Lecture One | Currency Master Class 101: Fiat, Gold, Bitcoin, Stablecoin

Submitted by DN-BBY t3_1276ml4 in wallstreetbets

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1 is highest rank. 4 is lowest rank.

Honestly tired about hearing all the drama about crypto vs gold vs fiat because there's so much nonsense out there that I'm just honestly tired of hearing about it. So this is my currency master class. Also I'm smoothbrained so you are basically learning a master class from a guy that should be on tik tok. And since I'm lazy, I'll post these in parts. Maybe maybe not. I think the next part will answer common misconceptions. Anyways this is just an introduction to the 4 most widely talked about currency or store a value type stuff.

First off, each of the 4 above have their own pros and cons, and which one is better depends on what your use case is as well as market environment. I'll just bullet point each of the 4 main what I consider, assets that are often used as both a currency and store of value.

USD

Definition*: The thing that cartels in Mexico hoard.*

  • Stability (1): Duh, that's why central banks hoard this stuff. That's why other countries peg their currency to USD. The USD is stable, because it's very predictable as to what it's value will be tomorrow. There isn't much devaluation of this currency...at least not yet. $5 can buy you a burger today. $5.50 can buy you a burger in like a year. It's very predictable. No crazy shenanigans like Zimbabwe Dollar or Argentina Peso, where you don't know how many money you need to buy stuff tomorrow. In other words, the volatility of USD is low.
  • Store of Value (3): It gets this rating because while it's very easy to predict what a USD can buy tomorrow, over time, you need MORE USDs to buy the same thing. Thus, in terms of real value, it loses out to real assets, like gold.
  • Use As Currency (1): This is obvious as value can be exchange both digitally and physically using USD. It gets the number one rating because it's easy to print more and thus you can implement monetary policy. It also gets a rating of 1 because it's the most widely used currency today.
  • Speed Of Transaction (3): The transfer of USD is 'fast' but not as fast as the others on the list. ACH still takes a bit of time as well as checks. Large transfers are usually audited for fraud, slowing things down. Cryptos on defi can transfer high value in shorter time.

Gold

Definition*: That shiny block of rock that doomsday people store in their basement.*

  • Stability (3): Pull out a price chart and you'll see that it has more volatility than USD, but less than Bitcoin.
  • Store of Value (1): Over time, a oz of gold will buy you more cheeseburgers than a stack of $1 bills. That's why gold has gone UP in price over time. It preservers purchasing power better than USD. With that said, it's arguable that Bitcoin could be number 1 as well because it has appreciated more than gold, making it potentially a "better" store of purchasing power. The reason why Bitcoin comes in second is because (1) there's always the threat of further regulation (2) bitcoin has more volatility (3) bitcoin has a shorter history
  • Use As Currency (4): You can't go to Target and buy tampons using a block of gold so it sucks as a currency. You also can't transfer gold digitally over the internet. But, you could create gold BACKED currency, which would solve both of the above problems, but even then, it would still be behind USD and USD Coin due to the difficulty it would be to have monetary policy.
  • Speed Of Transaction (4): Same reason as above. You have to physically transport gold unless you create a gold backed currency.

Bitcoin

Definition*: Some digital thing that cause boomers' eyes to glaze over.*

  • Stability (4): Pull out a chart of bitcoin and you can see it's unstable AF. Hard to know your net worth tomorrow if it's changing that much.
  • Store of Value (2): Despite the volatility, it has so far gone up over time in relation to the USD. Thus, it's a better store of purchasing power than USD. In fact, it has gone up more than gold in the same time period. Only reason I put it at (2) is because of the reasons I listed in the gold section.
  • Use As Currency (3): As much as crypto bois and gals love to say Bitcoin is going to be a new currency, it's 100% BS. No one is going to use a currency that is so volatile as Bitcoin. Imagine getting paid only in bitcoins and this month you can afford your rent and next month you can't all because of the volatility of bitcoin. In fact, it's arguable that Bitcoin should be given a (4) because of how unstable it is, but it being able to transfer digital out of the box makes it a (3). Remember for gold to become a currency, we need to first create a gold backed currency.
  • Speed Of Transaction (2): You can transfer large amounts really fast without going through banks like ACH or checks do. But it gets at (2) rating since USD Coin is built on Ethereum network which is faster.

USD Coin

Definition*: Tech bro's supposed genius solution to digital currency.*

  • Stability (2): Since it's pegged to the USD, it basically has the same stability as the USD. Oops unless it has funds in Silicon Valley Bank and drops 10% in a day. So no, less stable than USD.
  • Store of Value (4): Well this is obviously a poor man's version of USD. Not only does it lose purchasing power over time like USD, it's also at risk of bank runs and stuff. If everyone redeemed their USD Coin today, the last people probably won't get $1 back.
  • Use As Currency (2): Like I said, poor man's version of USD. It is less stable, but can transact faster.
  • Speed Of Transaction (1): Has the fastest transaction time since it uses blockchain but built on Ethereum so faster than bitcoin.

