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What makes a good currency?

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What makes a good currency?

Tips: 0.00 INK Postby Remæus on Sun Oct 16, 2016 1:35 pm

$I plan on adapting this thread over time to become an educational thread on economics, monetary systems, and natural law.

What makes a good currency?
Answer adapted from Luke Parker's response to this question:

  1. Scarcity: the property of having rarity, so subsequent value.
  2. Liquidity: no matter where you go, someone will always accept it.
  3. Fungibility: so every unit is worth exactly as much as every other unit.
  4. Portability: it's easy to move long distances.
  5. Durability: it doesn't degrade over time or use.
  6. Divisibility: it remains divisible into smaller units, no matter the value.
  7. Malleability: it can be re-combined into larger units.
  8. Recognizability: it is has a low-latency price resolution.
  9. Transferability: it is low risk to move, and thus low cost.
  10. Security: it is easy to defend against thieves.
  11. Incorruptibility: the value of it cannot be reduced by marking or doping.
Ludwig von Mises, The Theory of Money and Credit wrote:Perpetual vigilance on the part of the citizens can achieve what a thousand laws and dozens of alphabetical bureaus with hordes of employees never have and never will achieve: the preservation of a sound currency.

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Re: What makes a good currency?

Tips: 0.00 INK Postby LawOfTheLand on Sun Oct 16, 2016 6:38 pm

It took me a while to realize what point 8 was trying to say. "Oh. A 20 dollar bill should be easily and quickly recognized as being worth that much."

Might I add a twelfth point to this? I can't come up with a one-word thing for it, but I was inspired by a documentary about how on average a penny costs 1.4 cents to mint. So whatever form the currency takes, it should be a form that's easily and cheaply mass-produced. (Industry? Productiveness?)

And a thirteenth, for all the numismatists out there: Adaptability. There should be room for variance in the design or material composition such that those of a certain bent will go out of their way to acquire unusual specimens, such as printing errors or those made with a specific alternate marking. Varying the composition is also useful as an anti-counterfeit measure or as a reaction to material shortages, the best example of the latter category being the 1943 steel penny.
Image

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Re: What makes a good currency?

Tips: 0.00 INK Postby Remæus on Tue Oct 18, 2016 2:15 pm

Added by @varda in this message:
@varda wrote:good qualities include: (1) portable; (2) divisible; (3) durable; (4) sufficiently rare; (5) fungible; (6) not consumable. Reference: http://contrarianinvestorsjournal.com/?p=391

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Re: What makes a good currency?

Tips: 0.00 INK Postby Nekohina on Thu Oct 27, 2016 2:03 pm

@ LawoftheLand

While it may seem a bit weird, perhaps the word "economical" fits the description?

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Re: What makes a good currency?

Tips: 0.00 INK Postby LawOfTheLand on Thu Oct 27, 2016 8:25 pm

Nekohina wrote:@ LawoftheLand

While it may seem a bit weird, perhaps the word "economical" fits the description?


Sounds like a good word to me. Let's run with it!

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Re: What makes a good currency?

Tips: 0.00 INK Postby Remæus on Tue Dec 27, 2016 9:05 pm

LawOfTheLand wrote:Adaptability. There should be room for variance in the design or material composition such that those of a certain bent will go out of their way to acquire unusual specimens, such as printing errors or those made with a specific alternate marking. Varying the composition is also useful as an anti-counterfeit measure or as a reaction to material shortages, the best example of the latter category being the 1943 steel penny.


I'm not so sure that units of currency should have variance. Is this an argument for encouraging a currency market to emerge? How can fungibility be preserved in this environment?

Bitcoin is currently highly variable (every "coin" comes with a history of its use) but efforts are underway to remove this distinguishability. If a merchant were able to see the history of your money, they might choose to not do business with you on account of something they find unsavory (perhaps for moral or even legal reasons) in the historical circulation of that money, even if it pre-dates your possession of those units.

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Re: What makes a good currency?

Tips: 0.00 INK Postby LawOfTheLand on Mon Jan 02, 2017 12:29 am

Remæus wrote:
LawOfTheLand wrote:Adaptability. There should be room for variance in the design or material composition such that those of a certain bent will go out of their way to acquire unusual specimens, such as printing errors or those made with a specific alternate marking. Varying the composition is also useful as an anti-counterfeit measure or as a reaction to material shortages, the best example of the latter category being the 1943 steel penny.


I'm not so sure that units of currency should have variance. Is this an argument for encouraging a currency market to emerge? How can fungibility be preserved in this environment?

Bitcoin is currently highly variable (every "coin" comes with a history of its use) but efforts are underway to remove this distinguishability. If a merchant were able to see the history of your money, they might choose to not do business with you on account of something they find unsavory (perhaps for moral or even legal reasons) in the historical circulation of that money, even if it pre-dates your possession of those units.


So Bitcoin cannot be laundered because each unit carries with it a transaction history as proof of its worth? (i.e. that it has been successfully traded for this, that and the other thing since being mined, and one of those things happens to be illicit then that doesn't go away)

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Re: What makes a good currency?

Tips: 0.00 INK Postby Remæus on Wed Jan 04, 2017 8:00 pm

Bitcoin can be laundered, but only as far as you can separate an identity or a use-case from the actual transactions. Nothing about how the transaction is recorded in the blockchain contains a reason for the use, only that it was being used at a particular time by a particular identity (a public key, usually). Many systems capture personal information for legal reasons, but this is not part of the Bitcoin protocol.

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Re: What makes a good currency?

Tips: 0.00 INK Postby Adellesigmund on Tue May 22, 2018 5:15 am

Thanks a lot

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Re: What makes a good currency?

Tips: 0.00 INK Postby hoolahoop on Mon Oct 29, 2018 1:59 pm

Thank you! Appreciate alot!

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