# Bitcoin is not like gold



## Brendan Burgess

cremeegg said:


> It is much closer to speculating in gold than betting on horses.




Buying bitcoin has really very little in common with investing in gold.


Gold has an intrinsic value - bitcoin has none
Gold is difficult to value - it's hard to justify $1,300 per oz. But Bitcoin is easy to value - it's worthless 

Gold is a naturally occurring metal - bitcoin is artificially created 

Gold has been in demand for thousands of years - bitcoin has been around for a few years - 4 or 5?
I am not a fan of gold, but in the event of WW III, I would prefer to have gold than Bitcoin.

Brendan


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## cremeegg

Brendan Burgess said:


> Buying bitcoin has really very little in common with investing in gold.
> 
> 
> Gold has an intrinsic value - bitcoin has none


Go on I will rise to the bait. What intrinsic value does gold have.




Brendan Burgess said:


> Gold is difficult to value - it's hard to justify $1,300 per oz. But Bitcoin is easy to value - it's worthless



Bit coin probably is worthless, as there is no limit to the number of competing currencies that may be created. However if it becomes widely accepted then it will continue to have a resale value. Just like gold really.





Brendan Burgess said:


> Gold is a naturally occurring metal - bitcoin is artificially created



True, and this favours gold how?




Brendan Burgess said:


> Gold has been in demand for thousands of years - bitcoin has been around for a few years - 4 or 5?



True again, but so what, if people come to trust bitcoin.




Brendan Burgess said:


> I am not a fan of gold, but in the event of WW III, I would prefer to have gold than Bitcoin.



If things get really bad a bag of spuds will be worth more than either.


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## Brendan Burgess

cremeegg said:


> Go on I will rise to the bait. What intrinsic value does gold have.



Gold has been valued by people as an ornamental object for thousands of years.  They have been prepared to pay more for it than for iron and than for bronze.  They like wearing it. 

It's a little like art in this respect  - it has a real value. 

Hard to value and it may well be overvalued but it has a base value of something.

Brendan


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## Mrs Vimes

Brendan Burgess said:


> Gold has been valued by people as an ornamental object for thousands of years.  They have been prepared to pay more for it than for iron and than for bronze.  They like wearing it.
> 
> It's a little like art in this respect  - it has a real value.
> 
> Hard to value and it may well be overvalued but it has a base value of something.
> 
> Brendan



Gold is used extensively in electronic goods - it is a highly efficient conductor and does not corrode.


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## MrEarl

Mrs Vimes said:


> Gold is used extensively in electronic goods - it is a highly efficient conductor and does not corrode.



That is a very good point.

However, Bitcoin is a payment method use for some regular transactions and has the potential to continue to develop in that manner and become a globally accepted payment method ?


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## Brendan Burgess

MrEarl said:


> Bitcoin is a payment method use for some regular transactions and has the potential to continue to develop in that manner and become a globally accepted payment method ?



Hi Mr Earl

But so are cheques. And the cheques themselves have no intrinsic value. That is the point that people are missing. Bitcoin might be a useful payment method, but that doesn't confer any value on it.

Brendan


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## Brendan Burgess

From a thread on gold



landlord said:


> I also have a significant crypto holding (digital gold) as I do not know which will prevail in the event of geopolitical/financial meltdown.



This is good example of the complete abandonment of reason during a bubble. Describing bitcoin as "digital gold".

Brendan


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## MrEarl

Hello Mr. Burgess,

"Fools Gold" may be a little more accurate, given the original meaning of the phrase (and not intending to insult anyone).

https://www.phrases.org.uk/meanings/140000.html


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## Brendan Burgess

MrEarl said:


> "Fools Gold"



Brilliant!

You are some tulip!

Brendan


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## Gordon Gekko

My tuppence worth...

Bitcoin is a ludicrous investment and analagous to tulips in a historical context.

That’s not to say that there’s not money to be made on the way up, but it will all end in tears without a shadow of a doubt.

Its true value lies in the fact that it faciliates crime and terrorism and (for now) circumvents regulatory stuff like FATCA and CRS. But that will come.

Caveat emptor x 1,000...this won’t end well. And now the proverbial shoe shine boys are talking about it! It’s textbook stuff!!!

Having said that, I am also a sceptic with regard to certain characteristics that gold is said to have; the idea of it being a hedge against some doomsday scenario? Gold bars are unlikely to be much use against the rape gangs and marauding barbarians with baseball bats!


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## Steven Barrett

Gordon Gekko said:


> Having said that, I am also a sceptic with regard to certain characteristics that gold is said to have; the idea of it being a hedge against some doomsday scenario? Gold bars are unlikely to be much use against the rape gangs and marauding barbarians with baseball bats!



But you'll be able to bribe the gangs with your gold bars (if you know where they are held and can access them), while my Disney stock will be nothing but a memory. 


People ploughing their money into a "currency" that is completely unregulated is a crazy investment strategy. Who oversees bitcoin? Some people off the internet? Good luck with that. 


Steven
www.bluewaterfp.ie


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## Protocol

Bitcoin isn't really a currency, as it's not a widely used medium of exchange.

You could call it an asset, maybe, but typically an asset produces some form of income.


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## fpalb

SBarrett said:


> Who oversees bitcoin? Some people off the internet? Good luck with that.



Bitcoin doesn't need overseers because it's public. Anyone can analyse the blockchain to confirm that all transactions trace back to fairly mined bitcoins, and anyone can check the work the miners did to ensure any bitcoins were fairly mined. You can browse the blockchain yourself here https://blockchain.info/ 
Also anyone who wants to can mine. 
The fact that it's an open system that doesn't need gatekeepers or require trust in regulators is one of the main benefits.


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## azerogo

Economist Jim Rickards on gold versus bitcoin - manipulation - bubble

https://youtu.be/-xwqQz4NsyQ


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## Duke of Marmalade

_fpalb _you might have watched the video in #16.

This is a technical question arising from that video.  It concerns mining which I find the most intriguing aspect of the whole scheme.  The video says that BTC mining now consumes more electricity than Nigeria and is on course to consume more than Japan.  This still creates the impression that these massive mining costs are necessary for finding new BTC and for ensuring the integrity of the Blockchain. 
_
ant dee_ answered a previous similar question of mine by saying the main purpose for proof-of-work was to make the Blockchain secure.  But it all seems so artificial to me.  Apparently one of the main reasons for the proliferation of alt coins is simply changing the artificial rules. For example there are some alt cons which target 2.5 minutes settlement time and have no artificial scarcity limit at all.

The proof of work algorithm has got exponentially harder for Bitcoin not to make the Blockchain more secure but simply to target that  10 mins settlement time.  (i understand the need for a settlement time at all is to minimise the possibility of forks but also to control the BTC supply).  When eventually the 21M is reached and the only requirement is to reinforce integrity can the proof of work game not be reset to the baby levels of the early days and thus make great savings in electricity usage?

Still very confused


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## ant dee

Well, the need for security will not decrease after the mining rewards run out. You still need as much hashpower as people find it profitable to add.
If it is not profitable, miners turn off, after 14 days difficulty reduces, then it is profitable again and miners turn on. It a competition really, the more that mine the harder it gets, the less that mine the easier it gets.

One thing on the video, JR said miners will not be allowed to use that much electricity. Allowed by whom? No-one will ask for permission. People already hide miners in countries where it is illegal, like Ukraine, Venezuela. 
I doubt China can control what happens in their remote provinces around their vast lands. Miners set up mining farms on remote coal plants, water dams etc. A lot of the electricity being used is renewable that would otherwise go to waste. That makes it cheap because we know transportation of electricity is hard.
Maybe big mining farms will be targeted but that will open up the space for more small time miners to operate around the globe.
Plus all this crypto-mining makes renewable energy solutions more profitable, because wherever you set up the wind turbine, solar plant, water dam or whatever you can hook some miners and make money.


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## ant dee

Also, JR uses a lot of words like terrorist, criminal, felon, tax evader, manipulation, makes you think is it fear-mongering he is relying on this interview?


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## Brendan Burgess

Summary of the video 

He says:
Bitcoin is the biggest bubble of all time and will fall towards zero.

All markets are open to manipulation, and an unregulated market like Bitcoin, more so.

The amounts of electricity required to mine Bitcoin are huge and unsustainable.

