The rand as we know it will eventually disappear

Economist Dawie Roodt on the argument for private currencies replacing failing fiat currencies.

History teaches us that the same will happen to the US dollar and pound sterling. There’s a good case to be made for private monies like bitcoin as a replacement for failing fiat currencies, argues economist Dawie Roodt.

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lol

Did you listen to the podcast Hachmet? My view is that it was interesting and informative. Dawie is often radical in his forward thinking, but he backs it up with sound reasoning. Of course he may be very wrong, but I enjoyed the discussion.

Let’s just look at the facts, crypto lacks the capacity to perform enough transactions per second to be widely used as a currency. This is not taking into account high volume instances like “Black Friday” or payroll runs at the end of every week or month when current systems take strain, and current systems can perform ten times the number of transactions than cryptos. The theoretical limit of transactions per second is coded into the blockchain in terms of the size of the blocks and the ability of the network to process them. If you think that current crypto’s can be changed to up the rate of transactions, I will gladly remind you of what happened with Bitcoin Cash.

Fake news – There ARE actual solutions to scale a blockchain like bitcoin e.g. Liquid, lightning network, side chains, etc…

You just proved my point Quarkiee87. The solution to Bitcoin’s transaction speed problem is to transfer your Bitcoin onto an entirely different blockchain L-BTC and use that instead of the original Bitcoin network. If the whole point of blockchain is so that you can have the ledgers, why would I move Bitcoin onto a different platform just to do what Bitcoin was supposed to do in the first place?

Earlier this year Bitcoin reached 400,000 transactions per day. Just the US does just in credit cards (so not counting electronic settlement such as EFT) 6000 per second vs 5 per second bitcoin. In much of the world, electronic payments is less than 25% of total transactions.

If you added non credit card and physical cash transactions and the rest of the world, bitcoin transaction processing speed would need to scale a million times in speed and given the kWh required per transaction also figure in probably Europe’s total power generation capacity (and its cost). Also find more computing power than existed ever. Dedicated to what? Anonymous transacting?

You would also need to figure how those 75% of transactions that are not electronic are going to work in a crypto world.

Not going to happen. All else aside I prefer a world where traceability exists. If you don’t, hoard diamonds and gold.

Please don’t come here with factually accurate comments, pointing out the very real and insurmountable facts about the fundamental problem with blockchain. The crypto shills, like pyramid scheme members, don’t want to hear.

Not true. Research the capacity of Hbar and rethink your statement on speed and capacity.

All these doomsayers on crypto

I wonder if any of them have travelled the far east, such as Vietnam to see everyday purchases made with crypto

Evolution will speed up transactions, like cards did over dollar bills

I wasn’t expecting Dawie to say this. (..perhaps he’s been offered a glass of whisky prior the interview? 😉

The biggest threat to the Rand is not from crypto, but rather from WHO will replace Cyril Ramaphosa after his term expires?

The possibility of rule by the Magashule/Zuma’s RET faction is by far the real threat to the Rand (and the whole economy!)

indeed. So if we have a currency crisis again (we’ve already had at least 2), then to what will everyone convert to? It used to be the USD and was the case for Zim, Nigeria and Venezuela. It just depends whether you believe a USD is a better store of value than a BTC. I suspect cash USD will still win for a bit since you need a phone for crypto.

Crypto won’t be an effective hedge against hyperinflation because the capital gains in rand terms will be taxed. Crypto is regulated as a commodity in the USA and as a financial instrument in South Africa. You leave a paper trail when you buy crypto now. There is nowhere to hide from the taxman. The same is valid for gold if you own gold as a financial instrument, and not under the mattress. That is why people buy dollars on the black market in countries that experience hyperinflation.

To quote Dawie – “fiat currency debt is a derivative of a derivative”. It is the same as a bounced cheque in other words.

Another point – bitcoin can never rival fiat simply because crypto does not have a lender of last resort. The Reserve Bank stands ready to rescue the fractional reserve banking system in case of a banking crisis. There is nobody to support a fractional reserve system in crypto, and if there were, crypto would be exactly the same as fiat.

Crypto can only be a store of wealth and an alternative unit of account if it follows a 100% reserve ratio without a fractional reserve banking system. Now Dawie feels that a fractional reserve system is needed to enable crypto to become an alternative to fiat! This simply means that crypto will never rival fiat unless the formal financial system implodes, but then there won’t be any electricity or internet to gain access to your online wallet anyway.

