RE: Can an economy function on a social platform?
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Fiat currencies have value because they are legal tender, which means that:
Taxes and fees must be paid in them.
If one must accept them as repayment of debt.
Entities with accounting obligation must do their accounting in them.
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Who gives them that value?
Legal Tender by definition is a centralized authority, and while that is the way it has been for a very long time, it hasn't always been that way, and doesn't actually have to be that way forever going forward. Things change - whether it is within my lifetime or not.
Those who are forced to pay their taxes in them and accept them as repayment of debt, which is just about everyone.
Money as three basic functions, which are 1) medium of exchange, 2) measure of value and 3) store of value. The strongest fiat currencies such as the dollar and the euro work well as mediums of exchange and measures of value but they're poor stores of value. Bitcoin is an emerging asset that addresses the need to have a store of value. Bitcoin's greatest strength is that it is incorruptible because of its decentralized nature.
Gold is another but a friend of mine who had bought physical gold told me he could not get it cheaper than with a 4% markup from anywhere. He had his bullion mailed to him from England. The package was tracked an insured but having to wait for gold in the mail for days must be nerve-racking.
STEEM is a utility coin valuable on the Steem blockchain because it is needed to transact on it.
The "forced" part is the weakness as the emerging trend is to subvert force and there is now a technological possibility to do so. In the past, the immobility of economy and assets made the centralization and force easy. Digital currency moves with ease and changes the game and in time, can replace central currencies through usage, which replaces the utility of money as all three of those points, including a store of value.
If you get a parking ticket, there is no way to escape it and if the authorities want you to pay the fine in euros, you will do so. There is no choice. Also, your income tax must be paid in euros. You can try convincing the tax authorities otherwise but I can guarantee you it won't work. Also, you might want the authorities to help collect a debt, for instance, if a tenant of yours refuses to pay for their rent. If you refuse to accept euros, they won't help you. That is what legal tender means.
Bitcoin is the most valuable thing the cryptocurrency space can possibly offer. It doesn't need to scale (at least on chain) and its lack of administration is a vital feature. Bitcoin's key value propositions are 1) its monetary policy set in stone and extremely resistant to change and 2) the uncensorability of transfers on its network. It has potential become the ultimate store of value to be hoarded by central banks one central banks have ruined all major currencies by printing too much of them - they have no choice right now.
I believe that if the space fulfills on its promises Bitcoin will reign supreme as the ultimate measure and store of value. Various types of centralized or decentralized ledgers will be used to transfer it off-chain to be settled only in large batches on chain.
The success of coins like STEEM will depend on the value created by the network.
In 1990, it wasn't possible to stream 4k video either. Things change.
With NZ passing laws for salaries to be paid in crypto last year, I am guessing they also have to build gateways to use that crypto. Just because the possibility doesn't exist today, it doesn't mean it won't tomorrow and with each step, the value proposition of centralized currencies falls and becomes increasingly unstable - dropping the value further.