Intrinsic value is meaningless - what matters is subjective value, which is true of Bitcoin and Gold

Subjective Value is based on confidence, it's a liquidity preference - confidence is fragile and once it's lost, it's very hard to regain.

The differences between gold and Bitcoin

Gold has been around a long time. Bitcoin since 2009 

Bitcoin has never weathered a financial crisis or recession - so we don't know how it will perform.
What will bring Bitcoin down is when people make tax returns on the profits they made from Bitcoin. [ not at all convinced by that.]

Brendan


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## Brendan Burgess

Brendan Burgess said:


> The amounts of electricity required to mine Bitcoin are huge and unsustainable.



Bloomberg does not agree

*No, Bitcoin Won't Boil the Oceans*

Still, it’s important to put things in perspective. A recent report suggests that at current prices, Bitcoin miners will consume an estimated 8.27 terawatt-hours per year. That might sound like a lot, but it’s actually less than an eighth of what U.S. data centers use,   and only about 0.21 percent of total U.S. consumption. It also compares favorably to the currencies and commodities that bitcoin could help replace: Global production of cash and coins consumes an estimated 11 terawatt-hours per year, while gold mining burns the equivalent of 132 terawatt-hours. And that doesn’t include armored trucks, bank vaults, security systems and such. So in the right context, bitcoin is positively green.

There seems to be divided opinion 

*Bitcoin Mining Operations Now Use More Energy Than Ireland *


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## fpalb

I like Rickards in general, he's clearly a smart guy and he knows his financial stuff and history.  I agree with some of the things he said, which you have mentioned:

Bitcoin has never weathered a financial crisis or recession - so we don't know how it will perform.
Intrinsic value is meaningless - what matters is subjective value, which is true of Bitcoin and Gold

All markets are open to manipulation, and an unregulated market like Bitcoin, more so
I want to make some comments about the last point though. Firstly, the level of regulation on exchanges varies. Gdax exchange (run by coinbase.com) and Gemini (run by the Winklevoss twins of facebook fame) are both fully above board US based exchanges complying with regulation and with FDIC deposit insurance for dollar deposits, and some crypto insurance too. Concerns that they will run off with your money, or are faking trades etc are pretty far fetched. Of course there are plenty of dodgy exchanges all over the world that you can choose instead, but that's on you if decide to take that risk.

Regardless of trusting the exchanges themselves, he mentions market manipulation and painting the tape. I don't expect the regulated exchanges are doing this as it would be stupid and unnecessary but of course the market has its whales, and they may try to dump the market to get the price down or buy it up to pump it. Ultimately if they trying to push the market against where it's naturally moving they better have deep pockets, as there's only so long you can buy coins for more than they are worth, or sell them for less than they are worth before you lose money. For sure it's a lot of the cause of the short term volatility we see though, so be it.

I just paid my capital gains for the year to-date to November  so count me in as an exception then I guess.

My main gripe though is the mining comments, I fear he doesn't fully understand it. Bitcoin doesn't *require *the current amount of power that is being used for mining, that's just the amount that miners are *choosing to use*. If the figures are correct (they may not be if they are using old power efficiency numbers that are not applicable to the latest hardware, but I haven't looked into it further) then I expect is is unsustainable, which means the least efficient miners will go broke and stop mining. It is also a commonly made claim that bitcoin requires increasing amounts of power, it doesn't, mining power can go down as well as up, the mining difficulty adjusts in both directions so the production rate of coins, and the confirmation of transactions is unaffected by it.

Having said that, obviously the environmental aspect of any significant bitcoin mining is something we would rather avoid. I hope in future we'll figure out an algorithm that avoids the intense work, maybe proof of stake instead will work. In any case it's more likely bitcoin mining figures out a way to run in an environmentally friendly way than gold mining does.


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## Duke of Marmalade

fpalb said:


> I hope in future we'll figure out an algorithm that avoids the intense work.


I feel like screaming  With this statement I have downgraded my understanding of BTC to 1%

I thought the proof-of-work was completely flexible, the difficulty level is adjustable.  If an easier algorithm was used we would need to adjust its difficulty level to get the same result.  I thought the object was to target that it would need 10 mins on average for the whole mining power to add the next block.  It is the combination of the 10 min requirement and the current mining power that determines the electricity usage.  This is independent of the algorithm that got that result, I thought.


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## fpalb

Duke of Marmalade said:


> I feel like screaming  With this statement I have downgraded my understanding of BTC to 1%
> 
> I thought the proof-of-work was completely flexible, the difficulty level is adjustable.  If an easier algorithm was used we would need to adjust its difficulty level to get the same result.


Yes, for the current proof-of-work which is SHA256 hashing, obviously if you change the hashing to some other hashing  algorithm, in theory it will be no different in terms of power usage. The type of change I mentioned was moving away from proof-of-work entirely. This is a drastic change, and I'm not even saying it's likely or that we'll figure out an alternative that works, but it's possible that someone does maybe something like proof-of-stake: https://en.wikipedia.org/wiki/Proof-of-stake

In PoS-based cryptocurrencies the creator of the next block is chosen via various combinations of random selection and wealth or age (i.e. the stake). In contrast, the algorithm of proof-of-work (PoW) based cryptocurrencies (such as bitcoin) rewards participants who solve complicated cryptographical puzzles in order to validate transactions and create new blocks (i.e. mining).​


Duke of Marmalade said:


> I thought the object was to target that it would need 10 mins on average for the whole mining power to add the next block.  It is the combination of the 10 min requirement and the current mining power that determines the electricity usage.  This is independent of the algorithm that got that result, I thought.



Correct as long as the algorithm is also a proof-of-work one


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## Duke of Marmalade

Ok. It seems to me that if you introduce a random selection process considerable flexibility arises.  It could still be a PoW system but set the difficulty at just sufficient to meet the integrity objective and then after 10 mins select the winning miner randomly.


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## Duke of Marmalade

What about the dog that isn't barking?

I refer to those governments (mostly Arab) with huge amounts of wealth invested in gold and currencies.  Do they invest in BTC?  Not on your nelly, they want some "intrinsic" value.  Oh I hear B/S et al screaming that fiat currencies are a complete sham.  Then why does Iran hold so many dollars?  It knows the dollar value is far from bullet (nuke) proof but nonetheless it recognises that the self interest of America is to preserve confidence at home and abroad in its currency.


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## Firefly

Brendan Burgess said:


> *Bitcoin Mining Operations Now Use More Energy Than Ireland *



I think this is one area where the "powers that be" have a legitimate cause (and excuse) in stopping bitcoin.

That so much energy is being spent mining (or whatever it's called) is just ludicrous.

It has been argued that a cost of globalisation / capitalism has been the pollution of our environment. I think the use of such amounts of energy on mining bitcoins is most absurd and indefensible.


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## ant dee

It has been said before, some (a lot?) of the power used on bitcoin mining comes from hydro power plants, renewable sources etc that would otherwise not operate because the local demand from electricity there is not enough. Miners approach and buy the extra power. Probably they are bribing a few Chinese officials but hey that's no harm to the environment.


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## noproblem

When people /investors buy gold i'd imagine very few get the actual physical asset. So, my query is, if everyone got out of gold tomorrow, demanded their money back in cash, is it not true to say there wouldn't be enough  held gold in the world to cover that cash? Of course they could go mining again to cover this but where's the value in that if no one wants it? Also, would there be enough gold underground to cover the cash invested in it?


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## Duke of Marmalade

noproblem said:


> When people /investors buy gold i'd imagine very few get the actual physical asset. So, my query is, if everyone got out of gold tomorrow, demanded their money back in cash, is it not true to say there wouldn't be enough  held gold in the world to cover that cash? Of course they could go mining again to cover this but where's the value in that if no one wants it? Also, would there be enough gold underground to cover the cash invested in it?


I don't think that is true.  It might have been true with a gold standard i.e. governments undertaking to buy back their currency for a set amount of gold.  If there is fractional reserve banking then the calls on the currency could be a multiple of its base and it was presumably only the base that the Government held gold reserves for, but I am not sure if they did even that, and I am also not sure whether M2 was covered by the gold standard.  These days I don't think there is much, if any, multiplication of the calls on gold brought about by the fractional reserve process.  It would need people to be in substantial gold debt.