The doomsday scenario that supports the debate for crypto as an alternative currency also delivers the biggest threat to crypto.

As a libertarian, like Dawie, I support the idea of free money and free banking. I also believe in the right of independent institutions to issue currency. The problem is that we have governments and politicians and politicians depend on fiat currencies and the fractional reserve system to bribe voters with their own money.

The fact that the majority of voters are ignorant and naive fools, is the only “backing” and reason for the existence of fiat currencies. That brings us to the point – the majority of voters do not want crypto. They will ban it like they banned the private use of gold in the USA, under Executive Order 6102 in 1933.

Agree with Sensei. BTC which ironically enough is seen by the masses as a way to circumvent government oversight, is actually being used by governments to introduce their own digital currencies. They will not let control of currencies be ceded to the private sector and are only tolerating this as the “great unwashed” are conditioned to use digital currencies before its outlawed. You will be offered an abysmal conversion ratio to the official digital currency……Good luck dodging taxes from that day forth. …. every Govts dream to be able to track ALL transactions.

Take the current fiscal stimulus project in the USA for instance. People praise Biden for the cheques they recieve from the government. They do not realise that they will lose more in purchasing power per year, over the next decade, that the value of that cheque. The payout from government is way to stimulate the economy and save the banking system with the purchasing power of citizens. It is a devaluation of the dollar.

How wonderfully sophisticated, but morally corrupt is this mechanism? The government sends a cheque to voters to hide the fact that they are actually stealing from them!

This will not be possible under a 100% reserve crypto regime. Therefore, the ignorant voters will never support a crypto system. The voters will always support a system that steals from them as long as it is sold as a quest fir social justice and material equality.

@sensei – although every currency is eventually replaced by something stronger throughout history. People always move to something they think is better. Reichmark to gold, Zim Dollar/Ven Bolivar to US dollar, and USD needs to go to something eventually. I’m just curious what it’ll be, because it hasn’t been gold and I don’t see the US government letting it be BTC.

Despite the voters not wanting it, we might see people having to move to private money because of speculative attacks. There should be a few sovereign nations who’s money will become worthless in coming years. Will be interesting to see where they go, and whether governments have enough force of arms to keep citizens in line.

The dream of the new money totalitarians is a global control of things which responds instantly to their every whim so as to bring them the profits and everyone else the costs.
Of course it has to be digital. Its the only way to enslave and control.

The cryptos as they are now are WAY to expensive to produce and transact.

Before money as we know it, there was barter. I’ll swap you six of my eggs for a gallon of your milk. In concept, whether you call them clams or pebbles, economies need a common denominated value token. Money is just simpler. A dollar is worth six eggs, or a gallon of milk, or whatever else.

It costs more than six eggs to validate a crypto-settled transaction for six eggs.

CRYPTO vs ANC’s (Wealth destruction)?

Has to be CRYPTO.

Like the whiskey comment it makes the mind more creative.

Crypto currencies were not created by governments, thus they can be made illegal at any time.

If either the US or China alone disallow it, it will tumble.

It is like people doing business in the dark net.

Yes, everything will in theory eventually disappear, the Dollar also in maybe fifty or a hundred years.

More than 4000 different cryptos in circulation. If only there was one and that too regulated. Crypto exchanges come and go and the scamsters get rich of fees and the hackers of crypto.

For this to happen Government will need to surrender control of their currencies …..ours can’t even accept competition to Eskom ! Long time before this happens .

As candles have replaced electric lights so will goats and chickens replace the Rand. Any technology needs infrastructure and infrastructure does not really do all that well in Africa. I see your optimism and raise you reality.

“I see your optimism and raise you reality”
Best comment on Moneyweb for ages – applicable to so much in our country.

Morse. The forerunner of bitcoin. The first was a huge success. The Titanic used it to inform the public and owners. Otherwise that ship will have go down in history the ghost way. Bitcoin is used the same way. To inform the public. Your government use the tactic of bitcoin to make the fatherland rich beyond dreams. Adding on zero,s software wise. Any civil servant can master it. Times will come that bread, one loaf, will be more of value as all the digit coins in the world.

End of comments.

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