Bitcoin Forum

Full title: Nick Szabo: Central Banks May Turn to Cryptocurrency Reserves Over Gold

At the Israel Bitcoin Summit at Tel Aviv University on Jan. 8, veteran cryptographer Nick Szabo explained that the use of censorship-resistant cryptocurrencies will rise in countries sanctioned from trade and economies suffering from failed monetary planning. Szabo also argued that the world’s central banks might turn to cryptocurrency reserves in the future in order to supplement national gold reserves.

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Cryptographer Nick Szabo is an interesting character and a well known figure in the cryptocurrency community. Long before Satoshi Nakamoto introduced Bitcoin, Szabo designed the Bitgold concept back in 1998. Two years before that, Szabo’s writings forecasted the use of smart contract technology and autonomous organizations. On Jan. 8, Szabo spoke at the Israel Bitcoin Summit at Tel Aviv University and gave the crowd a history lesson on the use of currencies worldwide. During the talk, Szabo explained to attendees that he believes countries blacklisted from trade and regions dealing with hyperinflation will turn to digital assets. Over the last two years, cryptocurrencies like BTC and BCH have been gaining traction in areas like Venezuela, Zimbabwe, and Iran.

According to attendees at Tel Aviv University’s cryptocurrency event, Szabo’s keynote was in response to comments made by Avi Simhon, senior economic policy advisor and Israel’s head of the National Economic Council. Simhon remarked at the summit that Bitcoin technology is “intrinsically inefficient” and “will disappear.” Moreover, the economic policy advisor for the prime minister explained that using the technology on a global scale would waste “trillions of dollars of actual cost in energy.”


Of course, Szabo wholeheartedly believes in cryptocurrencies and his talk explained the many benefits of the digital revolution. Additionally, Szabo asserted that it is possible in the future some of the world’s central banks will turn to cryptocurrencies rather than gold.

“There’s going to be some situations where a central bank can’t trust a foreign central bank or government with their bonds for example,” Szabo emphasized during his talk. “One solution that’s been developed is to have the Swiss government hold it for you – that’s not a trust minimized solution. The Swiss government itself is subject to political pressures and so a more trust minimized solution is cryptocurrency.”

Szabo continued: 


Over the last few weeks, a number of top market makers and economists have asserted that the world is facing tumultuous times. Traditional investment vehicles like equities and stocks have been extremely volatile, but precious metals markets have recently seen significant gains. In contrast, this past Monday the spot price of gold touched a six-month high at $1,288.03 per ounce and gold futures settled at $1,289.90 per ounce. Meanwhile, because of increased demand and worldwide shortages, palladium hit an all-time peak in value this week.

During the speech in Israel, Szabo seemed to be far more confident about the future of digital assets over precious metals. Many cryptocurrency proponents over the years take the cryptographer’s predictions seriously because of his early forecasts about the future of smart contracts. An audience member at the Tel Aviv summit even quoted Szabo for saying “Bitcoin could survive a nuclear war.”

Source: https://news.bitcoin.com/nick-szabo-central-banks-may-turn-to-cryptocurrency-reserves-over-gold/ (https://news.bitcoin.com/nick-szabo-central-banks-may-turn-to-cryptocurrency-reserves-over-gold/)

let's suppose that yesterday some bank had bought bitcoin for the price of  $4000, The bank would take 4 billion dollars and Bum buys bicoin for the price of  $4000 and today they look at the bitcoin price:

1 btc =  $3500

the bank stay with many losses in less than 48 hours... bitcoin is very volatile

3 Volatile Technology Stocks for the Risk Taker (GOOGL, FB) (https://www.investopedia.com/articles/markets/030816/3-volatile-technology-stocks-risk-taker-googl-fb.asp)

You know what I love about cryptos? It can be a reserve fund, it's p2p, and you'll only need your public add plus private key. The only downsides are: scalabity, phishing, and its volatile nature.

Gold is shiny and has stable value. But you'll need to destroy the environment in order to have more of it. It's heavy and always a pain in the as* with transportation, you'll be needing four wheeled vehicle with the highest security level, plus papers.

If gold were only a decade old, it would be very volatile too. I don't think that's a strong counterargument to what Szabo is saying.

It's all hypothetical, but in the case of global mainstream adoption the volatility should greatly decrease eventually. Decades from now, most of the speculative potential would be gone and so would the fear and skepticism that Bitcoin = tulip mania. In that context, cryptocurrency could provide central banks with better risk-minimizing features than what gold already offers.

Nick Szabo talking about cryptocurrencies and Gold?
Expected.

Look what I found:
Nakamoto Institute with this paper from 2005 related to Bit-Gold:
Access link here (https://nakamotoinstitute.org/bit-gold/)

In Romania, we joke that Hungarians want the 'Ardeal' which is a fantastic region of Romania, close
to Hungary. It has good economy and offers many opportunities for entrepreneurs.
Nick Szabo is Satoshi Nakamoto who tried to get some money so he can buy Ardeal for Hungary.

Jokes apart, many hungarians are outperfoming
others in finance, business economics. Do I have to mention George Soros?
I HIGHLY SUSPECT THIS GUY TO BE MR NAKAMOTO.

Lets see that in 1 year or 2, or even 10 years... Banks can afford to hold for the long run, and Asians are a bit more long term minded, so it wouldn't surprise me if Asian Banks do it first...

Bitcoin is an asset that has gone from zero to $3500 over the span of 10 years, not from 20k to 4k in 1 year. Short term thinking is a problem of certain western countries, they just can't see past a year quarter...

Perhaps that explains why the majority of Bitcoin users are Chinese. That, and the fact that they hate debt. They rather live in poverty 20 years to save their earning and then buy a luxury home in a single payment, than getting in debt to buy it now and then be paying over 30 years...

The Chicago school of economy (the prevailing trend) is the one that promotes debt for "fast" growth (and its subsequent but inevitable "recession" afterwards), and that is fueled by fractional reserve banking. Entire societies are living in vapor, which could disappear tomorrow; unlike Bitcoin.

Diversifying their reserves would also shield them in case a sudden drop in the price of gold, such the discovery of a new source, or from space. Remember this is true long term thinking, not even the next decade...