Actually I am pretty sure it was only M0 (notes and coins) that were backed by the gold standard.


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## cremeegg

noproblem said:


> When people /investors buy gold i'd imagine very few get the actual physical asset. So, my query is, if everyone got out of gold tomorrow, demanded their money back in cash, is it not true to say there wouldn't be enough  held gold in the world to cover that cash?





Duke of Marmalade said:


> I don't think that is true.



I dont think its true either, but the fact that the question can be asked undermines the rational for investing in gold certificates etc. completely, unless you hold the physical gold.

But I didn't think Bernie Maddoff was a fraud either.


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## BreadKettle

Firefly said:


> I think this is one area where the "powers that be" have a legitimate cause (and excuse) in stopping bitcoin.
> 
> That so much energy is being spent mining (or whatever it's called) is just ludicrous.
> 
> It has been argued that a cost of globalisation / capitalism has been the pollution of our environment. I think the use of such amounts of energy on mining bitcoins is most absurd and indefensible.



You realise it uses less electricity than the production of cash and coins, and only a small fraction used to mine gold?

Should we also ban Google, as they use more again? Where do you want to draw this line of what you deem to be an allowable amount of energy to be used to produce something?


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## cremeegg

I am with bread kettle here. We are supposed to be horrified by the amount of electricity used in mining bitcoin, yet no one has even given a figure for the amount of electricity actually used. More electricity than Ireland, Venezuela, the moon, isn't an argument its a shout for attention.


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## Firefly

cremeegg said:


> I am with bread kettle here. We are supposed to be horrified by the amount of electricity used in mining bitcoin, yet no one has even given a figure for the amount of electricity actually used. More electricity than Ireland, Venezuela, the moon, isn't an argument its a shout for attention.



The point I am making is that with the focus on the environment, the powers that be now have another reason (the other being the rampant use of bitcoin by all sorts of criminals (so much for ethical investing eh?)) if they want to pursue bitcoin's demise.


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## Leo

cremeegg said:


> I am with bread kettle here. We are supposed to be horrified by the amount of electricity used in mining bitcoin, yet no one has even given a figure for the amount of electricity actually used. More electricity than Ireland, Venezuela, the moon, isn't an argument its a shout for attention.



The energy use figures are widely published, they're even quoted earlier in this thread. Much of our media just prefers dumbing details like this down for mass consumption.

So long as the miners continue to see a return, energy usage won't be a real issue.


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## ant dee

Another view on the energy consumption of the bitcoin miners.
https://youtu.be/2T0OUIW89II


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## cremeegg

A bitcoin question.

What gives bitcoin its value.

I understand the scarcity aspect, (like gold), I understand the security, anonymity and ease of use aspects, (I say understand, I mean accept at face value, because life is too short to follow then query the explanations, I'm not as brave as the Duke). I understand the network aspect. 

However none of these, to my mind, make bitcoin worth more than a debit card linked to a bank account with no money.

I even understand the, "not controlled by a Central Bank" aspect. Although I do not see that as a bad thing. The price fluctuations of bitcoin would not occur if there was some centralised control.

What I do not understand is what the worth (as opposed to market price) of a bitcoin is based on. 

 A Euro or USD represents a claim on the output of the Eurozone or US economy. What does a bitcoin represent.


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## Firefly

cremeegg said:


> A bitcoin question.
> 
> What gives bitcoin its value.
> 
> I understand the scarcity aspect, (like gold), I understand the security, anonymity and ease of use aspects, (I say understand, I mean accept at face value, because life is too short to follow then query the explanations, I'm not as brave as the Duke). I understand the network aspect.
> 
> However none of these, to my mind, make bitcoin worth more than a debit card linked to a bank account with no money.



What about those single use, virtual credit card things? I think P-TSB used to sell them - you can load them with say 100 quid and use them anonymously? Sure, that's the same thing isn't it?

I understand the scarcity aspect, (like gold) but I can't reconcile that to the level of quantitive easing. It's not like the Weimer republic we have here!


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## newtothis

Brendan Burgess said:


> Gold has an intrinsic value - bitcoin has none



Sorry to drag this back to the oriiginal point (or maybe that's a good thing?), but whilst gold does indeed have an intrinsic value (becuase of its use in industrial applications, for example), why is it relevant to anything whether Bitcoin has an "intrinsic" value? For example, what is the intrinsic value of a €50 note? I don't know what each one costs to produce, but I'd be willing to bet it's a long, long way from €50. Bitcoin is much more like cash than gold. Before anyone jumps on me, it's not the same as cash, just more similar to it than it is similar to gold.

It also does clearly have a value: currently very high and potentially next to zero in double quick time, but your constant claim it is valueless is simply not true.


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## fpalb

cremeegg said:


> A bitcoin question.
> 
> What gives bitcoin its value.
> ...
> A Euro or USD represents a claim on the output of the Eurozone or US economy. What does a bitcoin represent.



To make the case for whether bitcoin can be considered money, I need to go into the fundamentals of the concept of money itself and its history, and what could be more appropriate on a site called askaboutmoney.com 

*Defining Money*
Money is defined by its function, not its form. From wikipedia: "The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value....  Any item or verifiable record that fulfills these functions can be considered as money.

Also via wikipedia: "Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money." So for much of human history, what was money was not necessarily dictated from a position of power, but instead emerged from ground up.

Even just considering gold and euros as two types of money, we can say some things about money:
1) Money does not need to have physical form (most euros exist as entries in a digital database)
2) Money does not need to be endorsed or backed by a government (gold)
3) If something can fulfill the functions of money, that is enough to use it as money, it does not need to serve any other purpose (basically the intrinsic value argument, euros are only useful as money)

*What properties are useful for fulfilling the functions of money, why did gold win?*
So the history of money is that various civilisations used all sorts of things, some where commodity moneys, things used as money that also had other utility other than being money such as bronze, salt and gold. Other things didn't have much or any commodity value such as cowry shells, rai stones, tally sticks.

Why did gold emerge as the clear winner over everything else that people tried? The first answer you usually get is 'because it has intrinsic value, it has industrial uses, and it's desirable for jewelry". Fine, but lots of things have intrinsic value, and many are more useful and important than gold, like food. Diamonds are arguably more desirable in jewelry and also have industrial uses, but they are not used as money to the extent that gold is.

The reason I propose is that gold, of all naturally occurring things in the world has the best combination of properties that help make something fulfill the functions of money:

portablity
fungiblity
robustness
verifiablity
scarcity
divisibilty
Do you agree that the better something is in terms of all of those properties, the better it can work as both a store of value and medium of exchange? Can you find any other element in the periodic table that has a better combination? Can you think of anything else in the natural world that does? If not, do you think this is a coincidence?

Thought experiment: Is it possible that gold became used as money purely because it was the best thing to use as money and that the industrial and decorative uses are coincidental?

*Why did gold get mostly replaced by fiat?*
Horses were the main mode of transport for 1000s of years, the best naturally occurring thing that people could use for the function of transport. Then people eventually figured out how to create a a purpose-built technology that fundamentally improved on it and that was pretty much the end of horses.

Eventually people figured out purpose-built technologies for money too. Fiat, and especially digital fiat drastically improves the portability, verifiabilty and divisibility aspects of gold, making it way more practical to use as a medium of exchange. The trade offs are that fiat is not as robust (your digital accounts have counter-party risk) and more importantly fiat does not have absolute scarcity, meaning that fiat is worse as a store of value.

*Bootstrapping and confidence* 
Whenever you accept money as payment or use money to store value you do so with the expectation that at a future date someone else will accept it as payment from you i.e. you never accept money to consume it (or we would consider it barter not money). That means you need to have enough confidence that there will be continued widespread demand for the money.

When all monetary systems start they face a bootstrapping problem, why would the first person accept something as money when they don't know if anyone else will in future? While something might actually be capable of fulfilling the functions of money, if it cannot reach a critical mass of users it may never actually be used as money.

I think for gold it makes sense that the intrinsic value helped bootstrap it. It's less risky to accept something as money when you know it will always at least have industrial uses in future. For fiat it can be bootstrapped by the government endorsing it as legal tender, coercing the population to use it by forbidding other money and forcing payment of taxes in it.

