how do you explain gold's SOV function while not having any real payment usage?
Gold most definitely has a payment function, it was physical transfer of coins and bars. A payment system that lasted off and on for millennium. Even in the 1800s in many areas of the US people would only accept gold or silver coins/bars as payment, and it took some time for the population to become comfortable with paper dollars. That is a payment function for gold. Where do you think the English phrase "In cold hard cash" comes from. It is from people demanding the real payment function of physical coins/bars, not from people demanding paper notes. The "technology" innovation of dollars vs gold was that initially dollars were tokens exchangeable for gold (actually silver, the thaler). Gradually over time this link has been progressively severed through force of law by the primary beneficiary of the dollar issuance.
The frogs have been thoroughly boiled, all that is left is to see how many meals can be made of our meat.
instead of innovation, maybe we should call it "bait and switch"? What NL stated was the false promise given to people to make them comfortable with using paper dollars (the bait and switch). Otherwise many people would not have trusted dollars and continued to demand physical coins (in cold hard cash). Even with the government's false promise many still continued to use coins, which made FDR's executive order necessary. That said, the payment function for dollars IS better than the payment function for gold, which I believe is why dollars won. With gold you are limited to in-person physical transfers. This is very limited so we did have bank notes that people could transfer, but people understood bank notes were not the real thing and they could and did break promises all the time. Comparatively the FED dollar ledger is a superior payment function over gold. With the dollar ledger physical transfer is no longer necessary, banks can move the ledger across oceans as fast as they can move information, this is much more useful than gold coins. And a big plus for most people were dollars were guaranteed by the FED and there was little risk of dollars defaulting (since after FDR's default dollars were only backed by themselves). The point is gold has a superior SOV function, but I believe dollars "won" because they DO have a superior payment function. SOV alone is not enough, again Rai stones are superior to gold in SOV, but that does them no good since the payment function is very poor. Bitcoin has a superior payment function over dollars PLUS a superior SOV function over dollars (and gold). It is the ability to easily transfer value that makes a SOV system valuable. |
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The very first thing to understand about Bitcoin is that its store of value function is at least an order of magnitude more important than its payment or remittance functions. Very roughly speaking, something like 90% of the value of Bitcoin is in something the government cannot possibly replicate without relinquishing control of the money supply. They could create digital money, but that wouldn't touch the lion's share of Bitcoin's value proposition.
We are in agreement, this is also why most of bitcoin's earliest adopters are those who were already looking for a sound money alternative with independent control of the money supply. That said bitcoin's payment or remittance functions are what make the store of value function valuable. The more useful the payment functions are and are used the more valuable the store of value function becomes. Imagine bitcoin with no payment function but the same store of value function, yes the store of value function would work and remain fixed, but it wouldn't be valued very much. This is the fiat money as a technology invention argument on why dollars beat gold, better payment functionality makes a given money system more used, which in turn makes it more valuable. The fact that bitcoin's payment functions are superior to fiat is what makes the project have a fighting chance. I'm not sure I agree here, this seems backward to me. The payment or remittance function is only useful if people value the SOV aspect. Bitcoin has a fighting chance because of its unique monetary policies and its "sound money" function, not because of its payment system. What if Bitcoin's payment system was significantly more limited (for example let's say a payment took weeks because of the crypto or both parties had to be physically present). Bitcoin would still have the fixed 21M supply, but do you think it would be widely used if that were the case? Probably not. And without being widely used those 21M wouldn't have much value. What about Rai stones? They perfectly achieve the store of value function, but since payments are a tad difficult that system did not exactly take off, which in turn limits the total stored value. My point was simply that the more useful the payment function is found to be, the more people use it, which in turn increases the total value of the system. So I think payment functionality goes hand in hand with store of value functionality, not necessarily one driving the other. Many of Bitcoin's early adopters were drawn to the store of value function and sound money principles, but if we see wider adoption it will be due to the usefulness of the payment functionality of Bitcoin. It's likely a majority in the US today disagree with Bitcoin's fixed supply nature and believe the government needs to "adjust" supply to "grow with" the economy. This wrong, but probably 95% of the people I know believe it anyway. They will join Bitcoin for payment functionality first, then benefit from sound money principals as they adopt it. |
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The very first thing to understand about Bitcoin is that its store of value function is at least an order of magnitude more important than its payment or remittance functions. Very roughly speaking, something like 90% of the value of Bitcoin is in something the government cannot possibly replicate without relinquishing control of the money supply. They could create digital money, but that wouldn't touch the lion's share of Bitcoin's value proposition.
