Claim — Bitcoin is better than Dollars / Yen / Euros / [your fiat currency].

Reality — Not as a currency, no. Some stable coins probably are.

Bitcoin, and most alt-coins, are poor currencies. This is because currencies, contrary to much popular believe, aren’t actually supposed to hold value. Currencies have two real functions:

A. Provide an abstraction of value, so we don’t have to rely on the barter system.

B. Encourage people to spend said currency so the economy functions.

Bitcoin et al. fail on part B. One of the reasons we decoupled from the gold standard is that gold’s value substantially increases and decreases over time. This makes people hold gold when they think it’s going to go up, and spend or sell it when they think it’s going to go down. When money is tied to the gold standard, it functions as a proxy, and the same behavior applies. The net outcome of this is that if people think money is going to significantly appreciate, they don’t spend it, and when they don’t spend it, the economy crashes. To solve this problem, most central banks have a target inflation rate. It’s usually in the range of 1–3%. It ensures that money functions as a relatively stable store of value, but that the value declines steadily over time. This encourages spending and investment. If one believes the claims of crypto-cheerleaders, whatevercoin is a great investment. When pressed as to why it’s a great investment, they tend to point out how it’s going to replace money. But both can’t really be true, because if it’s a good investment (and it may well be, see the investment claim for more detail on why), it’s a crappy currency, and if it’s a good currency, it’s a crappy investment. Stable coins are an attempt to solve this problem, some of which are tied directly to a country’s currency. Stable coins function perfectly well as money, but for most of the developed world, they hold little advantage over fiat currency as they basically are the same thing with added complexity. But advantages are relative, and in developing markets where there’s significant inflation or high depreciation, being able to transact in *any* stable currency is superior to the alternative, and crypto provides a way to do so without exchanging physical Dollars / Euros / Yen. Bitcoin is thus a poor currency for everyone, but for the developing world, the relative stability of asset backed (stable) coins and the ease with which they can be exchanged do have significant advantages. I’ll go into those in the payments claim below.