The conclusions drawn from the above lengthy post are:
1) Money is anything which can function as money
2) Something with the combination of properties that mean it can best fulfill the functions of money will emerge as money and eventually succeed over worse forms of money.
3) Gold became the main global money because it had the properties which made it better than anything else at being money (intrinsic value is coincidental, but helped bootstrap it).

*The Bitcoin thought experiment*
Then we arrive at Satoshi's proposal:
As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: - boring grey in colour - not a good conductor of electricity - not particularly strong, but not ductile or easily malleable either - not useful for any practical or ornamental purpose and one special, magical property: - can be transported over a communications channel If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it. Maybe it could get an initial value circularly as you've suggested, by people foreseeing its potential usefulness for exchange. (I would definitely want some) Maybe collectors, any random reason could spark it. I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value. But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something. (I'm using the word scarce here to only mean limited potential supply)​And that is what bitcoin ultimately is, putting the above thought experiment into practice in real life and seeing how it plays out.

I think there's more to discuss here, we can go further into the properties and abilities of our various different money systems and make a comparison of which one is best at what. I think each has it's own set of positives and negatives and the choice of what is the best money is different depending on the circumstances.


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## Duke of Marmalade

fpalb said:


> *The Bitcoin thought experiment*
> Then we arrive at Satoshi's proposal:
> As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: - boring grey in colour - not a good conductor of electricity - not particularly strong, but not ductile or easily malleable either - not useful for any practical or ornamental purpose and one special, magical property: - can be transported over a communications channel If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it. Maybe it could get an initial value circularly as you've suggested, by people foreseeing its potential usefulness for exchange. (I would definitely want some) Maybe collectors, any random reason could spark it. I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value. But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something. (I'm using the word scarce here to only mean limited potential supply)​


This was Satoshi's riposte to the argument that BTC value was counter to Mises' Regression Theorem.  The MRT, as I understand it,  asserts that money must in the final analysis be traced to some commodity value (salt, gold whatever).  The riposte - "it can be usd for payment" ergo it has value.  Circular? Well yeah.

I have read the White Paper again.  Interestingly Satoshi was not in the least inspired by Shortie Syndrome - the obsession that Cental Banks are evil elitist manipulative fraudsters.  Rather he was obsessed with the need to transact at a distance without needing a "trusted party" (the banking system).  Unlike B/S he had no issue with the trusted party _per se_ (he trusted them) but he claimed it caused unwanted delays in settlement and also incurred too high transaction fees (ironic considering today's BTC fees).  In other words BTC was invented to make long distance payments quicker and less transactionally expensive than conventional banking facilities.    Even if these advantages exist they are surely not enough to support a price rise from 1,309 BTC to the $ (its first exchange transaction Oct 2009) to 17,000 $ to the BTC today.

You list out the requirements of a money system and for sure BTC has them, as do fiat currencies.  But it lacks at least two key requirements that fiats have.

1.  Mises' Regression requirement - that it traces back to something of "real" value.  Sorry, the circular argument that it is money because it is money doesn't cut it for me.

2.  With fiat money we have a reasonable assurance of what the price of real things will be at least in the short to medium term.  If we were to have a poll of what do we think the inflation rate will be over the next year it would show how remarkably trusting we are on this front.  To put it in pictures,  a company should have no difficulty in recruiting a contractor for one year at say €8,000 per month but I doubt whether even you would contract to work for a year for 0.5 BTC per month.

Getting back to that circular argument, Satoshi argues that if BTC gets any value whatsoever for whatever reason ergo it meets Mises' criterion and is suitable as money.  I contend that almost all of the "value" it currently has is speculation that it will get even bigger and I doubt whether Satoshi would argue that speculative value is a basis for sound money.


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## Duke of Marmalade

_fpalb _thinking more about Satoshi's thought experiment.  My guess is that he or they came up with this clever solution for peer to peer transfers- bitcoin - doing all the things you claim it does and I am not questioning the truth of those claims.  

But then there was the missing link - Mises' Regression Theorem or rather Plain 'Ol Common Sense (POCS) - how can it serve as money if it has no (intrinsic) value?  He wanted any value at all, you can see that in his musings "value, any value".  And then out of necessity he squared the circle and he admits it was circular.  He postulates that if even some folk are prepared to accept it as a transaction for real goods then, there you go, it has some value ergo (here's the big leap) it has value for everybody and is a self fulfilling medium of exchange i.e. money.


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## Duke of Marmalade

B/S go slowly with me here, I don’t have your insight.  QE is exclusively operated by central banks, how can you blame commercial banks?  How does QE lead to higher rents and wages that can’t buy food?


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## fpalb

Duke of Marmalade said:


> In other words BTC was invented to make long distance payments quicker and less transactionally expensive than conventional banking facilities.


I snipped your opening paragraphs to just this line, but I address all of it: While the whitepaper doesn't explicitly delve into 'Shortie Syndrome' there is other evidence that Satoshi was also pushing the libertarian angle somewhat, this quote for example:

The root problem with conventional currency is all the trust that's required to make it work. *The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.* Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts​
Also the community he first announced bitcoin to and some of the prior work cited by the whitepaper has strong links to the cypher-punk movement. You've probably never heard of this but the cypher-punk manifesto https://www.activism.net/cypherpunk/manifesto.html is an interesting read particularly when you consider it was written in 1993! before the internet as we know it and all of the privacy and big-data issues that are becoming more relevant.

ANYWAY, I say the above because it might interest you not because I think it matters that much. Satoshi's original intentions are of little practical relevance now that bitcoin is out in the world out of his control. What it does and how it can be used are what is important.



Duke of Marmalade said:


> You list out the requirements of a money system and for sure BTC has them, as do fiat currencies.  But it lacks at least two key requirements that fiats have....
> 
> 1.  Mises' Regression requirement - that it traces back to something of "real" value.  Sorry, the circular argument that it is money because it is money doesn't cut it for me.
> 
> 2.  With fiat money we have a reasonable assurance of what the price of real things will be at least in the short to medium term.  If we were to have a poll of what do we think the inflation rate will be over the next year it would show how remarkably trusting we are on this front.  To put it in pictures,  a company should have no difficulty in recruiting a contractor for one year at say €8,000 per month but I doubt whether even you would contract to work for a year for 0.5 BTC per month.
> 
> ...I contend that almost all of the "value" it currently has is speculation that it will get even bigger...



I don't think these are requirements, and I think bitcoin is proving it. Bitcoin is showing that people are willing to choose a speculative store of value that offers both more potential upside and more potential downside instead of steady predictable downside (fiat) or less-upside/less-downside (gold, in my opinion).

You only mentioned bitcoin fulfilling the medium of exchange function of money, but I think we can do a brief comparison of all three functions and rate them:

*Medium of Exchange*
Gold is clearly the worst, it's the least portable, it's hard to divide, it's also arguably harder to verify, it's not widely accepted.
Fiat is the best for the vast majority of cases, especially where you have access to the best fiat (dollars, euros) and 1st world financial services.
Bitcoin is the best when fiat is forbidden, it can also be cheaper and faster in cases where you want to send money across international borders or there are other frictions with fiat.
Bitcoin cannot currently handle transactions at any significant global scale. This MUST improve for bitcoin to ever have any widespread use as a medium of exchange. BUT *IF* the lightning network or other such layers on top of bitcoin provide a real solution to this there is potential for instant secure cheap transactions without geographical boundaries, there is potential for micro-payments on a scale we've never seen - it may be better than fiat in many ways, but *it does not work yet and may not*.

*Store of Value*
This is where it gets interesting, I think there are two aspect to this which I'll address separately.
1) Is it likely to maintain it's real value over time
Gold is probably the winner here, it's definitely the winner in terms of robustness, it has a long history, it's recognized globally, it has no exposure to failure of a single state, it's limited in supply by the laws of physics, it has some non-monetary value to provide an almost certain floor as a consolation prize even if its use as money dwindles.

Fiat varies from country to country. In Argentina,or Venezuela it's terrible. USA and Europe not too bad, for now. I guess people thought GBP was not too bad, and then Brexit happened, so you never know. Will the euro exist in 5 years? probably, 20 years? maybe 100? I don't know, not many have lasted that long.