We are in agreement, this is also why most of bitcoin's earliest adopters are those who were already looking for a sound money alternative with independent control of the money supply. That said bitcoin's payment or remittance functions are what make the store of value function valuable. The more useful the payment functions are and are used the more valuable the store of value function becomes. Imagine bitcoin with no payment function but the same store of value function, yes the store of value function would work and remain fixed, but it wouldn't be valued very much. This is the fiat money as a technology invention argument on why dollars beat gold, better payment functionality makes a given money system more used, which in turn makes it more valuable. The fact that bitcoin's payment functions are superior to fiat is what makes the project have a fighting chance. |
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the state is just a bunch of people doing what they know to be good, a little education and an investment in Bitcoin will help align self interest with public good and heal any perversions we see today.
Could not disagree with this more. Gold bugs have spent 100 years knowing they are "right" and waiting for everyone else to education themselves understand history and see the light. Never happened. In the meantime the state resorted to banning private possession of gold for almost 2 generations in order to break the public's view of gold as money. The state will fight Bitcoin just as hard. Harder to do that now with 99% of Americans on Social Media Most twitter comments don't focus on concepts for money. Most seem to be about Kim Kardashian and pictures of dinner. I fully agree with you that social media should help with education, I'm just trying to point out it is still extremely difficult, maybe we can cross the education hurdle this time, but maybe not. |
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This is basically where I see Bitcoin going. The coin itself will be (more or less) irrelevant, but the technology (or something like it) will play center stage. The U.S. government isn't concerned about Bitcoin as a threat to the dollar. The IRS has already made it impossible to use as a traditional currency without running afoul of tax code. Report capital gains on every transaction? Yeah right. They knew exactly what they were doing .. marginalizing Bitcoin. Digital currency has been here ever since banks established electronic lines of intrabank credit. This technology will likely be adopted in some form by governments, with their own strings attached (100% oversight). People will go along with it. Middle/upper class Americans simply don't have the stomach for dissent. They've too much to lose. Credit cards work fine for now, and when the time comes, a shift will be made to something a bit more streamlined, all the big players will be right there at the trough, make no mistake.
The tax code is a such a serious barrier to adoption now. Remember the FEDs finally brought down the mob not by convicting on actual crimes, but convicting on tax evasion. The Bitcoin tax rules will be so hard to follow it will function as a trap for most people. If the TV says Bitcoin is for terrorists but both my friends & neighbors use it and have doubled their wealth in the span of a year then I might just consider it.
Greed
We are 100% in agreement on the greed factor, but what if the scenario plays out as: "The TV says Bitcoin is for terrorists and both my friends & neighbors were dragged into court over tax evasion, one got off but lost his house and the other went to jail." Would kinda dampen the greed factor. |
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once again, this is why we need to continue focus on what has got us here, Bitcoin as Sound Money. b/c one day, the sharks will be coming not for your stocks, bonds, or insurance contracts, but your money: All this fancy footwork is to prevent a run on the TBTF banks, in order to keep their derivatives casino going with our money. Warren Buffett called derivatives “weapons of financial mass destruction,” and many commentators warn that they are a time bomb waiting to explode. When that happens, our deposits, our pensions, and our public investment funds will all be subject to confiscation in a “bail in.” Perhaps it is time to pull our money out of Wall Street and set up our own banks – banks that will serve the people because they are owned by the people.http://ellenbrown.com/2014/12/01/new-rules-cyprus-style-bail-ins-to-hit-deposits-and-pensions/hmmm, those personal banks sound like Bitcoin. That is a pretty decent overview of the G20 bank bain-in plan. Unlike coins and paper bills, which cannot be written down or given a “haircut,” says Napier, deposits are now “just part of commercial banks’ capital structure.” That means they can be “bailed in” or confiscated to save the megabanks from derivative bets gone wrong.
