> The dominant use case for cryptocurrency is speculation. Speculators want to put value into the system, somehow have it become greater, and then take more value out of the system than they put in.
Don't forget that another relevant use case is anonimized payments. Let's say you deal with weapons. A good crypto could help. Let's say you sell porn videos: in some cases, one wants to pay with crypto because they don't want their SO to find out.
Just like speculation: it's not always an ethical thing. I'm just saying it's a usecase (quite matter of factly / detached from emotion).
The more formal way to say that is that cryptocurrency payments are "payments without the requirement of multilateral fiat recognition."
Fiat money works and has value internationally, because governments extend treaty relationships with one-another to offer the same sorts of protections against fraud committed by citizens of treaty partner nations, that they do for fraud committed by domestic citizens.
But when this breaks down, so does the value of fiat money:
• Countries can do things like creating export controls on their fiat currency, to prevent capital flight; or declaring a particular denomination of their currency valueless.
• And, when two nations are at war, their governments lose the ability to prosecute one-another's citizens by treaty, and so fraud by citizens of an enemy nation goes unresolved.
Cryptocurrency payments aren't inherently anonymous, but cryptocurrencies do inherently allow two parties to continue to trade productively, even when domestic laws or international treaties would otherwise prevent one or both sides of a fiat-facilitated trade between those same two parties.
Thank you for putting it more formally. I think we can all see that I didn't put things as eloquently as I should have (not sure if I could have, but that's a different matter).
That use case is currently comparatively vanishingly small and no where near large enough to explain Bitcoin and other cryptocurrencies current values. Speculation isn't just the dominant use case. It's the overwhelmingly dominant use case.
Sure, but I do think it's worth pointing out as I feel it is more of a tangible value and it's easier to see why this value will stay. With speculation, it's hard to see if people will speculate later on (probably, but I wouldn't be able to tell why). I will be able to tell why people who need privacy will be resorting to a crypto in 2 years from now.
Another use case: there have been a couple of cases where I'd use a fast cryptocurrency over banking. This case is: fast international transfer.
Have you seen the speed that Ripple has, for example? (Yes, yes, I know Ripple not decentralized, I don't care, I care about speed)
What takes me days to with a bank, I can do in seconds with Ripple. Though, this only works if: converting back to fiat is quicker on the other side than the bank transfer or the whole transaction is possible with crypto.
IMO, speculation isn't the dominant use case for Bitcoin is store of value (not claiming it's small).
With a major, major recession looming, with negative interest rates, and at a time where owning govt debt instrument actually costs you, where will you park your wealth?
Well, parking your wealth in Bitcoin starts to sound like a really good idea:
- in spite of the crazy volatility: if you average out Bitcoin value over - say - a 2 years window, it's a pretty safe bet.
- it also happens to be pretty hard for governments to get their grubby little paws on your Bitcoin stash (short of torturing the password to your private keys out of you).
- it can be moved and spent quasi-instantly anywhere in the world, so no border headaches.
- no other financial instrument has the dual property of being limited in supply *and* infinitely divisible (or almost). Most people focus all their mental energy on the first and completely avoid thinking about the second.
Don't forget that another relevant use case is anonimized payments. Let's say you deal with weapons. A good crypto could help. Let's say you sell porn videos: in some cases, one wants to pay with crypto because they don't want their SO to find out.
Just like speculation: it's not always an ethical thing. I'm just saying it's a usecase (quite matter of factly / detached from emotion).
For me though, there's only cryptokitties <3