Bitcoin is new with a short history, most would say it has more potential upside and downside than both fiat and gold. There's no non-monetary use to provide a floor. Like gold it is not exposed to risk of any particular state, but any other number of events can cause a loss in confidence. At first glance it's easy to consider it the worst of the 3 here.

2) how practical is it to use as a store of value
This is where I think bitcoin starts to show some advantages over both fiat and gold, and I think this is really important to make up for the other shortcomings of it:

without counter-party risk you can secure it with a password
without counter-party risk you can store it in a redundant manner in as many geographical locations as you want (and in sophisticated ways using multi-sig wallets).
without counter-party risk you can store it cheaply in any amount.
It is the most transparent, you always know the exact percentage of the total in existence that you hold.
you can cross international borders with it undetected in any amount.
you can prove you hold it without giving anyone else access to it.
it is difficult for someone else to know that you hold it.

*Unit of account*
Not much to say here, this is much less important than the previous two monetary functions and Fiat wins here. From what I can tell things are almost never priced in gold or bitcoin due to the volatility. Not a big deal for bitcoin as wallets can do the price translation for you anyway. Bitcoin of course has fungible equal units which can be used as a unit of account if desired.



Duke of Marmalade said:


> But then there was the missing link - Mises' Regression Theorem or rather Plain 'Ol Common Sense (POCS) - how can it serve as money if it has no (intrinsic) value?  He wanted any value at all, you can see that in his musings "value, any value".  And then out of necessity he squared the circle and he admits it was circular.  He postulates that if even some folk are prepared to accept it as a transaction for real goods then, there you go, it has some value ergo (here's the big leap) it has value for everybody and is a self fulfilling medium of exchange i.e. money.



When wikileaks got cut off from all traditional fiat channels and started accepting bitcoin they had no other choice. Bitcoin was the only option that fulfilled the functions of money for their use-case. This is bitcoin providing value in and of itself. You can call it circular and say it's not enough, but I disagree. In short, I think by now Bitcoin has proven Satoshi's thought experiment to be true - If something can fulfill the functions of money in enough ways that make it stand out from the alternatives it can be enough even in the absence of intrinsic value or government backing, but the hardest part may be bootstrapping it.

My opinion is that bitcoin has already been bootstrapped and reached critical mass, probably since 2013. I know you're thinking that it's in a huge bubble and that everyone holding it now is doing it for short term speculation and that they'll all leave as soon as it stops shooting up. I certainly agree that a lot of people are, but not enough that next bear market will kill bitcoin.

*The 2013 bubble*
If you haven't already I'd recommend looking back at the 2013 bubble and the aftermath. Look at how bad this chart must have looked in 2015: https://news.bitcoin.com/wp-content/uploads/2016/12/Mike-Casey-chart1.png I was closely following the whole thing. A lot of things went wrong all at the same time. The Silk road market (which many had assumed accounted for ALL of bitcoins use) got shutdown in late 2013, bitcoin oddly started rallying and shot up from $100 to $1000 in 6 weeks. This was parabolic growth which of course had to crash. The crash coincided with Mt Gox which had up until then been the primary way peopled had traded bitcoin with fiat for years.

This was bitcoins biggest crash to date, and the first one since it had really come into the mainstream media. It got crucified. The price crash, the Goxxing and the shutdown of 'the only place people used bitcoin anyway' was a triple-whammy that saw the price steadily decline for the whole of 2014 with bull trap after bull trap, and plenty of fodder for bitcoin obituaries declaring it dead: [broken link removed] To make things worse the US government had almost 150,000 bitcoins they had seized from Silk Road and planned to auction off, so the market was going to get flooded with supply.

2015 wasn't much better, the price fell to the $200 range and stumbled along with the odd little spurt of hope before falling back. Sentiment was bad, even among some long-time bitcoiners. I posted on this site on the single thread that ever mentioned bitcoin and no-one cared. There was no media hype anymore, and I'm pretty sure there were almost no short term speculators from the 2013 bubble left.

So without all those short term speculators who was left? I was left, and there was enough other long term guys like me to keep it going, developers kept coding, the people who really believed kept building the exchanges, wallets and other services. Infrastructure improved, miners kept mining, transactions kept being made. At $200 and 15.75 in circulation bitcoin still maintained a market cap of about $3 billion without all the bubble speculation. The unique combination of ways bitcoin fulfilled the functions of medium of exchange and was a practical store of value was enough for us.

*My opinion on the risk*
Given my opinion about why I think bitcoin is money, I also see the main risk to bitcoin being that if it no longer sufficiently fulfills the functions of money it will lose users and eventually will fail. It has to offer enough improvements in certain aspects of the functions of money over gold/paypal/fiat etc to ensure that it remains useful.

While it has actually improved in terms of how easy it is to buy and store securely, I am disappointed that bitcoin has not managed to scale quickly enough to keep up with adoption. It used to be as cheap or cheaper than fiat in all cases, but it no longer is. I don't think it has to be a better medium of exchange than fiat in all cases to survive and have a niche, but it has to be good enough, and certainly better than it is now.


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## Duke of Marmalade

All the same _fpalb_ eppur si muove it is worthless


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## Duke of Marmalade

_fpalb_ very interesting post as usual. Your individual points are hard to dispute and that’s why I gave my eppur si muove response because I fear that no matter how convincing your arguments I will never recant

One thing I cannot dispute is that some (intelligent) people think it has value as evidenced by your good self.  Ergo in line with Satoshi’s thought piece it attains that missing link to make it money.  Maybe it will survive on that basis but it’s price is destined to be roller coaster.

One thing it will never be allowed to be is a mainstream currency. That’s because its main strength - it cannot me managed- makes it totally unsuitable for society’s needs just as the gold standard before it proved unfit for purpose.

Pity to learn that Satoshi was indeed a hard core disciple of Shortie Syndrome


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## fpalb

Duke of Marmalade said:


> _fpalb_ very interesting post as usual. Your individual points are hard to dispute and that’s why I gave my eppur si muove response because I fear that no matter how convincing your arguments I will never recant
> 
> One thing I cannot dispute is that some (intelligent) people think it has value as evidenced by your good self.  Ergo in line with Satoshi’s thought piece it attains that missing link to make it money.  Maybe it will survive on that basis but it’s price is destined to be roller coaster.


Thanks, and I respect your position, as I said when I finished explaining the technical 'how and what' of bitcoin and mining - the 2nd half is the harder part - as it's more down to opinion and economic theories which are hard to prove. It's a leap of faith in a way, though as time has passed and the more I re-think it such as explaining it here the more sense it seems to make to me - but I accept I might also be wrong. I have no doubt it will continue to be a roller coaster, that's half the fun.



Duke of Marmalade said:


> One thing it will never be allowed to be is a mainstream currency. That’s because its main strength - it cannot me managed- makes it totally unsuitable for society’s needs just as the gold standard before it proved unfit for purpose.


Bitcoin being banned in the US was one of my biggest fears for the system in 2013. I only bought in significantly after watching senate hearings which made it clear they had no intention of doing so.

The argument that bitcoin won't be 'allowed' is an interesting one for a number of reasons. It's difficult to enforce beyond just driving it underground, like banning drugs or internet piracy. It's global so one country banning it just moves bitcoin related businesses to other countries, there's usually a few countries willing to allow what others ban so they can take that business. It's already getting integrated to the legacy financial systems in at least minor ways - bloomberg terminals, nasdaq, the new futures markets. Plenty of people and institutions with a lot of capital and influence in the US are invested in bitcoin and bitcoin companies, they'll lobby against banning it.

Perhaps funniest of all, I watched a US senate hearing last year about bitcoin and an FBI or CIA woman was asked how much they're encountering bitcoin and she answered by saying that she mostly hears about it from her colleagues buying it! Maybe those in power just get on the train instead of trying to stop it!

I don't know how any of this will play out, but I totally agree that if bitcoin keeps growing there will have to be conflict with some traditional aspects of society, and there will be plenty of people who will want it eradicated.


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## Duke of Marmalade

I was in Dunnes Stores Cornelscourt yesterday.  Very busy this time of year. There are let's say 20 tills.  Queues at them all.  Thousands of people transacting.  The vast majority using credit cards or debit cards.  I marvel at how efficient money transmission has become.  Then I start to muse.  Is there in the milling throng a frustrated _fpalb _itching to use BTC and annoyed that Dunnes are forcing him to use fiat?  Will there come a day when BTC is mainstream?  Investopedia speculates 15% adoption.  Will there be a day when 3 or more of those tills will be dedicated to BTC because 15% of the population are being paid in BTC?

