El Salvador abandons Bitcoin as legal tender

Didn’t we learn back in the 1500s that asset-backed currencies are unsustainable? Bitcoin will never, ever be able to take the place of a fiat currency because it carries with it many of the same problems as Spanish silver the conquistadors were traveling all the way to SOUTH AMERICA to mine half a millennium ago. It was essentially a very difficult proof of work. The only real advantage bitcoin has is that it’s easy to carry.

Even when the entire world started selling off their gold to the US in the 30s and 40s it became obvious by the 70s that there wasn’t enough gold mining capacity on earth to sustain a global asset-backed currency.

So the modern version of traversing the world for silver would be energy used to mine? Like hypothetically the US building tons of nuclear power plants to "win" at mining? Of course that wouldn't add to the supply of bitcoin (harder than silver), so I'm not convinced your analogy stands. I don't know much about 16th century history, so I'm not trying to be too snarky.

You might think about the long game where no more bitcoin is issued and only transaction fees are awarded to the miners. How much energy will bitcoin consume then? There will be an equilibrium somewhere between energy prices and transaction fees.

I'm not even saying we should abolish fiat currency, or that the USD has to be fully backed by a hard asset. Individuals will hold whatever asset/currency/whatever they think will be the best choice for them.

The point is that the money supply needs to increase at or near the pace of the economy or we end up with a currency shortage, and bitcoin being harder to mine would prove that point faster than silver ever did.

Thanks for clarifying!

Although I don't think I agree. Wouldn't a currency shortage be another way to say deflation? If your economy is producing more value than your currency represents, then your currency is more valuable.

I have also heard people say deflationary currencies inevitably lead to a catastrophic spiral where liquidity dries up because no one wants to spend (or loan) today what can be more valuable tomorrow. There's even a page on the Bitcoin wiki about it that has been there since 2010.

Also, a quick google brings me to the "Price revolution" page on Wikipedia (https://en.wikipedia.org/wiki/Price_revolution) where it says: "Generally it is thought that this high inflation was caused by the large influx of gold and silver from the Spanish treasure fleet from the New World; including Mexico, Peru, Bolivia and the rest of the Spanish Empire."

In the end... I don't really know. I appreciate you sharing your thoughts.