Bitcoins/Litecoins/Virtual Currencies

TJT said:

Bitcoin breaks $100k support.

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My god, we are trading at prices we haven't seen since October 10th!

BTC bucking QQQ and following gold so far today.

Going to guess it's bc the QQQ drop is being largely driven by govt shutdown fears and BTC is sovereign resistant

Flobee said:

I'm not saying money itself is a moral abstraction, I'm saying the current system is immoral and the ability to manufacture money is theft.

You're saying plenty of things that are true, but missing the point entirely. I'll break it down like this:

Most of history - Gold and silver were collateral for trade, early on exchanged directly, later exchanged with paper IOUs.

1971 to today - Gold was replaced with US Treasuries which act as collateral for the creation of money via debt.

I'm not sure why you're separating trust and value because they are the same thing in this context.

USD system has worked due to a combination of trust and threat of violence since the transition from gold backing to UST backing via the petro dollar system. I'm not sure why you're trying to overcomplicate this.

To expand a bit one of the main reasons I think Bitcoin works is because it is very fit to be pristine collateral in a way that Gold and UST could never be.

Instant settlement that requires no trust alone is massive. Plenty of other traits that are valuable but this thread is largely about exactly that so I won't bother to rehash it.

Trying to sum this entire argument up, the economy at large requires collateral to create trust which allows for trade. Gold has historically been that collateral, UST is that collateral now, and we're moving away from UST playing that role clearly. Bitcoin's value prop is, imo, largely in replacing that collateral layer. I think it can replace a LOT more than that to be frank, but at a minimum I think it will do that.

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You're framing money as if collateral = trust = value, but that's not how large-scale economic systems actually function. We don't disagree that some form of trust is required for trade. Where we disagree is what layer provides that trust in large-scale economies.

You're treating collateral as the foundation of money. That is only true in low-complexity, low-coordination economies.

Gold did act as collateral in early trade networks, no disagreement there. But once economies scale past local exchange and interpersonal trust, collateral stops being the foundation and settlement enforcement becomes the foundation. This is the part you're compressing: Collateral creates trust between counterparties. Settlement systems create trust between societies.

Gold works when: Trade is slow, credit networks are small, settlement cycles are infrequent and dispute resolution is local. Once you have, courts, tax systems, international clearing, and long-term credit markets, the ability to enforce settlement becomes the core layer, not the metal. That's why when the U.S. dropped gold in 1971, global trade didn't collapse. Instead, the settlement infrastructure (dollar clearing, SWIFT, Eurodollar markets, UST collateral) became the trust layer.

Gold stopped being the core trust layer not because anyone forgot it exists, but because it doesn't scale for modern credit-based economies because it settles slowly, it's hard to mobilize across borders, it can't expand elastically with trade volume, and it depends on centralized custody anyway.

You keep saying "trust and value are the same thing. They are but the source of trust shifted: Pre-state and early state commodity collateral created that trust and it worked because it was interpersonal/local. In the Industrial and global trade era enforced settlement and shared accounting standards created that trust and it works because it's institutional/systemic.

Now, about "The economy requires collateral to create trust." No. The economy requires enforceable settlement to create trust. Collateral is just one way to back some kinds of settlement. It is not the root of the system anymore and hasn't been since long before 1971. This is why your argument feels like it keeps slipping back to moral preference: You prefer the collateral-based trust model. I'm describing the settlement-based coordination model. Those are different mechanisms, not different "values."

You're calling Bitcoin collateral, but you're using that word to mean two different things: Collateral you can pledge into a credit system (like USTs today) vs. an asset you can self-custody and transfer without permission. Those aren't the same.

Bitcoin does excel at self-custody and seizure resistance. No disagreement there, it's the strongest bearer asset ever created. But for Bitcoin to function as systemic collateral, it has to satisfy the other half of the equation: Collateral must be usable in a settlement framework that courts, businesses, and trade networks are willing to recognize.

Right now: you cannot settle taxes in BTC, you cannot denominate corporate balance sheets in BTC without exposure and volatility risk, you cannot settle international commercial contracts in BTC, you cannot clear large-scale trade flows in BTC, and banks cannot expand credit based on BTC reserves. Which means Bitcoin currently functions as a savings asset, not collateral in the credit-issuing sense. You're talking about the "collateral layer," but collateral only matters inside a recognized settlement system. Bitcoin doesn't sit inside that system yet, it sits adjacent to it.

That’s the gap. Bitcoin can replace gold's role. It has not yet replaced the legal, political, and institutional machinery that makes an economy able to settle obligations at scale.