The answer is never, not even if 15% of folk wanted it to happen.  Society ( I won't say Central Banks as we all know they are out to get us) will ban it long before it comes about.  Banning the use of a currency is not to be compared with banning, say, drugs.  Banning drugs does not stop the craving, might even enhance it.  Banning the use of a currency would be 99.9% effective because banning its use removes (almost) all need for it.

Now as to the use of bitcoin in those parts of the world that do not have our highly sophisticated money transmission systems, the idea that equipping these folk with $500 Smartphones is the solution seems ludicrous to me.


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## fpalb

Duke of Marmalade said:


> Will there come a day when BTC is mainstream?  Investopedia speculates 15% adoption.  Will there be a day when 3 or more of those tills will be dedicated to BTC because 15% of the population are being paid in BTC?


Look, this is so many steps and years away that it's not worth debating, this would be the very last steps of adoption. bitcoin needs to succeed as digital gold first and needs to increase the transaction rate and become mainstream for internet payments and remittances and all of the other things where it can have more of an edge over legacy stuff. 
[/QUOTE]

The answer is never, not even if 15% of folk wanted it to happen.  Society ( I won't say Central Banks as we all know they are out to get us) will ban it long before it comes about.  Banning the use of a currency is not to be compared with banning, say, drugs.  Banning drugs does not stop the craving, might even enhance it.  Banning the use of a currency would be 99.9% effective because banning its use removes (almost) all need for it.


Duke of Marmalade said:


> Fair point





Duke of Marmalade said:


> Now as to the use of bitcoin in those parts of the world that do not have our highly sophisticated money transmission systems, the idea that equipping these folk with $500 Smartphones is the solution seems ludicrous to me.



You should look into M-pesa in Kenya if you haven't already. They leapfrogged so people have mobile phones (not yet as sophisticated as our smart phones of course, but how long?) and solar power without having domestic electricity, a wired phone network or a bank account.

Smart phones are so useful and being produced in such numbers that I work under the assumption that in the near future the vast majority of the world will have a phone and internet access. Especially when Zuckerberg, Musk and others are pushing hard to provide the necessary infrastructure.


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## spondulix

To address your points:

*Gold has an intrinsic value - bitcoin has none*

Bitcoin's value is intrinsically linked to the decentralised Bitcoin network. The value of the Bitcoin network is in its utility. You can transfer value (Bitcoin) at a cost (Bitcoin) to a peer, free of regulation and 3rd party liability (a bank).

You cannot have the Bitcoin network without Bitcoin. There is only one Bitcoin network. It does not accept euros.

The network is an amazing technical feat. However is dated and it has scaling issues (but it is faster than using e.g. SWIFT). Bitcoin miners charge fees to add your transaction to the distributed ledger. These fees are growing with time as the network becomes more congested.

Bitcoin is sometimes the only means of accessing exchanges to get other cryptocurrencies. That's because the Bitcoin Network arrived first. The other cryptocurrencies have different characteristics and utility.

Beyond all of this, Bitcoin has value because people want it and it is scarce. There will be 21 million and that is that.

Is Bitcoin overvalued? Maybe. It will settle at a particular value over time. Other, more scalable cryptocurrencies may overtake it in the long run.

*Gold is difficult to value - it's hard to justify $1,300 per oz. But Bitcoin is easy to value - it's worthless *

Mmm, Bitcoin seems to be worth something right now. It won't be worthless until the network is worthless.

*Gold is a naturally occurring metal - bitcoin is artificially created *

An iPhone X is artificially created.

*Gold has been in demand for thousands of years - bitcoin has been around for a few years - 4 or 5?*

Yes, and it's in demand.


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## joe sod

To all the bitcoin holders on this site most say they only have a small amount invested compared to their overall investments. Therefore they might have much more invested in say global etfs. These global etfs would have big investments in say banking and oil companies, therefore you might be more invested in banks and oil stocks compared to bitcoin indirectly. Yet there are no passionate debates about the benefits of banking investments at 3am in the morning. Is bitcoin a form of "identity investment", you might not have much money invested but you want to be associated with it


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## ant dee

Well, truth is our global etfs and banking investments are boring. Nothing to talk about.
Will probably give us decent profits but whats to talk about?


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## fpalb

joe sod said:


> Yet there are no passionate debates about the benefits of banking investments at 3am in the morning. Is bitcoin a form of "identity investment", you might not have much money invested but you want to be associated with it



For some people bitcoin is just a speculative investment, for others it's a medium of exchange for the niche cases where it's advantageous over competitors, and for others it's ideological: 
https://twitter.com/JulianAssange/status/941600368588476416
Or any combination of the three.


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## Duke of Marmalade

fpalb said:


> You should look into M-pesa in Kenya if you haven't already. They leapfrogged so people have mobile phones (not yet as sophisticated as our smart phones of course, but how long?) and solar power without having domestic electricity, a wired phone network or a bank account.
> 
> Smart phones are so useful and being produced in such numbers that I work under the assumption that in the near future the vast majority of the world will have a phone and internet access. Especially when Zuckerberg, Musk and others are pushing hard to provide the necessary infrastructure.


I have now looked into M-pesa.  In what I am about to say I may have got the wrong end of the stick in which case I stand to be ejected

Firstly I concede that the idea of large numbers in the unbanked developing world possessing smartphones is not so ludicrous as I intuited.

Now I know you were not claiming that M-pesa was a crypto.  But on the contrary it seems to underpin that crypto has nothing to offer in this space.  One of the promos for mobile banking which I read quotes the example of the daughter needing to send money home to her family.  Being unbanked she hithertofore had to place the money in notes in an envelope and trust someone to physically deliver it.  Now with her mobile banking she can to this instantly mobile to mobile.  But she is transferring currency she believes in.  It is held by a trusted party like Vodafone.  Her security is the good ol' PIN technology.  No need for her to have miners work through 10s of millions of nonces.  Bitcoin would cut out the need for a trusted party as Satoshi intended but the idea that she would have any confidence in knowing she has a secure and transferable amount of nothing doesn't wash.


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## fpalb

Duke of Marmalade said:


> Now I know you were not claiming that M-pesa was a crypto.  But on the contrary it seems to underpin that crypto has nothing to offer in this space.  One of the promos for mobile banking which I read quotes the example of the daughter needing to send money home to her family.  Being unbanked she hithertofore had to place the money in notes in an envelope and trust someone to physically deliver it.  Now with her mobile banking she can to this instantly mobile to mobile.  But she is transferring currency she believes in.  It is held by a trusted party like Vodafone.  Her security is the good ol' PIN technology.  No need for her to have miners work through 10s of millions of nonces.  Bitcoin would cut out the need for a trusted party as Satoshi intended but the idea that she would have any confidence in knowing she has a secure and transferable amount of nothing doesn't wash.



We're just looking at the 'medium of exchange' aspect here. My views on this are that pretty soon everyone will be paying for everything with their phone. In brick and mortar shops you'll be making contact-less payments with it. Other payments will be made via apps - online banking for bills, dedicated apps like the one to top up your leap card (if not tapping the phone itself instead of a leap card), paypal for other things. All else being equal, practicality wins, and this is why physical cash is disappearing.

I think M-Pesa or paypal or anything else that works better than crypto as a medium of exchange will be used instead of crypto. So I think we will see a continuation of crypto only being used as medium of exchange in cases where it is is better, which right now is a set of niche cases like this one I wrote about recently . The previous two posts I wrote on the same page of that thread also relate to the reasons bitcoin might be used over alternatives, particularly by merchants.

One advantage is the global nature. M-pesa is fine until you want to transact with someone in a country that doesn't support it. We still don't have a system apart from crypto that's available worldwide, I guess paypal is the closest. Paypal is interesting because they originally were trying to make something like bitcoin, something outside the existing financial system, but they found they couldn't do it due to the regulatory burden and this is why I think a product from a company will never directly compete with bitcoin entirely, as Peter Thiel, co-founder of paypal said:

_“PayPal had these goals of creating a new currency. We failed at that, and we just created a new payment system. I think Bitcoin has succeeded on the level of a new currency, but the payment system is somewhat lacking. It’s very hard to use, and that’s the big challenge on the Bitcoin side.”_

So yeah, basically I agree with him I think bitcoin has its work cut out for in the mainstream medium of exchange aspect, and so much of it depends on how the technology will improve in terms of speed, cost, ease-of-use and transaction throughput and this is hard to predict. It is more competitive in the store of value aspect currently.


