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What does it mean in real life for the common citizens?

From all the discussion above, I understand cryptocurrencies can be used for all sort of illegal transactions. Black money transfer, Ammunition deals, terrrosits funding, Bitcoin has covered that all withouth leaving any trace. Scary world we live in. I would rather want my money to be governed by a group of legally bound people rather than see it being used for bombings & killings.

I'm oversimplifying, but here goes:

1) If the value of Rupee falls against other currencies, RBI will step in or Govt will take financial measures to ensure it does not happen too rapidly.

2) RBI involvement in creation of rupees ensures that Rs. 2000 is worth Rs. 2001 today or Rs. 1999 tomorrow. Rs. 2000 will not be worth Rs. 1900 tomorrow or Rs. 2400 the day after tomorrow. This gives confidence in the currency - poor people don't mind holding their savings in cash - because of its low volatility.

3) Government backing and a banking system means the money in your savings account cannot be hacked or stolen. If a bank fails, most likely the Govt will step in and ask a bigger bank to acquire the failing bank. Your money is almost 100% safe.

4) Government backing and a banking system means your currency is inflation proof. You can invest your surplus cash in a fixed deposit and earn interest - which will cover for inflation.

The biggest reason why cryptocurrencies will NEVER become currencies because of its volatility. Currencies are supposed to have stable values in the short term. Central banks ensure stability. Since cryptocurrencies have no central banks managing prices, it will never be stable.

Cryptocurrencies could become a "financial asset" though - just like stock or commodity futures.

Will it? With articles talking about how 40% bitcoins are held by 1000 individuals, what stops these people from playing the bitcoin market in their favour? The closest commodity bitcoin may become would be diamonds where monopolistic control ensures the value of diamonds keep rising by controlling supply.

Let me offer my two satoshis to the discussion here.

It's a misconception that bitcoin transactions are totally anonymous, while in fact they are pseudonymous. Since all transactions are in a public blockchain, if someone is interested, they are free to analyze it and try to link with real world entities. Any point of interaction of a crypto-wallet with a real world entity can be used to link the wallet/transaction with some person. Unlike cash transactions, here you are leaving a digital trace for whole world to see.

What if Facebook or Twitter launch their own crypto-wallets and allow users to transact with each other? Will we as a society be comfortable with such a scenario where everybody will know everybody's crypto-worth?

Other than the volatility right now, main issue with bitcoin's usability as a real currency is that it's not easy and simple enough for an average person to use it as such. Unless the ecosystem around bitcoin matures enough, it will only be used for speculative trading and may be as a hedge against other currencies/asset classes.

Even if it is played by individuals, it can still be an asset - as long as bitcoin has some economic utility. Remember even crude oil is controlled by a handful of countries. Promoters of companies own 40 to 80% of the company, but its stock is still an asset. So concentration of owners does not matter.

From what I see so far, bitcoin has the following utility or economic value:

1) Speculative utility: With hedge funds and stock/commodity exchanges getting into this bitcoin business (via futures or direct investment), bitcoins now have a speculative utility. That is, a hedge funds can now take 10% exposure to bitcoins (by going long or short) and achieve different type of returns.

2) Pseudo-Gold Utility: For this to happen, central banks should hold bitcoins in their reserves. Some are speculating that this will eventually happen. For example: Countries that have been sanctioned by USA like Iran, North Korea, Venezuela might consider holding and transacting in bitcoins.

3) Tax Evasion utility / anonymity utility :This is some tax evasion economic utility, but not much. Cash is much better tax evasion tool, because of low costs and wide acceptability as a currency. With bitcoins, you have to incur 20% charges when you buy/sell.

4) International money transfer utility: Again, because of high costs involved (20%) in transacting, traditional banking channels are better. It costs roughly $20 to $40 to do a international wire transfer.

All those 'legally bound' groups of people, i.e. governments also use our money for bombings and killings. Of course, they call it 'war'. :)

(Sorry for going OT, couldn't resist.)

I look at crypto currency as a missed investment opportunity. I was too lazy to do the research and actually buy some through some friends in the US, when the price was affordable not so long ago. Would have been rich enough to retire now if I had. But then again if I had, I probably would have also sold looong before the really big price jumps happened. So maybe not so much of a missed opportunity either.

I do see governments getting together and imposing restrictions soon however. No way the people in power will let something as important as a form of exchange remain beyond their control and without them profiting from it for too long!

It can also be 'un'written by the governments, i.e, Demonetisation. Remember Nov 8 2016 lately & some before ?