Question Of the Day

Why did I put "don't care" under defi? 🤔🤔🤔

Hint: I am talking about these 4 assets in the context of store of value and currencies...

Answer in the comments...

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>TL;DR: USD is stable. Gold is a good store of value. Bitcoin is volatile but has potential to be a good store of value (and it's the best if you use it as a currency). USD Coin is the fastest for transaction, but least stable and least liquid.
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DN-BBY OP t1_jecu8sa wrote

Answer: Because "defi" doesn't matter in the context of currency / store of value.

No government will ever give up control of monetary policy, so selling an asset class like it's out side of government control and will grant you independence as a good thing is just plain nonsense. It's basically the same rationale as gold bugs saying that when the world ends, you just need to buy gold and guns. While gold does have inherent value, when the world ends, gold is useless.

Same with defi. The government will always want control, so there will never be a dominant currency with anonymity or under no one's control. It will always be a side show. And those that advocate it probably are criminals at heart and just want to money launder.

Now defi as a concept is great! Just not a good sales point for crypto currencies. Just like hoarding gold when nukes go off is not a good selling point for gold.

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VisualMod t1_jecu8yl wrote

>I think the main reason why I don't care about DeFi is because it's still very new and unproven. There are a lot of projects that have failed already, and I think there's a good chance that many more will fail in the future. I'm also not convinced that it offers anything particularly unique or valuable compared to other assets like USD, gold, or Bitcoin.

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ashdraked t1_jecyqsm wrote

B coin is in the monetization stage and still tons of people use it as a currency even if it’s a vehicle currency it’s still a currency.

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NRA-4-EVER t1_jecz7mf wrote

Replying to DN-BBY (#2,511,377)

Bullets will be the perfect currency in a post apocalyptic world. So they should be saying buy a few guns and millions of rounds. Nothing exotic, basics, .22, 9mm, .223 etc.

Also, cash is anonymous as long as you keep it out if the banking system. So there's already an anonymous dominant currency. They're trying to take it away from us and if they do it will be a line they will regret crossing.

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DN-BBY OP t1_jed15bc wrote

Replying to NRA-4-EVER (#2,512,779)

Come on dude, you really gonna store cash under a mattress.. .LMAO. It'll be hard to make big purchases and you won't collect interest.

This is what I mean by misinformation. There's too much out there.

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DN-BBY OP t1_jed1buo wrote

Replying to ashdraked (#2,512,656)

Dude bitcoin won't evern be a currency unless it stops being volatile.

This is what I mean misinformation.

And even then, it won't be a dominant one because the gov doesnt control it.

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PhillyChapter9 t1_jed3gfn wrote

Replying to NRA-4-EVER (#2,512,779)

If your storing cash and lead for the shtf scenario, then you would be much better off swapping the cash for another metal - silver. In the scenario where bullets have value, cash would be worthless or inflated to near worthless while silver oz’s would have barter value just like your rounds. Between the collapse and shtf cash will have a use, but you will be better off in the long stockpiling more silver than cash.

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NRA-4-EVER t1_jed43m1 wrote

Replying to DN-BBY (#2,513,341)

How is it misinformation? You can still use banks, but once you remove cash, it is now off the "grid" if you will. The only thing that tracks the money is the system. You scream "misinformation" because you won't admit that you were wrong.

I try to never buy things that can be tracked. If I'm buying something online I'll even buy gift cards to do it, like PSN cards. Obviously if you register a car or buy a house, it's going on the record in other ways, but that's not cash's fault. I remember when I bought my last Jeep I bought in an envelope of cash, but they convinced me to save money through some shady banking and when they ran my SSN, they couldn't find any record of me. They said they only see that with people who have been in jail for 10 years. It was pretty funny.

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NRA-4-EVER t1_jed4p84 wrote

Replying to PhillyChapter9 (#2,513,985)

I'm not saying the cash is for that scenario. I was refuting the OP and their claim that no dominant currency is anonymous.

Like I said the end of the world currency is definitely bullets. Post WWI Germany, during the hyper inflation, many used bullets as currency. Just make sure you store the most common rounds.

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SateliteDicPic t1_jed5x4m wrote

Replying to NRA-4-EVER (#2,514,316)

You are correct that it is anonymous but only in small sums. You can’t make any large purchases like a house using cash and any transaction above $10k goes on record etc. So I would say cash imparts partial anonymity or it’s utility as an anonymous currency is limited.

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ashdraked t1_jed7tmt wrote

Replying to DN-BBY (#2,513,391)

The worst two possible reasons you can think of, certainty is more important than it’s USD exchange rate. There will only ever be 21 million therefore it’s the most certain asset on earth you can’t say the same for any other asset

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NRA-4-EVER t1_jedaybe wrote

Replying to SateliteDicPic (#2,514,633)

Per to per transactions of any size are anonymous. There is no way to know where cash goes. The government has to wait for people to report income or register a car etc. This is why the FED wants to switch to a digital currency, so they can remove the anonymity.

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