Posted on 12/05/2017 5:19:26 AM PST by E. Pluribus Unum
Yes —scarcity. However, bitcoin is built on defined amount of supply to be mined [21 million coins ever, a shade under 17M already mined] therefore the scarcity and future supply is known 100%.
Gold is “scarce” but it’s supply is, in fact, increasing by many tons every year (for example: “Chinese annual gold mining output has grown by 62% since 2007, and first exceeded the 300 tonne level in 2009, followed by the 400 tonne level in 2011. By 2014, it had reached a record 478 tonnes of gold output. In early 2017, the Chinese Ministry of Industry and Information Technology stated that the nation plans to boost annual gold output to 500 tonnes per year by 2020. This would mean gold production growing by an annual average 3% over the 2017-2020 period” - Bullionstar.com). Rising gold prices will spur increased mining increasing supply into the rising market and putting on the brakes to some degree.
Therefore over time, gold’s scarcity is a fluctuating and unknown factor. It is possible that some as-yet unknown supply source will overwhelm the market.
I’m NOT saying this to be negative about gold; I’m just saying that as far as scarcity goes, Bitcoin’s knowns vs. gold’s unknowns work in Bitcoin’s favor.
All those points are true — which is why gold historically is perceived as valuable. I’m NOT arguing against gold in any way.
I’m just saying that for whatever reasons, people perceive it valuable therefore it is valuable. For other reasons, many of which people in stable countries like the US cannot understand, people around the world perceive Bitcoin valuable therefore it is valuable.
“..used to facilitate trade as it is uniquely durable, transportable, divisible, combinable, homogeneous, identifiable and properly scarce” -—
Bitcoin also has those properties —
1) durable: your safe will keep your gold from disintegrating; Bitcoin’s peer-to-peer network of thousands of nodes keeps Bitcoin from disintegrating or disappearing
2) transportable: gold is transportable only within limits. It is much too heavy to be used for any normal sized transactions, and regulations galore limit the amount that one has permission to transport and where it can be transported. Bitcoin is “permissionless”; nobody can withhold permission to transfer any desired amount to any place in the world virtually instantaneously
3) divisible: Bitcoin can be bought or traded in quantities as small as .00000001 bitcoin
4)combinable: Bitcoin is accumulated just as another currency, and there are NO limits as to how much can be transferred in one transaction (try that with gold!)
5) homogeneous: Bitcoin itself is not affected or changed by any other entity; altcoins can fork, but Bitcoin is Bitcoin
6) identifiable: like any currency, cryptocurrencies are their own entities. One can identify a BTC vs and Ether vs a Litecoin etc....
7) scarce — see comments above
I am not a fan of bitcoin; I have no desire to get involved with an “investment” or “currency” that I cannot physically touch and hold. However, it disgusts me that some petty totalitarian would ask to ban it simply because it is outside of the control of bureaucrats. Leave it alone and keep government small enough that decent people don’t feel a need to evade it.
This, friends, is why you shouldn't hold yourself up as an authority on anything, let alone economics, if you can't be bothered to proofread your own work. Childish mistakes like this serve no purpose but to discount any rational point you were trying to make.
I understand your sentiments.
I would point out however, just for the sake of discussion, that many people with such sentiments maintain their funds in bank accounts or mutual funds or the like. Such accounts are not holding their physical currency, they are just ledger entries. Many people have stocks. Those stocks are also just ledger entries today. The days when currency actually was related to a physical backing like gold are long gone.
So people put their trust in ledger entries. By necessity they put their trust in those who GUARD those ledger entries to prevent malfeasance, or even something that might be a simple error like double-spending. But who guards the guardians? What happens when one wakes up in the morning and banks are closed for weeks on end (as has been happening in Zimbabwe and Venezuela and other countries) to prevent currency from collapsing? What happens when the government forces the guardians to open that ledger to force a “savings tax” - as happened in Greece not too long ago - to pay for crushing socialized debt?? Those of us who were investors in 1987 remember not being able to able to withdraw our money from mutual funds who locked their withdrawal functions for days while the market tanked and we helplessly watched the values decline. The guardians of the ledger entries control YOUR money, not you. The ledger guardians of Enron showed that beyond doubt.