Rather than reining in the massive and risky derivatives casino, the new rules prioritize the payment of banks’ derivatives obligations to each other, ahead of everyone else. That includes not only depositors, public and private, but the pension funds that are the target market for the latest bail-in play, called “bail-inable” bonds.
“Bail in” has been sold as avoiding future government bailouts and eliminating too big to fail (TBTF). But it actually institutionalizes TBTF, since the big banks are kept in business by expropriating the funds of their creditors.
Sometimes I seriously consider simply closing every single dollar account and going all in on bitcoin and fully exiting the dollar system. Revolutions have started over less. Even if it all goes to zero at least it was the good fight. |
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the state is just a bunch of people doing what they know to be good, a little education and an investment in Bitcoin will help align self interest with public good and heal any perversions we see today.
Could not disagree with this more. Gold bugs have spent 100 years knowing they are "right" and waiting for everyone else to education themselves understand history and see the light. Never happened. In the meantime the state resorted to banning private possession of gold for almost 2 generations in order to break the public's view of gold as money. The state will fight Bitcoin just as hard. |
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One thing we have going for us though is greed. If there is money to be made holding your wealth in Bitcoin then people will gravitate toward that option.
Had the exact same thought last night. If a new form of sound money is created from nothing, the potential for the largest transfer of wealth in possibility humanity's history will be so tremendous that human greed will have the strongest influence of all. It would only take a few senators on the right committees aligned to Bitcoin's speculative waves, to gum up state attempts to block Bitcoin. They would position themselves as the good guys, but it would really just be greed. |
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The first wave of alts were simple clones, it was almost a given that network effects would hold them back here. However the next wave of alts are going to
a) come with real innovations and then
b) come with government sanctioned force
i think a) and b) are oxymorons. force precludes the need to innovate. thus Bitcoin will always have that advantage. we've already seen the failure of MintChip due to just this dynamic. Yes, I was saying they are different coins and different attempts. The first wave were the clones (which we've already had), the next wave a) will have some level of actual innovation, and the wave after that b) would be government attempts to resist Bitcoin and regain control. the creation of USDCoin would be a tacit admission by the govt that Bitcoin has merit and, paradoxically to their wishes, money will always flow to that platform which treats it best. that can't happen with an inflationary, violent coin.
It would be an admission by the government that Bitcoin has merit. It would also be sold to the public as having all the benefits of Bitcoin with all the security of government money. Given the history of money, this has worked. It did for the FED in the 1930's. |
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I don't understand the fear of alts. I'm into Bitcoin because it's better money, in our history it's the best yet.
Competition is what will make it better. Alts can out innovate Bitcoin on every metric except one, the Network Effect, and this is what makes it useful as a SoV.
I think this significantly underestimates the threat of alt coins and why Bitcoin is not a given (I'm saying this as someone who believes/hopes in the project) For example what if the US government created a USDollarCoin that: 1) has all of the benefits of programmable money, you can have your own wallet and spend it through computing devices 2) has the _perceived_ benefits of centralized control including the ability to "recover" lost coins and "reverse fraudulent" transactions (possibility a majority of people prefer this based on Bitcoin's detractors' views). This could be accomplished with forced use of multisig where the FED has co-control. 3) has significantly easier tax implications to deal with (meaning no tax implications) compared to bitcoin where EVERY transaction is a taxable event 4) launches with mass adoption through automatic bank account conversion 5) was legislated as the only legal currency Maybe that doesn't scare you, but it scares me. The first wave of alts were simple clones, it was almost a given that network effects would hold them back here. However the next wave of alts are going to a) come with real innovations and then b) come with government sanctioned force Network effects & Bitcoin's programmable nature will probably keep a) at bay, however network effect might actually work against Bitcoin if b) ever came to pass. I'm not saying this will happend, and it may seem far fetched today, but it is in the realm of possibilities. The US government lives off of the inflation tax and if Bitcoin ever becomes a real threat, the state will definitely try more and more attempts to maintain control of the money supply. It's possible the proposal above would be a last ditch attempt to save itself. As I have said previously, the beauty of cryptocurrency is that it democratizes the creation of money. Competition is now possible and Bitcoin has obvious competitive advantages solely because of its monetary policy. This is exactly right, Bitcoin enabled real competition with state fiat money and has provided us a fighting chance. My main point was it will be a fight and Bitcoin's success is anything but a given. The USDcoin might have the benefits of digital money but carries with it the devaluation problems and the reliance on a failed, soon to be bankrupt state.
