Debate: Will Crypto Overtake Fiat as the Preferred Medium of Exchange?
Everywhere you look, from Asia to Europe to the U.S., there are signs that cryptocurrencies and the blockchain are making their way into the mainstream. Never was that truer than July at the Soho Forum in New York when two executives from different worlds — decentralized and centralized finance — sparred on the future of bitcoin.
The gloves were off for Erik Voorhees, who is at the helm of cryptocurrency exchange ShapeShift, and Peter Schiff, the founder of Euro Pacific Capital. The debate resolution is below, for which Voorhees argued the affirmative and Schiff, author of Crash Proof 2.0 who recently criticized CNBC for only putting crypto bulls on the air, took the negative position.
“Bitcoin, or a similar form of cryptocurrency, will eventually replace governments’ fiat money as the preferred medium of exchange.”
Voorhees broke his position down into four key points:
- Bitcoin is good money
Voorhees pointed to some of bitcoin’s features, such as it’s fungible, divisible, portable and scarce. He went on to point to the limited supply of 21 million coins, adding that he could tell you the precise number there will be tomorrow and next year. “Let’s see any central bank attempt such a feat,” said Voorhees. A critical attribute of bitcoin is its programmable nature, through which it can be programmed for economic activity.
- Fiat is bad money
Voorhees didn’t hold back, calling fiat money an “absolute scam” and “inappropriate for an ethical market-based society.” How can you have a free market, he argued, when the most important good is centrally controlled?
He went on to discredit the durability of fiat, saying if you want to know how durable it is, ask the citizens of Argentina.
In addition, an international wire transfer is impossible to do after 5 p.m. or on a Sunday. At best, the transaction will take 3-5 days. “Indeed it’s faster to strap cash to an anvil and FedEx it to Tokyo than it is to send an international wire. Do you really think that that system is going to outcompete bitcoin in an open marketplace?”
- Gold is insufficient
Despite the fact that Voorhees owns and like gold, and gave a nod to Schiff for teaching the public about the precious metal, transacting in gold is inconvenient. Voorhees used the example of trying to make payment in a strip club with bullion, trying to make payroll or change for a pizza.
- Bitcoin will win
Bitcoin already won “because there is now competition in money,” exclaimed Voorhees.
Schiff was quick to warn the audience not to confuse the financial success of early bitcoin investors with whether or not the leading cryptocurrency by market cap will ultimately succeed and replace fiat. Incidentally, Schiff and Voorhees were on the same page that the fiat system will ultimately fail. But where the road divides is that Schiff doesn’t believe the answer is bitcoin (or any cryptocurrency for that matter) while Voorhees does.
At first, it was hard to tell that Schiff was there to tear bitcoin apart, as he was pointing to all of its strengths such as its ability to replicate gold. But once he declared the No. 1 cryptocurrency to be fool’s gold, it was apparent what side of the aisle he was on.
“Bitcoin is replicating all of the properties of gold except the most important one. And that’s the gold itself, the element, the rare, scarce element that has been valued as a commodity for thousands of years,” Schiff argued.
According to Schiff, other than being used for transactions, bitcoin has no real value as a commodity. It’s true that bitcoin’s worth is dependent on what the cryptocurrency community places on it. But Schiff argued that one of the reasons bitcoin is nothing is because it doesn’t have a history like gold, which seems a bit shortsighted for tech innovation whose very existence is dependent on taking chances.
An interesting point from Schiff was the bitcoin scarcity factor. He said it was self-imposed and not accurate, as bitcoin could be forked off as many times as the community wants, pointing to altcoins like Bitcoin Cash and Bitcoin Gold. Unlike bitcoin, “there’s only one gold, there will never be another gold,” he argued.
The primary reason why bitcoin can’t overtake fiat, according to Schiff, is that it’s not a reliable store of value, as a result of which “it can’t be money.” He argued about the volatility in the bitcoin price to make his point, saying: “You have no idea what bitcoin will be worth hour to hour, let alone day to day or year to year.”
All is well that ends well. In the end, the two shared a drink and the ShapeShift chief even helped Schiff with his very first bitcoin transaction.
Me, and @niccary of https://t.co/UUtUSZRsX1 helping @PeterSchiff with his first Bitcoin transaction ever. Had a great time at the debate tonight. Peter was reasonable and curious, and it was an honor and privilege to share the stage this evening. pic.twitter.com/nvqObI2qMB
— Erik Voorhees (@ErikVoorhees) July 3, 2018
While the event was held in New York, ShapeShift doesn’t operate in the state amid cumbersome regulation.
The debate video can be accessed in full here.
Featured image courtesy of Shutterstock