Bitcoins are Fiat — Coins just “spoken into being”
Just because you have to meet a requirement before speaking it into being, doesn’t mean you aren’t creating it from nothing. Banks can’t just issue dollars to throw a party, there is a process. They issue it as debt, so there’s a borrower and an approval process. Fiat doesn’t mean: “Just cuz I feel like it.”
Here’s how to tell a fiat currency from its two alternative forms of issuance:
- Mutual Credit Issuance: Someone is debited for every credit. Positives and negatives always balance. The net supply is always ZERO.
- Backed Issuance: Proof of an asset held on reserve is required for to issue an amount of currency equal to the reserve. If the currency that was created is not redeemable for what is on reserve, it is not backed by it.
- Fiat Issuance: Someone gets to create something from nothing. In other words, a moment prior it did not exist, then without anyone else being debited or an asset being earmarked as reserved, it now exists.
Fiat currency gets spoken into being by an authority. The fact that you were the miner who produced the hash with the required nonce is just what proves your AUTHORITY to be the one to create the coins from nothing. It’s the nonce starting with enough zeros that has the other miners accept the authority to create those coins from nothing — proving you’ve done the work of finding it. Just like it’s an approved bank charter that validates their authority to issue dollars from nothing through loans.
You have to make a purchase on eBay before you can give a rating, but you are not deducted points when you give someone a +1 or -1. Fiat. The new crypto tokens that the miner creates are coming from “nowhere” — meaning, a moment ago they didn’t exist, then *POOF*, they “speak” brand new tokens onto the chain when they commit the block.
It doesn’t matter whether you’re doing proof of work, or proof of stake, or spinning a bottle to select the authority. You are still creating the coins from nothing, which equals FIAT.
Just because you waste a bunch of electricity doing computation that everyone throws away every ten minutes, doesn’t mean you created value. And even if you did create value by churning through SETI data, or protein folding or some actual useful computation, the CURRENCY is distinct from that value.
Really… think it over. If the currency isn’t coming from somewhere else where it existed, it is getting created in that moment by fiat.
The confusion around this in the Bitcoin community truly boggles my mind. It seems to come from the logic: “I just had to do a hell of a lot of work, so the work must have been valuable, and therefore it must be what makes the currency valuable.”
Sorry… but that’s nonsense. The work gets thrown away, and for ALL the other miners who didn’t get it as fast as you, their work and their hashes get thrown away. You are not doing essential work, or securing the network, your just randomizing who does the next commit. It was just wasted electricity for the purposes of creating a 10 minute delay and randomizing the selection of the authority to create the coins by fiat and commit the next block.
There are certainly other randomization methods, but better yet, get rid of the GLOBAL ledger so that you can only make commits to your own chain. Then you don’t have to randomize anything. YOU ARE THE AUTHORITY for your own chain. Countersignatures on your transaction show mutual consent so you didn’t manufacture it from nothing. Then BOOM! No proof of work needed. No proof of stake. No proof of value, or any other crazy scheme to try to make a broken starting place of enforcing uniqueness of tokens across scads of copies of a single global ledger. It’s just a bad architecture. You don’t have to start with the problems it has, there are better starting places, with fewer problems.
While I’m ranting… proof of stake is not an answer either. It’s a Pareto Effect amplifier. Those who have a lot of coin get to increase their influence over the coin, to help ensure that they can continue to increase their influence. It doesn’t waste as much electricity, but in the end, as we see POS systems really play out, I think we’ll see it is at least as elitist as mining has turned out to be.
Every crypto-coin implementation I’ve seen so far, is a fiat currency (except this one which still runs on Ethereum’s tokenized blockchain, requiring fiat ETH to operate it).
</rant>
