Using cash has multiple advantages:
- It's light and thus portable. You can easily walk around with a few thousand dollars
- It's highly divisible. Easily pay someone $1, $5 or $500
- It's anonymous. Nothing can be traced to anyone using it
- It doesn't require electricity
- It doesn't require a data connection
- It's self verifiable i.e. doesn't require a third party, on an operative level
- There's zero transaction cost
Overall, when infrastructure is stressed, e.g. when natural disasters such as floods hit, and transactions need to be completed, people first choice for medium of exchange is banknotes. Specifically for the above reasons (except #3). Anyone who experienced hurricane Sandy can attest to this.
Bitcoin, though it does share most of the above advantages, doesn't fulfill the two crucial features, #s 4 and 5. Regardless of whether or not infrastructure is stressed and physical means rule, sometimes it's just more convenient to walk around with a few bills to make small payments.
Do any of you envision a role for physical notes in a world in which, say, Bitcoin and precious metals dominate? (It's important to point out that rectangular gold leafs [a fraction of a mm thick] are not practical simply due to gold's physical properties [maybe more practical with silver but not likely].) Or will we all be walking around with digital devices and/or gold and silver coins to make payments?
In disaster situations like that, money is hardly of any use, since people trade in kind—swapping a chicken for medicine, water for medicine, or clothes for food, and so on; that is exactly what is happening in Venezuela right now.
I would have said that cash would be with us for a long lingering time, not much used, hanging on anyway -- but since Covid it seems like cash has taken a nose-dive. Whether the world relies on bitcoin and gold or fiat, the trend seems to be away from cash. All the advantages you identify are real, yet I think developed nations won't have cash ten years from now.
I don't disagree with you, but no developed nation has had its infrastructure put out of commission for long enough to render electronic means unusable for us to test this trend. All it will take is one hurricane Sandy type of event in a major Western metropolis for us to see how people buy and sell stuff in such a situation. Not that I look forward to it - I simply like cash in many situations because it's just so simple 🤷♂️
yes, you make a good point. But how long a lack of major infrastructure downtime in the developed world is necessary for the short-term thinking public to simply lose the habit of cash?
The memory of the public seems short. I definitely see people happily abandoning cash for card and phone payments. I suspect most people in the developed world feel almost naked without their phone somewhere near their person. That incredibly strong emotional feeling was created in roughly fifteen years. We could easily forget cash in such a timespan.
Just yesterday, my wife was downtown, and for some reason, her phone wasn't picking up the cellular network; when she went to pay, she couldn't manage it at all... she was literally left "naked" without her phone. Luckily, she had some cash on her—money that, according to her, had been sitting there for three years, ever since we first arrived in Brazil and didn't have bank accounts yet.
I think we've reached the point where normies are so accustomed to using electronics to pay for everything that the habit is lost for a good portion of society. So yes, definitely many people have been conditioned to live digitally. Hence I mentioned a natural disaster scenario as a reminder of the strong utility of cash.
With that said, there are segments of society, typically "working class", that have strong intuition to preserve cash usage. It seems like many even insist on using it out of ideology, as a "dumb" way to retain some type of self sovereignty.
Until the world is optimized for digital payments, my favorite use case for cash is being able to leave money on the table and not have to wait for the check (or your card back)
I remember a good discussion about this awhile ago. Because of the properties you outline, I wonder if there will be some form of cash that can ultimately settle on-chain.
If not, I don't see cash being stable in a bitcoin standard society, because it wouldn't have a stable relationship with existing prices.
That would be marvelous but I don't think it's technically possible unless we'd be able to embed a nano electronic component in a bill. That seems like a long way off but if you'd have a solar powered banknote that would have an embedded broadcasting mechanism built in, then it might be a possibility. I'm no electrical engineer so I might be hallucinating but fun to think about...
Like I mentioned, cash is the most convenient medium in many everyday situations so I can't envision at least some parts of society fervently holding on to the tradition of cash. For some people it's even a type of political statement the same way using Bitcoin is...
I suspect it would have to be some sort of note that's redeemable in bitcoin, similar to gold and silver notes of yore.
If there's a technological solution that removes the counterfeit and issuer risks, that would be amazing, but I also can't think of how it would work.