Of course we both know that to the general population this is not a real concern as they do not realize that money is stolen from their pocket through inflation but now that a deflationary alternative is available it won't take long until they realize they're on the wrong side of the fence.
And those views will be part of the fight, a fight proponents of the gold standard lost BTW. The majority today are against a gold standard, I can't count the number of times I've been told that the gold standard caused the great depression, which is blatantly false but has been taught in the common core for generations. I think it will be an uphill battle to convince minds they should prefer "Bitcoin as a better gold standard" over a slow inflation fiat money with _perceived_ security. The views held in this thread are contrary to many many people, even if we know we are "right". |
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I don't understand the fear of alts. I'm into Bitcoin because it's better money, in our history it's the best yet.
Competition is what will make it better. Alts can out innovate Bitcoin on every metric except one, the Network Effect, and this is what makes it useful as a SoV.
I think this significantly underestimates the threat of alt coins and why Bitcoin is not a given (I'm saying this as someone who believes/hopes in the project) For example what if the US government created a USDollarCoin that: 1) has all of the benefits of programmable money, you can have your own wallet and spend it through computing devices 2) has the _perceived_ benefits of centralized control including the ability to "recover" lost coins and "reverse fraudulent" transactions (possibility a majority of people prefer this based on Bitcoin's detractors' views). This could be accomplished with forced use of multisig where the FED has co-control. 3) has significantly easier tax implications to deal with (meaning no tax implications) compared to bitcoin where EVERY transaction is a taxable event 4) launches with mass adoption through automatic bank account conversion 5) was legislated as the only legal currency Maybe that doesn't scare you, but it scares me. The first wave of alts were simple clones, it was almost a given that network effects would hold them back here. However the next wave of alts are going to a) come with real innovations and then b) come with government sanctioned force Network effects & Bitcoin's programmable nature will probably keep a) at bay, however network effect might actually work against Bitcoin if b) ever came to pass. I'm not saying this will happend, and it may seem far fetched today, but it is in the realm of possibilities. The US government lives off of the inflation tax and if Bitcoin ever becomes a real threat, the state will definitely try more and more attempts to maintain control of the money supply. It's possible the proposal above would be a last ditch attempt to save itself. |
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With that possibility out of the way, you are still quite correct that Bitcoin the protocol could fail for technical reasons, so arguably a monoculture in protocols is bad. However, monoculture in the sense of everyone using the same ledger is not a bad thing at all, and it's kind of the point of money in the first place; the only way it could be bad is if the system for updating that ledger were faulty, which again points to the protocol as a possible weak point, not the ledger itself.
TL;DR: Monoculture in protocols may introduce weaknesses; monoculture in a having a single ledger doesn't, and is pretty much the point of having money at all.
This is a great way to look at it. Thank you. |
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If your point is that this has no direct harmful effect on bitcoin itself, I mostly agree (and disagree with cyperdoc) and consider side chains to be a bitcoin application that leads to more demand for bitcoin (to put in the "vault"), except for possible systemic and contagion effects, which are difficult or impossible to reason about in advance.
I never said there are no direct harmful effects, I only said that the allocation is known, and then pointed out how that itself is a large step better than today. |
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It's arguable that after the Brenton Woods agreement that the world did in fact have a single global currency. All other currencies were fixed to the dollar which in turn was pegged to gold (remember foreign central banks could redeem dollars for a fixed quantity of gold even if individuals could not).
