay off their bonds subscribed to by the Federal Reserve.
But let's now go to Bitcoin. When someone says that bitcoins are just numbers on the screen, the automatic response by the Bitcoin proponents is this: "So are the dollars" or "so is fiat money". They are basically saying that if you trade goods and services for the numbers issued by the Bitcoin system this is like trading them for the numbers issued by the banking systems. But this is of course not true. Unlike the banking systems, the Bitcoin system doesn't protect holders of its numbers.
The so-called Bitcoin miners who initially receive numbers from the system and then trade them for goods and services are not like loan beneficiaries in the banking systems. They are not forced by the system to return numbers to the system. So they are not forced to work for Bitcoin holders or sell them goods and services. Even if they received enormous amounts of tangible property in exchange for the numbers, they have zero obligation to return anything to anyone. The whole Bitcoin system is just a giant decentralized database showing the past and current number holders. There is literally no one and nothing in the system to protect these holders by ensuring they get goods and services back.
If you gave your house for Bitcoin, the only thing that can save you is someone's goodwill to enter the system and give you some good or service. But if people get bored of bitcoins and don't want to invest in them anymore, you are left with nothing. You gave up a house, and in return, you can't even get a haircut. And no decentralized system can help you.
Of course, people mostly don't trade goods and services for bitcoins. They trade numbers issued by the banks - dollars, euros, pounds, etc. Bizarrely, they give up numbers that are good for them due to the said protection, to get numbers that are bad for them because they lack such protection. And they do that because someone or something convinced them that such bizarre trades will become massive in the future and earn them a lot of bank-issued numbers. Or they believe that because someone in the past achieved such earnings, so will they.
|
