Bitcoin Forum

He's the author of Currency Wars (http://www.amazon.com/Currency-Wars-Making-Global-Portfolio/dp/1591844495/ref=sr_1_1?s=books&ie=UTF8&qid=1328123695&sr=1-1), and he's coming to my class tomorrow. He advocates a return to the gold standard.

What would be the best way to pitch Bitcoin to him?

My line of thinking is that we have uncertainty in the rate of growth of the gold supply, but we have much greater certainty in the quantity of Bitcoin being produced. The issue of transport is also solved - simply send (a series of) transactions over the network to transfer a large Bitcoin holding.

One very strong argument against Bitcoin is the public transaction ledger: corporations / governments / individuals would not be able to conduct secret transactions.

Funny, I've always thought of that as a plus, not a minus.

I'd run with the simple fact that gold can't be shoved down a wire and spent online, and that any gold-backed electronic commerce comes with all sorts of risk from the centralization necessary to operate it.

"Online commerce is here to stay, and we need digital cash. Would you prefer it be golden fiat, yet another promise-to-pay that can fail like it has before, or to be an actual digital commodity, limited in amount and with a free-market exchange rate, that's almost frictionless in it's utility, and that is always paid-in-full?"

My understanding is that while the transactions themselves are public, the identity of whose is carrying them out isn't. It can be deduced with some degree of effort, but it can also be hidden by taking the appropriate steps if so desired.

I would not argue against a gold standard to Jim.  Besides, I don't think he's in favor of a gold standard per-se.  Gold standards don't really work…they inevitably break down because the temptation to counterfeit is too strong.  But gold is a very good barometer for the health of a currency and a government should pay attention to the exchange rate of its currency with gold.  I think Jim argues that the US needs to defend the value of the dollar by targeting a rate of exchange with gold for a period of time in order to restore confidence in the value of the dollar.  It's possible they are already doing that, but simply not overtly stating it (in other words, the FED might have a target of say $5000/oz that they are seeking in order to sufficiently devalue the dollar and yet do it in a managed way over an extended period of time).  

It seems to me that a significant devaluation of the dollar is the least bad outcome for resolving the over extended debt situation that we have...if it can be managed without degenerating into a hyper-inflation.  The alternative is lots of insolvencies and chaos.  It's the nature of fiat currencies that they don't deal well with debt contraction.  But people need an effective vehicle to move out of various kinds of debt backed instruments for that to work well.  Unfortunately it isn't that easy for people to transition into gold (and I'm talking physical, not a paper substitute, which is just another form of debt), so it doesn't function as smoothly as you would like for the purpose of people shifting out of debt backed instruments like the dollar.  That's where bitcoin can come in.  There have been some prominent articles about using gold in various ways to facilitate this shift and avoid complete chaos and breakdown (one recent article proposed the government introduce gold backed bonds).  Bitcoin would be a far better instrument for this purpose if only it were more widely known and used.

I would suggest you read this article before talking to him: http://www.libertariannews.org/2011/06/21/against-the-gold-standard/

It is by far the best article I've seen written that explains the problems with a gold standard and why bitcoin (and its free floating exchange rates) are the perfect digital complement to gold.  I'd recommend you find some abbreviated way of expressing the view of this article to Jim Rickards.

Well it shouldn't be too hard. Think if you just bought something from a company with BTC, then you can trace your coins through that company's transactions forever. Alternatively, if there was some large, publicly-known transaction -- say a government purchase -- then you will be able to know exactly what the government does with all those coins.

Governments and companies will not like this aspect, and I'm sure that there are block chain analysis companies / tools in the works. Ultimately, companies and governments will have to accept Bitcoin for it to take hold long term.


Thanks for the article, Steve.

Rickards seems to be encouraging a gold-backed currency for use in international trade, such that countries could not unilaterally drop the standard (or if they did, they would lose the ability to conduct trade).

He also advises a significant amount of study before implementing a new standard, calling for one "flexible enough to accommodate modern central banking practices."

Jim Richards is favor of the gold standard if the gold is priced according to the market, which is very very high right now.  I heard that from his interviews a couple months back.

Ask him what he thinks of bitcoins, tell him that Jim Willie publicly endorses bitcoins already.  He should definitely know who Jim Willie is.

Ask him if he believes the free market to be the toughest and sufficient regulator or if he believes there needs to be a central authority regulating either the market or at the bare minimum the monetary policy and then cry when he picks the later.