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## Duke of Marmalade

fpalb said:


> We're just looking at the 'medium of exchange' aspect here. My views on this are that pretty soon everyone will be paying for everything with their phone. In brick and mortar shops you'll be making contact-less payments with it. Other payments will be made via apps - online banking for bills, dedicated apps like the one to top up your leap card (if not tapping the phone itself instead of a leap card), paypal for other things. All else being equal, practicality wins, and this is why physical cash is disappearing.
> 
> I think M-Pesa or paypal or anything else that works better than crypto as a medium of exchange will be used instead of crypto. So I think we will see a continuation of crypto only being used as medium of exchange in cases where it is is better, which right now is a set of niche cases like this one I wrote about recently . The previous two posts I wrote on the same page of that thread also relate to the reasons bitcoin might be used over alternatives, particularly by merchants.
> 
> One advantage is the global nature. M-pesa is fine until you want to transact with someone in a country that doesn't support it. We still don't have a system apart from crypto that's available worldwide, I guess paypal is the closest. Paypal is interesting because they originally were trying to make something like bitcoin, something outside the existing financial system, but they found they couldn't do it due to the regulatory burden and this is why I think a product from a company will never directly compete with bitcoin entirely, as Peter Thiel, co-founder of paypal said:
> 
> _“PayPal had these goals of creating a new currency. We failed at that, and we just created a new payment system. I think Bitcoin has succeeded on the level of a new currency, but the payment system is somewhat lacking. It’s very hard to use, and that’s the big challenge on the Bitcoin side.”_
> 
> So yeah, basically I agree with him I think bitcoin has its work cut out for in the mainstream medium of exchange aspect, and so much of it depends on how the technology will improve in terms of speed, cost, ease-of-use and transaction throughput and this is hard to predict. It is more competitive in the store of value aspect currently.


_Eppur si muove_ it is worthless


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## jman0war

Many bitcoiners are also into gold.
But the scarcity of gold will soon be tested.
They say we are about 20-50 years from mining asteroids.
At that point it is expected that "rare earth" deposits will be found in abundance.


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## jman0war

> What gives bitcoin its value.
> 
> I understand the scarcity aspect, (like gold), I understand the security, anonymity and ease of use aspects, (I say understand, I mean accept at face value, because life is too short to follow then query the explanations, I'm not as brave as the Duke). I understand the network aspect.
> 
> However none of these, to my mind, make bitcoin worth more than a debit card linked to a bank account with no money.


Censorship-Resistant transaction that is not subject to seizure.
Ari Paul of Blocktower Capital explains it in the short video on this page.
http://www.businessinsider.com/cryp...ned-by-crypto-hedge-fund-cio-ari-paul-2017-11


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## Leo

jman0war said:


> Censorship-Resistant transaction that is not subject to seizure.



The Feds in the US are looking to shift more than $9M worth of Bitcoin from a single seizure, so that last piece is a fallacy.


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## jman0war

Leo said:


> The Feds in the US are looking to shift more than $9M worth of Bitcoin from a single seizure, so that last piece is a fallacy.


Fair enough, if you give up your private key, then yes your bitcoin can be "seized"
By the way, the bitcoin only lives in the blockchain.

If you trust your private key to a custodial service, then yes that custodian may be subject to the laws of that country.
But in bitcoin, that is generally unwise.

Think of it like this, if you have cash or money in a bank, authorities can seize it.

The bitcoin blockchain, exists in cyberspace and is not subject to any particular countries laws. Bitcoin isn't something you can take physical possession of. Authorities can acquire your private key (password), that unlocks your bitcoin on that blockchain. But they can't compel the blockchain to give up anything.


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## ant dee

Leo said:


> The Feds in the US are looking to shift more than $9M worth of Bitcoin from a single seizure, so that last piece is a fallacy.


Leo you are mistaken here.
If someone funds Wikileaks via a bank transfer, that transaction can be censored or seized.

If someone funds Wikileaks private bitcoin wallet via his private bitcoin wallet, that transaction is irreversible, censorship resistant.

But if I used my custodial Bitcoin wallet, eg Coinbase, to fund Wikileaks' Coinbase account, Coinbase might get a court order and reverse the transaction, since it never actually touched the blockchain.
It was just a change in Coinbase's private ledger. Coinbase acts pretty much like a traditional bank in that regard.

Regarding seizure, if someone's house gets raided and the Feds locate and capture the private keys, then the Bitcoin is seized. Technically, just the keys of the wallets are seized, transferring control to the Fed, but its the same thing.
However, if the Feds don't find the private keys (you can encrypt them, or even use a mnemonic phrase you can remember and have basically a 'brain-wallet') the Bitcoin cannot ever be seized, unless the individual gives them up.


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## Leo

jman0war said:


> But they can't compel the blockchain to give up anything.



Correct, they can't compel the blockchain to give it up, but in search & seizures authorities are successfully seizing bitcoin. So as stated in the linked article, it is resistant to seizure, but it is still subject to such in certain circumstances.


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## ant dee

Leo, i think the word you are searching for is 'theft'


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## jman0war

It's one of the potential benefits of bitcoin.
Imagine if people, say refugees can take their accumulated wealth across boundaries without the ability of x government to seize it?
They could do so by memorizing the password (mnemonic phrase) that unlocks their bitcoin on the blockchain.
They could cross through borders with literally empty pockets.


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## Leo

ant dee said:


> Leo you are mistaken here.
> If someone funds Wikileaks via a bank transfer, that transaction can be censored or seized.



Yeah, I wasn't suggesting the transactions themselves could be censored or reversed, but Bitcoin is still subject to seizure.


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## Leo

ant dee said:


> Leo, i think the word you are searching for is 'theft'



Not if seized under an appropriate warrant, but yeah, theft is an issue, as is loss.


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## jman0war

Leo said:


> Correct, they can't compel the blockchain to give it up, but in search & seizures authorities are successfully seizing bitcoin. So as stated in the linked article, it is resistant to seizure, but it is still subject to such in certain circumstances.


Sure, but those custodial sites that are subject to seizure orders from the country in which they operate are not exactly part of the bitcoin whitepaper.
Those are websites and businesses that just sprang up on their own.


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## Firefly

jman0war said:


> It's one of the potential benefits of bitcoin.
> Imagine if people, say refugees can take their accumulated wealth across boundaries without the ability of x government to seize it?
> They could do so by memorizing the password (mnemonic phrase) that unlocks their bitcoin on the blockchain.
> They could cross through borders with literally empty pockets.



Multiple Bitcoin accounts and a few shell companies dotted around the world and your money would be _extremely_ difficult to trace....

I can see why the authorities will go after Bitcoin now....


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## jman0war

Andreas Antonopolus took a well meaning question from a member of the audience regarding compliance with the signs posted at Customs, compelling the traveller to declare if they are taking or bringing 10k with them.

He explained that this paradigm is archaic and has limited relevance to global money that is 'cloud based'.
https://www.youtube.com/watch?v=EZh1-ZqffOw


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## joe sod

jman0war said:


> Many bitcoiners are also into gold.
> But the scarcity of gold will soon be tested.
> They say we are about 20-50 years from mining asteroids.
> At that point it is expected that "rare earth" deposits will be found in abundance.



I think I will bet on gold still being rare in 50 years time than on bit coin being the new gold or even being  in existence. Harvesting gold from asteroids or deep in ocean's is a whole magnitude of difficulty much greater than hacking into the bit coin source code and changing it. If I were a technologist and given a big budget and a choice I know I would choose cracking into bit coin as being doable, harvesting gold from asteroids as a good Hollywood movie from 1970s.


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## jman0war

joe sod said:


> I think I will bet on gold still being rare in 50 years time than on bit coin being the new gold or even being  in existence. Harvesting gold from asteroids or deep in ocean's is a whole magnitude of difficulty much greater than hacking into the bit coin source code and changing it. If I were a technologist and given a big budget and a choice I know I would choose cracking into bit coin as being doable, harvesting gold from asteroids as a good Hollywood movie from 1970s.


