Here is the situation as I understand it: a monetary system only has "worth" if the people perceive some value in it. Take the gold standard for
instance. People had a lot of faith in paper currency because they knew it was backed by gold. The money was perceived to have some value other than
the government saying it has a value.
With Bitcoin things are a bit different, and personally I see the currency declining in the future, although many think it is just getting started and
will take off. Mining Bitcoins today is much harder than it was previously, and what I think is going to happen is that much of the wealth will stop
flowing. Your everyday person is not going to ever use such a currency, because there is still much risk involved, a single bitcoin is expensive, and
they are not all that easy to come by...at least not like a dollar in US currency, a single unit of monetary value.
Even though we are off the gold standard and the FED just prints money, people still have faith that the government knows what it is doing, even
though the government is not really who is printing the money in the US, lol. A bit ironic in a small way.
But the main reason people have faith in the US dollar is because it still has a lot of purchasing power.
Going back to Bitcoin, basically it was just some guy inventing a currency. What occurred was that 21 million coins was set as a cap, and coins
started being given to people who were solving problems using their computer power to help the Bitcoin network. So they were "awarded" in a sense.
Their only real value comes from the fact that there are people who are willing to assume they have value, and treat them as valuable.
So theoretically a new currency could come out, and if everyone started using it, it could work. But without that widespread faith the system cannot
succeed. I suppose it could still work amongst those willing to use it, but that would be a hassle, because you couldn't deal exclusively in that
currency, and would have to supplement it with another currency. Theoretically money could be printed and given away to make everyone wealthy, and if
the people still thought it has a certain value, it would be used. But the problem with something like that comes from the fact that if everyone were
rich, nobody would work, lol. Economics can be quite complicated sometimes, and sometimes quite easy and intuitive. I am not an expert by any means,
as I have a hard time with even some of the basic concepts myself.
But it seems like common sense once you realize that anything can be used as money if the people have a certain degree of faith in it. The main
problem that would be faced in creating a non-government regulated currency would be that unless it is backed by gold or something else to give it
value, people won't use it on a large scale. Another problem is the fact that someone still has to control the system. This is sort of a problem in
any democracy because authority must be delegated to other people, and one can never be certain what that person will do.
So a non-government regulated system can still end up being monopolized, because no matter how good your intentions, the people cannot actually
control what is going on. This has happened with the Federal Reserve in the US. Those who seek power will ultimately become leaders of the
institution, and things will not work like they were supposed to. That is another problem in democracy in general...often times those who seek power
are the very people that you don't want in power, although you don't realize it because these people put a smile on their face and pretend to care
about you. Often times they don't.
And these same people will come to control any standardized system, and to be honest I do not know if safeguards could ever be put into place to
prevent such a gradual takeover. Think about all the revolutions that have ever occurred in the name of freedom, when they've actually succeeded. For
a time things seem alright, but eventually the same problems will crop up due to corruption. It is an inevitable fact, and the only way to prevent
such a thing that I can think of would be to create ironclad regulations that are NOT subject to change of any kind. But then you end up with a system
that cannot grow and progress. Maybe I'm being too cynical, but that is how I see things. There would be upsides too, but I don't see a new system
replacing the old without something significantly different about the system.
edit on 4/26/14 by JiggyPotamus because: (no reason