Jim Rickards knows what's up, he is an insider and will tell the truth but he is not an Austrian economist who believes in the free market, he would want to go back to a managed gold standard which is just as flawed as what we have today. I want to go forward to a free market of competing currencies where the market picks the money and it's value.

So I believe pitching Bitcoin to him will be kinda pointless.

Right, but that's not really a gold standard, that's basically what we have today.  Although, if he's promoting an international, gold backed currency for use in trade, then he probably does have a traditional gold standard in mind for that (basically, you have a token of some kind that is exchangeable for a certain amount of gold).  As I said before, the temptation to counterfeit is too strong…it would only be a matter of time before that too would break down like all other gold standards before it.

Ask him why a war with Iran is so important that an otherwise respected analyst would damage his credibility by downplaying the fallout to the possibility of some minor equipment loss on the part of the US.

I believe I know the answer, but it would be interesting to know what comes out of that particular horse's mouth.

This only makes sense if you assume they use only one address (or very few). But using an address per transaction, as is common, makes tracing very much more difficult. You could not distinguish between internal transactions and external ones without knowing all the addresses held by a company/govt.

If you bought something from a company with X coins, you could watch as the coins were tranferred/split/combined over and over but you would never know after that first address who the owner of subsequent addresses were. They could be regurgitated in the same company's ledgers, or they could hit MtGox and then be passed onto other traders.

The only thing you would probably know is that future coins to that same address would be associated with the company. Using a new address for each transaction makes this kind of useless.

I would stress the main advantages of bitcoin compared to gold : Easy and cheap to transfer. The sound money of the new era, where information only takes milliseconds to transfer from any point of the globe.
Just that easy pitch will make him interested, and i'm totally sure he'll understand very fast all the implication of bitcoin.

Not sure he'll understand the open source side, or any technical information, so don't go to far on that. Just saying that the system is still working besides a big incitative to attack it, and that professionals are confident it'll keep working.

Can you link to that endorsement?

If I was going to ask him anything I'd ask him this:

"What would you say if I told you someone invented a digital commodity that behaves much like gold in the real world and people actually believe in it for $6 a pop?"

A&M?

I suggest these tables. He should see the key significance.

	Fiat	Gold	Bitcoin	Ideal Unit
Decimal Shift:	<	>	>	Gold/Bitcoin
Divisibility:	Unlimited	Physical Limits	Unlimited	Fiat/Bitcoin
LT Price Stability:	Yes	No	Yes	Fiat/Bitcoin
Needs Infrastructure:	Yes	No	Yes	Gold
Supply Mgmt:	Central Banks	Producers	Participants	Bitcoin?

Clarification (https://bitcointalk.org/index.php?topic=61334.msg721641#msg721641) on the decimal and divisibility.

[Item Supply]	[Fiat Units]	[Fiat Price]	[Bitcoins]	[Bitcoin Price]
100	100	1.00	100	1.00
1,000	1,000	1.00	100	0.10
10,000,000	10,000,000	1.00	100	0.00001

[Item Supply]	[Bitcoins]	[Bitcoin Price]	[Decimal Shift]	[Resulting Price]
100	100	1.00	N/A	1.00
1,000	100	0.10	->x1	1.00
10,000,000	100	0.00001	->x5	1.00

• With fiat, the money supply expands indefinitely as per the issuer.
• With gold, the money supply expands according to producer capacity and can be divided to about the gram level.
• With Bitcoin, the money supply can be subdivided indefinitely as market forces demand.

If fiat were to be reversed in its decimal movement, it would preserve purchasing power. However, the problem of management would remain.

Gold's greatest benefit now is that it might be all that's left in the event of infrastructure collapse.

Bitcoin offers price stability and a stable purchasing power all in one, effectively satisfying the Triffin dilemma (http://en.wikipedia.org/wiki/Triffin_dilemma).

The infrastructure needed depends on what you require as basic functionality. I can't buy design work from a guy in Hawaii for gold without a hell of a lot of infrastructure. 99.9999% of people are out of my reach in regards to trading using gold without any infrastructure.

Granted in the 0 infrastructure word gold still exists and Bitcoin kind of doesn't anymore. But for anything resembling the real world, Bitcoin infrastructure grows to exactly where you want it nearly instantly "Hey guy, download Bitcoin".

edit: I see you already said most of this.

I would present Bitcoin as complementary to gold rather than as a replacement of gold, while focusing on both the similarities between Bitcoin and gold and also how Bitcoin can complement gold for example for long distance small transactions over the Internet. 