So please enlighten me, why does the value of Dollar goes only up? I know i'm being a little stupid here, but to counter your point stupid:

Yes it can. Remember November 8 2016. stupid:

So, why is there a huge cry over the FRDI bill?

I vaguely remember an incident in the early 2000s. There was a rumour that ICICI Bank was broke & people were running like rabbits to withdraw their money from the bank. Why is it so, if the money in the bank is safe? If there is some issue, the Government will step in, right? Then why the anxiety?

Currency note demonetization is a bad example to raise here. The bank note says "I promise to pay the bearer a sum of five hundred rupees". And that promise was kept - the bearer just had to deposit the note in a bank, that's all.

Because we have a current account deficit. Imports are higher than exports. Note that during certain stages, the rupee gains against the dollar. That's because of huge amount of dollar inflow (for investment in stocks & bonds) that makes up for import / export imbalance.

Discussion on FRDI bill
http://www.team-bhp.com/forum/shifti...amendment.html

And I vaguely remember what happened to Global Trust Bank. Depositors did not lose a single rupee.
https://en.wikipedia.org/wiki/Global_Trust_Bank_(India)

It will be a political suicide for the ruling party to let a large bank like ICICI Bank fail, and depositors lose their money. It costs the Government nothing (again, I'm oversimplifying) to restore back funds into depositors account.

That's why BITCOIN, GOLD etc is a terrible form of currency. The power of Govt to create money out of thin air is a good thing, not bad. Especially in a stable (more or less) economy like ours. Countries like Venezuela, Zimbabwe etc will screw up anyway - whether they have fiat currency or gold/bitcoin.

Are you trying to prove my point? :) That is a great example of how a underwritten currency kept it's value despite the discontinuation of the two largest rupee bills. All the rupees in the bank was safe. And even the 500/1000 bills, once deposited, retained their original value. Again, thanks for giving that example.

hahaha this is epic! Creator of Litecoins has sold all his holdings
https://www.cnbc.com/2017/12/20/lite...ocurrency.html

Shouldn't all creators be doing this?

His Statement
Secondly, if enough people with wealth decide its much safer to "hide" wealth in crypto, what can governments do? As long as their peers are willing to accept crypto, it is untracable. Its like you have chickens and your neighbor having cows, and you willingly start using eggs and milk as currency. Its illegal and that would make you a criminal, but can you be caught?

Remember, to live and survive, you need very little cash. Its the spending which can be curtailed by the govt. So if a software engineer paying tax in 20L a year income buys a 1 crore car , taxman will come after him. So he has to hide cash (which can be lost due to demonitization), or in the bank (which will have a tax problem), or in a USB pen drive.

Wealthy people like to hoard wealth.
Currently transfer of money out of country is a big problem, but crypto allows you to do so. It makes tax havens more powerful.

The creators may be techno-nerds, so they did not solve any economic problem. But they solved a technology problem with money movement. It will have legitimate uses (Ripple payments by 20+ Asian banks), as well as illegitimate uses. Govt may try to regulate illegitimate uses, but unless it can control where the money was converted to real goods, it will have no power.

I also see an argument, that when govts realize this they will try to clamp down. No they will not. They will just prohibit illegal use (just like buying drugs with money is illegal but money is not illegal). Secondly you also have to realize that the fantasy of of the people, by the people etc., is for civics books. Developed economies employ politicians. Would you help develop a framework which harms your employer?

The new order is here and it will be here to stay. Of course, the valuations are a bubble, just like dot-com, but when dot-com bubble burst, it did not end technology as such. Similarly Internet gave the opportunity to move information, and blockchain converts money to information. So no more silly swift systems. I can today buy crypto in on country, put it on my USB key and send it anywhere where user downloads it into USB key.

Unless conversion of crypto to real currency happens, there is going to be absolutely no way any govt can intervene. Can govts stop barter system?

Well Crypto is not going away. Exchanges are getting FDIC insured and KYC is needed in USA now to transfer real money.

So getting money in and out will be regulated.

Just like in game money when you play video games becomes taxable when real money transaction is involved.
Dot-Com bubble was a big bubble, but it spawned the connected world where information (even personal information) could flow. People suddenly opened their bedrooms and let in Mark.

Crypto bubble will spawn a new era of asset transfer where instant transfer of money (legal) will become a reality. From information we go to digital assets.

I hope we are alive when quantum teleportation becomes a reality, when you can transfer physical assets

Audi and BMW can be bought in Japan with bitcoin:)


link

And they will be paying sales tax to the government and won't be anonymous at all. The invoice will have the buyer's name, address and Tax Identification Numbers. Why use bitcoin at all?

But who in their right mind will pay in bitcoin, when the bitcoin is appreciating every week in price?