Pegs have always been fragile and failed, and that is exactly what happened. That is an argument on why any single system controlled by people (whether a few or many) will almost always fail, not that we didn't have a single global currency for a shortish time period. What I'm arguing is that separate "pegged" currencies are not really one currency after all (and can't be). Relevance to side chains. OK got it, been trying to avoid SC. Side chains are not really pegs though and I think there's been some confusion on that. I think side chains can best be thought of as a vault with some known quantity of BTC allocated to that vault. For example side chain A has 400 BTC allocated to it while side chain B has 4000 BTC allocated to it. SC A can do whatever it wants, but it only has value of 400 BTC, similarly SC B can do whatever it wants, but it can only have value of 4000 BTC. Compare this to gold today. Today we are told the FED's vault has x,xxx tons of gold, JP Morgan's vault has y,yyy tons of gold and Russia has z,zzz tons of gold in their vault. But there is no method at all to verify this. It is up to the vault's word, and even if the vault publishes accurate numbers it's possible they are mistaken and unknowingly have tungsten bars. This is why time and time again pegs to gold (paper products, etc) have failed over and over again. There is no method to verify in real time how the peg is doing. Now compare this to side chains. With side chains you can compute in any given second EXACTLY has much BTC each side chain has allocated to it. You can always know the quantities of each vault. Now side chains can if they want "peg" their scBTC to their BTC allocated to them, or they can not. It is up to the function of that SC and there are no technology constraints. Personally I think economic factors (not technical) will cause people to only use SC's that maintain a peg otherwise it will be very visible that you are being devalued in terms of BTC. |
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It's arguable that after the Brenton Woods agreement that the world did in fact have a single global currency. All other currencies were fixed to the dollar which in turn was pegged to gold (remember foreign central banks could redeem dollars for a fixed quantity of gold even if individuals could not).
Pegs have always been fragile and failed, and that is exactly what happened. That is an argument on why any single system controlled by people (whether a few or many) will almost always fail, not that we didn't have a single global currency for a shortish time period. |
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there are huge advantages and efficiencies to developing a one world currency that is apolitical and controlled by the will of the majority of ppl. we can't imagine it from a digital standpoint except in the context of physical gold which actually worked pretty well for centuries.
Both the advantages of and also the problem in getting to a one world currency are stated in your first sentence. "controlled by the will of the majority of ppl" is the problem in that getting agreement by the majority of people is not an easy or even possible task. A problem for sound money is gaining agreement on what construct to use as the basis for sound money. Gold bugs believe "# of atoms of gold" should be used and many will hold on tight to that belief, but why not other rare metals such as platinum or palladium? Many others (probably a majority today) believe flexible supply controlled by the government is best. Probably all of us here believe "# of BTC on the Bitcoin ledger" should be used, but why not other ledgers? What if the FED created a FEDcoin with all of the programmable money benefits we love combined with centralized control? It is possible a majority of people would gravitate to that. Would many of us here join FEDcoin or keep fighting? The will of the majority is not always right or best and gaining a super majority agreement is unbelievably difficult given the numerous diverse views all 7 billion of us have. |
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We don't have a single currency in the world today, and not even a single reserve currency (where presumably the network effect of liquidity could reign supreme, unfettered by legal tender laws, etc.). I doubt in the history of civilization we ever really have, except perhaps in some isolated simple economies. If the dollar fails, then we can turn to sterling, or bitcoin, or renminbi, or gold. The world has a way of recognizing fragile over-optimization and avoiding it, though sometimes this process takes the form of going to far and having a catastrophic failure first.
One single coin to rule them all is a catastrophe waiting to happen. I doubt that happens though. People recognize the risk and avoid it, which is likely why something like LTC has any value at all (though LTC isn't really the best for this and will likely be overtaken). It isn't for features or even marketing.
It's arguable that after the Brenton Woods agreement that the world did in fact have a single global currency. All other currencies were fixed to the dollar which in turn was pegged to gold (remember foreign central banks could redeem dollars for a fixed quantity of gold even if individuals could not). The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states. The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to gold and the ability of the IMF to bridge temporary imbalances of payments.
....
What emerged was the "pegged rate" currency regime. Members were required to establish a parity of their national currencies in terms of the reserve currency (a "peg") and to maintain exchange rates within plus or minus 1% of parity (a "band") by intervening in their foreign exchange markets (that is, buying or selling foreign money).