If he likes gold, make sure to mention Coinabul! :)

Most people would use cash in such a case unless you talk about a hyperinflation.
Both cash and gold can be forged but cash is much more common.

Yeah!



What do you mean by this? I know that it can be divided down to 10^-8 units, but no further. Are you referring to something different?

We could change the code to allow further subdivisions if necessary. It would still maintain the 21 million bitcoin cap.

Great article, thanks.  Just bought currency wars, which I am looking forward to reading..

Two possible meanings of that. Off-chain accounting could go smaller, but we can only settle (for now) to 10^-8. The protocol can be modified for extra precision, I don't know how hard of a change that is. So it's fair to say that Bitcoin as we have it has limited precision.

I'd love to hear an update as to what Rickards had to say about Bitcoin...

Ok, so he entertained questions about the IMF and SDRs (http://en.wikipedia.org/wiki/Special_Drawing_Rights) most of the time, but I asked him about Bitcoin at the end, and his response was pretty basic:

"Bitcoin looks great as an exchange currency, but not as a reserve currency (http://en.wikipedia.org/wiki/Reserve_currency)."

He had heard of it before, so I didn't have to explain it to him. Very interesting talk overall, but it was focused more on how a global currency crash would happen rather than exploring options for new currencies.

well you dont need to send coins through the network to give someone some bitcoins

so ya corporations / governments / individuals will still be able to conduct secret transactions.

but they will need to exchange the bitcoins in person

Color me unsurprised that Rickards was familiar with Bitcoin.  I'd wager that he understands even the technical details better than a majority of those on this board.

Lamentably, I must agree with Rickards that Bitcoin is not a very suitable reserve currency.  Although I sense that Satoshi might have had some impulse in this direction, the focus on making it a decent exchange currency both initially and more significantly as a goal of it's recent evolution have simply not been in that direction.

I do have hope that Bitcoin will inspire a purpose oriented and successful reserve currency solution and have hope that it will come into fruition prior to Bitcoin's collapse.  A collapse which, although I dearly hope does not occur, I expect will be assisted when the timing is most opportune.

Thanks for the update, BTW.

Why in person? All they really need to do is encrypt a private key and attach it to an email or some other messaging system. Or dead drop a flash stick. But there's little difference between that and sending it normally on the network as any receiver would still want to transfer funds into a new address.

One could send the funds to a Cassacius coin and then dead drop the coin (or FedEx it). That way the private key is not exposed. No different than just sending on the network.

Hmm I am still waiting for a good translation from this one

http://en.wikipedia.org/wiki/Currency_Wars

If bitcoin ever became the number one exchange currency; it would inevitably become a reserve currency too.

"Reserve" fundamentally means that huge numbers of people (traditionally governments) hold it for its store of value properties.  In which case it's a popularity contest, and is nothing to do with fundamental currency characteristics.

In short: it doesn't matter.  Bitcoin can do its thing and might become popular enough to become a "reserve".

there is no reason it cannot become the global reserve currency (as long as the code remains secure). 

in fact, i'd argue it would function better than the USD as a reserve currency.  the reason is b/c it is not controlled by any one gov't to that gov'ts advantage.  the Fed/US gov't constantly manipulate the USD to its own benefit.

with Bitcoin, this can't happen.

the reason Bitcoin would function as a global reserve currency better than gold is to understand how gold functioned in the past.

countries had to ship gold bullion from country to country over the seas when a particular country got too far out of balance with its money supply.  piracy was in vogue back then.  not to mention the lag effects.  

then countries decided to store their gold at places like the LBMA or at Fort Knox.  that hasn't worked out so well either due to the opacity and risk of storing the gold within one countries borders.

these problems cease to exist with Bitcoin as gov'ts could instantly rebalance their books every nite and instantaneously if need be.

Having Bitcoin:

 - serve as an exchange currency for 6 billion people buying skittles

 - serve as a reserve currency with as solid a support as gold and it properties or the USD and nearly half of the world's military expenditures

 - operate in a decentralized manner with minimal reliance on corp/gov sponsored/controlled infrastructure

is, in my opinion, a pipe dream.  It may be theoretically possible to achieve 1 and 2, or 2 and 3, but not all three.

Bitcoin would have to do a 180 degree turn to be the kind of reserve currency that I envision, but even then it would be carrying significant baggage and I very much doubt that it would survive the stress very gracefully.  But there is no real reason to try to hammer this square peg into that round hole in my opinion.

Bitcoin would most certainly solve the Triffin Dilemma (http://en.wikipedia.org/wiki/Triffin_dilemma).