It doesn't matter if you change bitcoin code, that's what the hard forks do.
What matters is, does anybody else accept your code?

There is a saying in bitcoin: Don't Trust, Verify.
Bitcoiners that run Full Nodes (not mining) verify transactions.
If your transaction does not compute, it's dropped.


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## joe sod

jman0war said:


> It doesn't matter if you change bitcoin code, that's what the hard forks do.
> What matters is, does anybody else accept your code?
> 
> There is a saying in bitcoin: Don't Trust, Verify.
> Bitcoiners that run Full Nodes (not mining) verify transactions.
> If your transaction does not compute, it's dropped.



Ive done a bit of programming back in the day and bitcoin at the end of the day is just code that was created by a human, there was an arbitrary limit when the code was originally written that set the limit at 21 million bitcoins. That is an arbitrary limit that can be changed, surely the creators of bitcoin still have access to their code. When enough resources are thrown at something all unbreakable codes can be broken, remember enigma
Gold is extremely rare even in the universe and humans cannot create gold like they can with bitcoin. Do you not think a bit far fetched to suggest that gold will become cheap because we will be able to harvest it from asteroids but breaking the bitcoin code is too difficult so it will replace gold ..... good luck with that


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## jman0war

joe sod said:


> Ive done a bit of programming back in the day and bitcoin at the end of the day is just code that was created by a human, there was an arbitrary limit when the code was originally written that set the limit at 21 million bitcoins. That is an arbitrary limit that can be changed, surely the creators of bitcoin still have access to their code. When enough resources are thrown at something all unbreakable codes can be broken, remember enigma
> Gold is extremely rare even in the universe and humans cannot create gold like they can with bitcoin. Do you not think a bit far fetched to suggest that gold will become cheap because we will be able to harvest it from asteroids but breaking the bitcoin code is too difficult so it will replace gold ..... good luck with that



I disagree about the ability to "hack bitcoin"
The code is open source, anybody can copy it and make whatever changes you want.
It's not the code that runs the protocol that is unhackable, it's data that comprises the blockchain.
My point is, that the scale of resources and timing to "hack bitcoin" the bitcoin protocol is too great probably for even a nation state to attempt.

I believe it requires that every single node across the entire network be hacked simulateously, and nobody notices?
It's not realistic.

Gold is hard to find and acquire on Earth due our molten core pulling heavy elements to the center, and what we find in the upper crust is the gold that has been churned up from meteor strikes and from plate tetonics.

Asteroids don't have this problem.
433 Eros:

_Data from the Near Earth Asteroid Rendezvous spacecraft collected on Eros in December 1998 suggests that it could contain 20,000 billion kilograms of aluminum and similar amounts of metals that are rare on Earth, such as gold and platinum_

I believe the 20,000 billion kg is greater than all the gold we've mined on Earth... ?


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## joe sod

jman0war said:


> I disagree about the ability to "hack bitcoin"
> The code is open source, anybody can copy it and make whatever changes you want.
> It's not the code that runs the protocol that is unhackable, it's data that comprises the blockchain.
> My point is, that the scale of resources and timing to "hack bitcoin" the bitcoin protocol is too great probably for even a nation state to attempt.


 
Fair enough you obviously understand bitcoin in depth which I dont. If you give me a choice between 1 bitcoin and 10 ounces of gold (about the same value now at todays prices) , I will take the gold. Im surprised it has fallen given that a few days ago it was over $20000 a bitcoin nearly 16 ounces of gold.


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## tecate

No conspiracy theory - just establishment spin facilitated by the national broadcaster.


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## tecate

So what's golds price and what's its value right now?    How is that determined?


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## Andrew365

Why not? Gold only has a value because the collective believe it has value i.e. you and your neighbour. This is after thousands of years of people believing it has value but in reality what is the use of gold? It is basically only useful for making Jewellery. 

There is no difference with Bitcoin, if the collective believe it has a monetary value then it does.


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## tecate

Andrew365 said:


> Why not? Gold only has a value because the collective believe it has value i.e. you and your neighbour. This is after thousands of years of people believing it has value but in reality what is the use of gold? It is basically only useful for making Jewellery.
> 
> There is no difference with Bitcoin, if the collective believe it has a monetary value then it does.


Quite right.  Gold has been established over an age - that's clearly to be respected.  However, otherwise, in terms of valuation, there is no difference.  Some will say that it has use as jewelry or limited industrial use but the reality is that its primary use is as a store of value. 

Both implicate scarcity - designed in, in the case of Bitcoin.   Bitcoin is digital gold - and can be transmitted anywhere in the world.

I brought it up in the context of the price/value point because in terms of the price/value consideration, they're both exactly the same.


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## Andrew365

I am with you, my post was moved from the other thread in which Brendan had stated Bitcoin is not like gold.


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## Brendan Burgess

Andrew365 said:


> Brendan had stated Bitcoin is not like gold.



Just to be clear. Tecate asked my opinion on the value of Gold and I referred him to this thread in an effort to keep some order on the other thread. 

Brendan


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## tecate

Well, there really seems to be a lot of confusion in conventional centralised banking and monetary circles.  The Chairman of the Fed - Jerome Powell - acknowledged early today that Bitcoin is a speculative store of value - just like gold.  

Well I never.


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## Brendan Burgess

Hi tecate

“Almost no one uses bitcoin for payments, they use it more as an alternative to gold,” he said Thursday afternoon. “It’s a speculative store of value.”

Isn't that what you and the others do with it? 

You are using it as a speculative store of value? 

Or are you using it for payments? 

Brendan


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## tecate

@Brendan :  You seem to have missed the part relevant to this thread.  It's as follows;

 "it's a store of value, it's a speculative store of value -* like gold*".


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## Duke of Marmalade

David Marcus (of PayPal and Facebook Coin fame) has described bitcoin as digital gold.  He makes it clear that by this he his referring to a shared attribute of bitcoin and gold - they are uncorrelated assets, meaning the price movements seem to bear no correlation to movements in the prices of conventional securities.  All commodities share this attribute - but I suppose if David was to describe bitcoin as digital oats or digital pork bellies, his erstwhile bitcoin devotees would have accused him of betrayal.


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## Brendan Burgess

Duke of Marmalade said:


> I suppose if David was to describe bitcoin as digital oats or digital pork bellies,



Duke that is brilliant. 

Brendan


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## elacsaplau

Brendan Burgess said:


> Duke that is brilliant.



The turn of phrase is excellent but unfortunately the central premise upon which it is founded is not.

It is simply not true that commodity and equity returns are uncorrelated.

This statement is broadly true in certain geographies, broadly untrue in others and somewhere in between in others! Dems the facts!


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## Duke of Marmalade

elacsaplau said:


> The turn of phrase is excellent but unfortunately the central premise upon which it is founded is not.
> 
> It is simply not true that commodity and equity returns are uncorrelated.
> 
> This statement is broadly true in certain geographies, broadly untrue in others and somewhere in between in others! Dems the facts!


Ah _elac _you are letting the facts get in the way of the message.  My point was that the main, if not only, justification Mr Marcus has for calling bitcoin digital gold is that its price is uncorrelated with conventional asset prices.  Those few hedge funds who are trying to differentiate themselves by embracing bitcoin use the same argument.  There are of course lots of other uncorrelated assets, I am sure you can name some, however digital XYZ commodity is not what Marcus' former bitcoin followers want to here.  These people like to Google bitcoin and see images of gold bitcoin coins and gold bullion and not pork bellies portrayed as bitcoins.


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## tecate

Duke of Marmalade said:


> *These people* like to Google bitcoin and see images of gold bitcoin coins and gold bullion and not pork bellies portrayed as bitcoins.


It's one thing that comes through from your ramblings, your dukeness.  There's no doubt in my mind but that the main issue you have with all of this is the origin of the Bitcoin project.  Afterall, Facebook has been public enemy no.1 the last couple of years and whilst I don't recognise it as a true crypto, it is a digital currency they're proposing.  That you see all the good and none of the bad in that and you repeatedly dismiss the positive facets of Bitcoin betrays a less than wholesome approach to the subject.


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