In theory, the reserve currency would be the bancor (a World Currency Unit that was never implemented), suggested by John Maynard Keynes; however, the United States objected and their request was granted, making the "reserve currency" the U.S. dollar. This meant that other countries would peg their currencies to the U.S. dollar, and—once convertibility was restored—would buy and sell U.S. dollars to keep market exchange rates within plus or minus 1% of parity. Thus, the U.S. dollar took over the role that gold had played under the gold standard in the international financial system.[20]
Meanwhile, to bolster faith in the dollar, the U.S. agreed separately to link the dollar to gold at the rate of $35 per ounce of gold. At this rate, foreign governments and central banks were able to exchange dollars for gold. Bretton Woods established a system of payments based on the dollar, in which all currencies were defined in relation to the dollar, itself convertible into gold, and above all, "as good as gold". The U.S. currency was now effectively the world currency, the standard to which every other currency was pegged. As the world's key currency, most international transactions were denominated in US dollars.
I think what you are saying though is as cracks form and the single system becomes weaker and weaker humanity exits that system in greater and greater numbers, so that by the time such a single system fails functioning alternatives exist. Today with the dollar in the state it is, you can see multiple alternatives that could function if there was a sudden dollar disruption. |
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for those assets, what are the advantages of decentralization?
Lots of advantages in reliability and assurances. More fundamentally it obsoletes some functions of auditing and government along with the associated costs to society. It automates many of the administrivia of corporation management. If you have ever run a public company, the advantages are more immediately apparent. the pt that i was getting at is that until Bitcoin fulfills Satoshi's visions as a generally accepted and large enough form of currency or money, there will be no such trust or confidence given by the masses or larger financial institutions to embed asset derivatives into the blockchain as the "legal" ledger. what will drive Bitcoins growth is a maintenance of its Sound Money function along with transactional growth which we are fortunately beginning to see w/o a doubt. once it becomes a generally accepted global and apolitical public good as money, then it might be used to embed more riskier assets within the blockchain as with CP. otoh, the blockchain may only ever be applicable to Bitcoin as Money. in which case, all those speculative assets may just be bought and sold with BTC as they will become denominated as such with the records continuing to be maintained by those organizations responsible for enforcing those contracts. if we use Bitcoin to win the Money Game, we win Everything. that is where the problem lies. Yes Yes... This is why I would like to see SPV side chains implemented on some altcoins. In matters such as these, it is not as important to see how things work, as it is to see how they fail and under what circumstances. i would prefer NOT to see the spvp implemented, period, for all the reasons i've already made ad nauseum. let them experiment on federated servers. i'm not even sure how you'd bring an altcoin into a SC with spvp since the monetary properties of such altcoins are usually so divergent and non-sensical to most Bitcoiners it wouldn't be worth anyone's time or effort. I'm quite sure NL was referring to a SPV proof trial test on an altcoin before merging it into Bitcoin. By the time such a trial test had enough time to prove out the various risks of having a multitude of side chains offering new functionality below an established coin, you might just find that usage and gravity inadvertently shifted to that altcoin over bitcoin. I still believe alts are the highest potential threat to the whole experiment. Network effects and the economic need for interoperability between users have successfully kept alt coins at bay so far, but if SC's prove successful network effects might just shift to the tested altcoin. |
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What's unfamiliar to me is how the device gets mobile internet access, in over 60 countries, without roaming or monthly fees:
Amazon does something similar for Kindle readers (they claim 100 countries). I don't know who is being paid or what the payment model looks like. Bought the wife a Kindle DX while we were living in Asia. At the time she spent 2-3 hours a day on buses and subways traveling to various jigs. The Kindle DX connectivity was both free and worked flawlessly everywhere she went. It was one of the few times we've been pleasantly surprised by how well something worked beyond our expectations. But the connectivity was only useful for purchasing and downloading kindle ebooks and not much else. That's a several MB's per month at most and why the model works. Doubt you'd be allowed to run a Bitcoin node over that free connection... |
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