I don't agree. Gresham's law is originally about the commodity value of the currencies, but I'd argue that limiting its application to currencies with commodity value is too narrow.

More generally, Gresham's Law says that the currency which is perceived to be undervalued by the market won't circulate because people would rather hold onto it. In this instance, most Bitcoin hodlers perceive Bitcoin to be undervalued by the market and thus prefer to spend fiat while holding bitcoin.

I think it's a proper application of Gresham's Law to explain why Bitcoin circulation is low, but I don't think it's the only explanation for why circulation is low.

Hans-Hermann Hoppe disagrees :) Excerpt from the Gresham's Law Wikipedia article that you linked:

Austrian economist Hans-Hermann Hoppe said that "so-called Gresham's law" only applies under certain conditions, largely a result of governmental interventionist policies. In his 2021 book, Economy, Society, and History Hoppe states:

You might have heard about the so-called Gresham's law, which states that bad money drives out good money, but this law only holds if there are price controls in effect, only if the exchange ratios of different monies are fixed and no longer reflect market forces. Is it the case that bad money drives out good money under normal circumstances without any interference? No, for money holds to exactly the same law that holds for every other good. Good goods drive out bad goods. Good money drives out bad money, so this bezant was for something like 800 years considered to be the best money available and was preferred by merchants from India to Rome to the Baltic Sea.

Even though contemporary currencies are not backed by nor made of precious metals I can think of a similar real-life situation to the one you described in the blogpost: when one fiat currency pegs to another and then (hyper)inflates away (e.g. the Argentinian peso in 2001).

If Gresham's law only applies to money with differences in face value and commodity value, perhaps we need another law to describe what happens with bitcoin?

I think some people interpret bitcoin's "commodity" value as, effectively, infinity and its face value as the exchange rate.

Do you disagree that Gresham's Law at least applies in spirit here? If not, is there a concept in economics that describes people not spending hard money when they can spend easy money?

P.S. Your blog looks awesome. Do you have RSS setup for it? Also, where are these 3D printed maps you list in your interests?

Whether we called it Gresham's law or not it's a similar outcome. People that understand the difference will spend their bad money and hold onto the good money.

yeeeessss indeed. #738907

People in this coiny fantasy land are not stupid — they know that the gold content is what matters. At some point, someone will realize the bad coins don't have as much gold as they claim and will develop a preference for the good ones. So, if I'm John the Blacksmith and I want to buy some iron, and I have a stash of coins — some good, some bad — I would rather keep the good coins and spend the bad coins. Why? Because I want to keep as much gold as possible, of course.

Does this apply to people spending fiat instead of sats?

So, if I'm John the Blacksmith and I want to buy some iron, and I have a stash of coins — some good, some bad — I would rather keep the good coins and spend the bad coins. Why? Because I want to keep as much gold as possible, of course.

Here again. If everyone would rather spend the bad coins and keep the good ones, doesn't this gives the bad coins a chance of being superior over the good ones in circulation?

I mean this is interesting.