At least with Bitcoin, the guardianship of the ledger is distributed (peer-to-peer, not centralized), tamper-evident (blockchain), tamper-proof (through proof-of-work), and permissionless (YOU control your bitcoin unless YOU give your keys to someone else).
Should you put all your money into Bitcoin? Of course not!!! But it behooves everyone to learn about it, and just as gold has a place in everyone’s portfolio, I believe BTC does also.
As you said, Bitcoin the technology (which is only PARTLY Blockchain) is different from Bitcoin the currency application running on it. We are only discussing the currency application here.
“Programmers are constantly forking the code and taking off down their own “better” paths. One day one of these new crypto-coins may become the “new” bitcoin leaving the old bitcoins less valuable and maybe even valueless. “ .... When there is a fork, the holders of BTC get a “dividend” on the forked chain. However, to be successful, the new coin has to be supported by miners and exchanges and wallets. Assuming it is to some degree supported by enough miners, exchanges still consider the chain with the most accumulated difficulty “bitcoin” and the other chain the altcoin. If the new coin is so much “Better” than BTC (at least for a given application), it will stick around but BTC doesn’t suffer. There are over 1300 altcoins now and probably many more coming in the future; some are great for certain things (Etherium for smart contracts, for example). But BTC doesn’t suffer because of it.
Security — agreed on Windows; people should not keep their keys on Windows. Best would be hardware wallets like Trezor or LedgerSNano; other cold-storage (offline) options exist. Many still keep paper wallets. Is this a drawback? Storing gold requires a safe,keys, a guardian, etc...surely keys to a safe can be lost or stolen, guardians become thieves, gold itself become lost, etc.
“Bitcoin relies on complicated systems that no one man can understand well enough to say, “Yes, this system is secure.””....The beauty of the cryptography behind bitcoin is that it is one way. With one seed one can create thousands of addresses so that every bitcoin transaction uses a different address. However, even with the computing power you mention, it would be nigh impossible (or at least use all the electricity on the planet for several million years) to be able to go the other way. BTC is as immutable and tamper-proof as it gets. “Mastering Bitcoin” by Antonopoulos is a great introduction to the technical aspects and explains how the math works in detail. It can be readily understood by anyone with a mathematical bent. It is this same power of cryptography combined with proof-of-work that makes the historical record (the blockchain) tamper proof.
“A man can easily carry a million dollars worth of gold. A single shipping container can transport a billion dollars of gold. Naval ships have been used to carry the gold that settles accounts between governments for hundreds of years. “ ... $1M of gold at todays prices would weigh about 65 pounds I think. Carrying around 65 pounds of gold yourself will probably get you in jail. The ships etc are great for gov-to-gov transactions. What about smaller ones? what about the guy who has to get funds to his family overseas for a medical emergency right away? It would be almost impossible to get the gold there in any reasonable time due to red tape, international limits, etc, and when it did get there it would take time to sell and convert to cash (again with a lot of red tape etc). To say nothing of the cost of shipment. $1M worth of BTC would take about half a second and cost maybe $10 or less in fees.
Bitcoin never claimed to be anonymous. It is, however, extremely difficult to match transactions to owners because their are no identifiers on the blockchain except for sending address and receiving address, and one-way cryptography allows one “account” to use thousands of addresses. However, regulated exchanges such as Coinbase are the touch-points to the government. Most users buy their BTC from Coinbase (but not the only way to buy) and then move it to their private wallets. Once there, it can be stored, moved, or whatever, without permission from any government and without anyone’s knowledge except for the sender and the receiver. At some point, if the holder wants to sell his BTC on an exchange (not the only way to sell) he moves the BTC to the exchange and once again there is a contact point to the outside world.
Interesting that you mention legislation. Japan and many other countries have legalized BTC as currency. China has outlawed it. It has made no difference to the acceptance of BTC in those countries - People in China still are buying BTC and people in Japan are still buying BTC. Exchanges might be affected by laws etc, as would be one’s moral compass, but there really isn’t a way for any government to stop it!
Great discussion -— thank you!
In late 2010, when I first heard about Bitcoin, it was selling for 10 cents per coin. I blew it off, foolishly thinking it was BS. A mere $100 investment back then would’ve bought me 1000 bitcoins. 7 years later, those thousand bitcoins are now worth close to $17 million. ‘Ugh’ doesn’t even begin to cover it.
I thought about it a lot over the years as well. If I’d just done it LAST year, even...
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