Qyöt27;57503159 said:
This is more commonly known as the chicken-and-egg problem. Currency rests on people believing it has value. In all seriousness, aside from rarity and the concept that people like shiny things, gold and silver are just pieces of metal/rock. Inherently they have no value, and the value they do attain is only as much value as we're willing to give them through supply and demand, and through industrial uses that the average consumer doesn't immediately deal with (like being used on microchips).
Likewise, if something can be used as currency it gains value. So which comes first, a declaration of its value as currency so people will accept it, or people accepting it so it gains value as currency?
The first money (as far as economic historians have been able to ascertain) was salt - something which had properties that were useful to everyone (food preservation and the cleaning of wounds). It's universal acceptability was built into the qualities of the good itself.
Imagine you raised chickens in a pre-money (barter) economy, and you want a jar of preserved food. You won't have any problem finding a brinier to give you the food. The problem is, he also has to want chickens, or eggs. But what if he has enough of both? You are a chicken-having pickle-wanter in search of a pickle-having chicken-wanter - an inconvienent requirement of coincidence. But if you know that the brinier will accept salt (obviously a major component of brine), then you can obtain some salt from the beach and give it to the brinier in exchange for preserved food. As soon as everyone realizes this, salt can be given to anyone in exchange for anything, because everyone knows they can at any point bring it to the brinier in exchange for the universally-desired good of preserved food, and also to the doctor who uses it in his universally-desired service of medicine.
The problem with salt is that it is not durable, it is not very scarce, it is worth little in terms of volume, and it has a high use value outside its service as a medium of exchange. So people began to use tokens which were relatively scarce, durable, portable, and whose value was explicitly attached to their usefulness as a medium of exchange, to represent quantaties of salt. It is possible that people began to use these tokens by prior agreement, but more likely that someone in posession of a large quantity of salt issued them under the promise that he would deliver salt to those who most needed it in exchange for whatever he needed. This would make him the first banker. But before long, people would have realized that measuring the value of tokens in terms of salt was an unneeded step, since everyone was accepting the tokens anyway. Thus all goods and services began to be measured in terms of those tokens.
Eventually, the tokens were refined out of the market according to their comparative lack of monetary qualities - scarcity, homogeneity, divisibility, durability, and portability. Gold and silver rose to the top not because of some fiat order or Universal, spontaneous agreement, but because they possess those qualities of a good money more strongly than any other substance on earth. Thus tokens of gold and silver became the standard medium of exchange - the primary money - for the past 5,000 years, until they were eventually replaced by currencies, which were warehouse reciepts guaranteeing the bearer a certain quantity of gold or silver. But those warehouse receipts were gradually perverted by states desiring the ability to make war through debt financing, issuing quantaties of currency wildly in excess of metal reserves.
Bitcoin's goal is to dissolve the link between the economy and the tax-and-war machines enabled by governments' monetary monopolies. It has all the qualities of a good money: it is scarce, limited to an eventual 21,000,000 coins; it is homogeneous; it is INFINITELY divisible; it is durable, given proper safeguards taken by the user; and it is far more portable than metal. Its only drawback, as far as I can see, is that its durability depends upon communication technology remaining at its current level.
It only required a prior agreement of acceptance because people have forgotten
what money is over the past century or so. Bitcoiners intend to teach them through example.
