this post was submitted on 30 Jun 2023
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well, fiat money is issued by a central authority and its value depends entirely on the faith people have in that central authority. Compare that to monetary systems based on the gold standard, where a unit of currency has a fixed value in terms of gold. When the dollar followed the gold standard, it was technically possible to exchange dollars at the bank for a fixed amount of gold. While with fiat, you could say that the market decides how much gold one dollar is worth.
Bitcoin and other cryptocurrencies are more like gold or silver than they are dollars or euros or whatever other fiat currency. The value that gold itself has is determined by a lot of things, but ultimately it comes from its rarity. You can if you want go out into the hills and spend time and energy digging up gold. Likewise, you can if you want spend time and energy mining bitcoin. This is why people often say bitcoin is digital gold - it's rare and it takes time and energy to find.
Gold is a fiat currency. There are things that are far rarer and harder to extract that are worth far less. Sure, the metal itself has some intrinsic uses, but that's not where most of its value as a currency comes from. It's just pretty and lasts a long time, so we decided it made a good currency. That's still an arbitrary decision, and if we collectively decide we don't care about that anymore its really not worth much more than copper is for its usefulness and rarity. It's valuable because it is the original fiat currency.