I couldn't have said it better myself!

There's still plenty of room for various financial systems to interoperate on a global basis, just as there is a range of political systems that work to varying degrees of success depending on an indigenous society's biases (i.e. there is no one-size-fits all in the same way teenagers can't be managed the same way as older adults). I especially think a Bitcoin/gold hybrid as reserve platform may offer the best possible foundation for most of the world.


Your opinion is understandable. I'm curious as to what the reasoning is, though.

As an exchange currency, theoretically unlimited divisibility supports that, either directly or indirectly as highlighted by FreeMoney:


Functioning as a reserve currency relies upon the existence of modern telecommunications infrastructure, again offering a base from which derivative currencies can operate in the off-chain method suggested above. By operating in a hybrid manner alongside gold, wherein gold acts as the physical link to the abstract reserve crypto-currency, gold can be held locally or distributed as seen fit by respective owners while Bitcoin is used for large-scale balance-of-payment transfers.

Gold would only need to be physically moved when the owner decides a threshold has been met; gold stores would follow Bitcoin flows. Also, the potential of infrastructure collapse is largely mitigated, since the independent wealth store can provide a fall-back until the crypto-currency system is restored.

Decentralized operation of the system precludes complete elimination of Bitcoin by any known, conventional methods of attack by established institutions. As for physical infrastructure reliance, the move is already aimed toward mesh networks (http://twitter.com/NobleNomads/statuses/156114539803447296) that cannot be shut down by central authorities. Adoption of such a distributed hardware environment to match decentralized software platforms is likely to occur much more rapidly than the shift from wired to wireless networking. This will remove the "kill-switch" that centralized institutions currently hold over the telecommunications infrastructure.

I think the key to all three of your points being met is the physical hardware paradigm (http://twitter.com/NobleNomads/statuses/164134057247113216).

If you have links to prior discussion/explanation on your position, I'd be glad to check them out.

After the above post, I started a set of documentation which explains my thoughts better.  It probably won't be ready for initial display for a few weeks (and perhaps never.)  If/When it is, I would be utterly delighted to get your and anyone else's feedback, critique, input, etc.

My concerns about Bitcoin scalability is rooted in my study of this document and it's directly linked material:

  https://en.bitcoin.it/wiki/Scalability

For one thing, I consider 'keeping up with Visa' to be potentially a very low bar to set.  Another thing that I have significant concern about is the ideas of 'supernodes' and certain things about the bandwidth provisioning.  Although I do find it technically plausible to arrange supernodes as clusters of processing units with load balancers distributing work, I do *not* believe that I will feel compfortable with the function of my currency system relying on the function of such hardware (and software) in light of the potential for coordinated attack by the state and corporate adversaries.

A crypto-currency solution, or set of solutions which do not anticipate and actively guard against a coordinated attack such as I've eluded to are a much less interesting solution to me than ones which do.  Frankly, I feel that any crypto-currency solution which operate within a free and semi-functional economy are mostly just interesting novelties.  But the world is full of interesting novelties and there are many which are far more interesting than crypto-currencies.  We see much less interest in Bitcoin at this point than I would have expected, and I believe that a fundamental reason is that it is simply not a necessary thing at this point in time.  If and when it is, I want it to have a good potential to live up to it's promise.


I researched the state of mesh network development a few months ago and was horrified to be honest.  To the extent that mesh networks might work at all, I think that anyone who is anticipating a network experience which remotely resembles the Internet that we all know today is in for a fairly big shock.

My best hope is that a handful of people are able to achieve something which harkens back to UUCP if the 'Internet kill switch' is ever flipped.  (In fact, I suspect that it actually would be UUCP initially.)

I puttered around with some documentation this weekend.  It is not close to ready for presentation, but has enough material to potentially be of some interest to the handful of people following this thread:

  http://www.bakcoin.org

Good points about mesh nets, and I agree with the current assessment. I think that could change pretty quickly, though.

I haven't had a chance to read through your page yet; I'd be glad to discuss further - might be good to start a different thread.

Hah!  Inspired by the 2013 conference, I was just trying to find more info about Kaminsky and his recent proof-of-work projection and discover that I was not the only one who was underwhelmed by that document:

  http://www.youtube.com/watch?v=bifnDbPdCTI  (around 4:20)

I watched the whole thing and it reminded me that I was going to fuck around with 'nooter' one of these days.  In fact, it reminded me that it even existed.

Didn't find much about what I was originally seeking though.