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"Solo un necio confunde valor y precio" (Only a fool mistakes value for price - Spanish proverb)
This is a topic that generates quite some interesting discussions between a group of Telegram friends. How we met is quite an interesting story. We've been in touch for over 15 years, over a series of communication channels (starting with following each others' blogs, on to Twitter, and now in a Telegram channel hosted by one of them) but - we've never met in person! Note to self - write an article on this, but another day. Today it's about stable currencies, everyday economy and crypto.
So I've been rapping my Telegram friends about BCH, how its main philosophy is to be real money for real, day to day economic transactions more than just being a store of value or even a cult like some BTC guys seem to behave. Most of us in the channel have read NN Taleb's Incerto and are following his latest Twitter rant about Bitcoin. Basically the famous Lebanese author claims that without a governing body that controls its huge sways in valuation (against fiat), it's just impossible to use it as currency, and the fact that the minting of Bitcoin has a hard limit on 21 million units is an unsurmountable handicap.
On the other hand, every article on Dogecoin states that due to the fact that there is no limit in the supply of coins there, the currency in inherently inflationary and that it will never be a good store of value.
So, on one side we have 21st century Dutch tulips (highly valued -perception- but without great inherent value -substance-), also not really usable because of the technicalities we all know and also because, who will buy something with BCH -let's say a Tesla- when it's possible that the day after tomorrow with the same amount of coins you can buy two of them? Or not even a bag of apples? That would be Bitcoin. On the other we have the situation painfully known for citizens of countries where government fixes liquidity by printing more money (quantitative easing): their money devaluates so quickly that they better swap it for something useful as soon as it's in their hands, making devaluation of the currency even steeper: Dogecoin.
Where does BCH stand?
We are all very happy about the current valuation of BCH. It recently surpassed the US $1000 mark and look where it's at right now. From the time I got my first BCH (thus qualifying for the #1BCHClub!) if I think of it in fiat my money has tripled! This is great when you want your crypto to be a store of value, but - will I dare pay a pizza with BCH when there's always this thought at the back of my mind that if I hold it then I can buy 2, 4, 8, 16, 1000 pizzas with what I paid for one?
My point is: sudden rise in its value makes it psychologically harder to use BCH to pay your day to day consumption. Even if the tools have excellent usability, fees are in the dollar cents range and transactions are almost instantaneous.
Dual scenarios, where people use both fiat and BCH, will always present this problem. Am I better off using BCH as a savings account of sorts and using fiat for my day to day transactions? The answer to this question is YES if the fiat currency we are talking about is stable enough and BCH price increases steadily against it.
If your national currency is not stable, and is in fact devaluating fast (Venezuela, South Sudan), you're better off swapping your bolívares for something stable as soon as you get them. In the recent past this would have meant a de facto dollarization of the economy, and a regression to bartering as main means of small commerce. Currently, for technologically savvy people, swapping bolívares for BCH and living your life in BCH could be frictionless, providing enough merchants are onboard so that you can actually buy the stuff you need, and that the price of BCH is stable.
Which brings me to the Spanish proverb above: How much is BCH worth? It does have practical value, like a can of tuna has (as a source of nutrition the latter, as a means of exchanging goods and services the former) but if price (how many dollars to get a coin) exceeds its value (what it really is worth), its days as real currency are counted.
If you've reached this far, I would love to hear your comments!