Indeed! "Render unto Caesar what is his." People also seem to forget that the singular reason for any national currency having any representation of value, or the measure there of, is taxation. Without taxation, the digital blips on the computer screen will become worthless. The reason for merchants accepting a national currency is because the government accepts these currencies for taxation purposes.
The crypto-fiends sometimes forget that without the ability to exchange cryptocurrencies for a national currency, the cryptocurrencies become an dd curiosity at best. Recently, the crypto-markets experienced this harsh reality, when China prohibited free exchange of crypto-coins to Yuan. While the West forgot the first rule of governance (control the courts and coin) the East rules with an iron fist.
Great post the IRS left an interesting note in their notice 2014-21. It is "convertible virtual currency" which can somehow get back to USD fiat that is taxed. A crypto currency perhaps could be designed to fall outside the definition of taxed property, but then people would have no way to cash out and become millionaires in the Fiat world. How about them apples.
Arguably, a national currency that is backed by a precious metal has some value aside from taxation. But any backing other than "the currency is literally made of the stuff" relies on the government ordering the gold (or whatever) window to exist. If the government snaps its mighty fingers--then it's purely taxation and legal tender laws.
It is quite interesting how so many still believe in the traditions regarding gold and silver. Even the term, "precious metals" indicate this faith, maybe the Faith, in these worthless metals. Historically, the king of Lydia used gold alloy coins, that were readily available in his region, as means of exchange. He convinced his subjects to accept the coins by accepting taxes only with the coins. For whatever reason, the trend was mimicked by other states. Gold has no intrinsic value, as it is functionally useless. Only by sheer intransigence of tradition, do people still hold to these as currency.
All money is "made up." The belief in the system gives value to currency.
I suppose here we see the difference between natural and artificial wealth.
Natural wealth, such as trees, cars, fancy paper, and gold, is valuable because you can do something with it. For example, make shiny jewelry from gold, or drive a car around. Every form of currency aside from digital blips (as you put it) has some physical value, however little.
But artificial wealth, dollars, bonds, contracts, etc, is created sheerly by human whim, and rises or falls in value based on that whim. The government's whim, in the case of money, is absolute, most directly because of taxation.
Wealth is an extension of a man's emotional state, fluctuating with circumstance and desire. Indeed, men are blessed with the resources of this globe, but like the desert nomad who believes two jugs of water more valuable than a lake, we impoverish ourselves via arbitrary quantification and divisions.