Martin Armstrong Discussion

[iamnotback]

As btc nears gold parity the gold bugs have come out against btc hard.

The so called "gold bugs" have been right all along, just none of those guys know enough about bitcoin to articulate why.  The fact is, bitcoin does NOT function as a store of value, period.  The way bitcoin is designed pigeonholes it into acting as a settlement layer, and what is the #1 attribute needed for being a settlement layer?  ...being a store of value.  This makes it kind of inherently designed to fail at what it's supposed to do because bitcoin does not exist in a vacuum, it has to compete against the noble metals.  The noble metals are orders of magnitude better in anti-fragility, store of value, and even decentralization than bitcoin is.

As I said before:

A settlement layer has to compete with or beat gold as a store of value.  Bitcoin cannot accomplish that task so it has to do something else besides being a settlement layer or there is no point!

This means bitcoin's value has to be floated by raw transaction flow instead of people hoarding it for no reason as a store of value.  It is my estimate that you would need something like 5000 TPS in order for bitcoin to function as a raw transaction handler instead of a store of value.  And the following post explains why bitcoin isn't a store of value in the first place:

https://steemit.com/bitcoin/@r0achtheunsavory/the-r0ach-report-vol-7-bitcoin-is-not-an-actual-store-of-value-because-there-is-no-real-price-floor-or-inelastic-demand

I actually agree that you need very high adoption and TPS to achieve any lasting system with crypto. What do you think I am working on!

[sidhujag]

Bitcoin is a settlement system not a transaction processor.. systems can build processors ontop but the core remains settlement. Gold does not come anywhere close to the utility bitcoin provides.. its apples and oranges. Gold has history behind it and that is all.

[OROBTC]

Bitcoin is a settlement system not a transaction processor.. systems can build processors ontop but the core remains settlement. Gold does not come anywhere close to the utility bitcoin provides.. its apples and oranges. Gold has history behind it and that is all.

sidhujag, iamnotback, r0ach

Word definition differences come to mind as I take exception to sidhujag's characterization of gold having but history behind it and nothing else.  

There is a great case to be made that gold is the best settlement!  Once you have bought gold with your currency (BTC in this case), you have already been paid.  You have settled!  You have real wealth, the best wealth for preservation.

With having BTC stashed away, you only have an asset that you really need to turn into something else, to be paid.  You have your BTC, but you have not "completed" the transaction to get paid, to settle.

* * *

I concur w/ r0ach that BTC is to a large degree a Store of Value, that it has some utility being hoarded.  I hoard it!  I spend some BTC, but I also keep some with the expectation that it will be worth more.

So I agree w/ r0ach and iamnotback that as a payment system BTC has a long way to go, especially in handling a large number of transactions.

Thx for leaking a little bit out re your plans that you are working on, iamnotback.  I think that all of us look forward to seeing what you produce.

[STT]

Gold has a history because its durable and time proven to be consistent in its relationship with ordinary commerce, it requires no support system to continue its chemical atributes in our world among the other commodities.  Its likely to keep that status for the rest of my life and beyond, science ability to transend physical limits known for centuries is slow and change is not likely to affect gold and it will stay unique.

Bitcoin is not comparable, its transactional in its worth and more likely a conduit to other value and ideas that may occur in my life time and likely technology related.  Its not proven durable yet and it does require support in order to continue in value and desirability.   Long before Im in need of security in old age I expect bitcoin to have developed into something more sophisticated or different substantially in order to stay active in its value vs competition from other technology based products enabled by modern processing.   There are significant changes occurring in the shallow petridish which bitcoin grew out of, we can presume it'll evolve but its obviously far more challenged in its status due to ease of duplication and replacement.

tough choice. #Not

prices matching doesnt really mean anything of course.  Bitcoin can still be undervalued now, its far more dynamic then gold.   As well being less used there is also less of it, just using one nominal price to compare is not right.   Comparing supply vs demand would maybe be better just like anyone smart enough to compare rent costs vs housing prices had more of an idea 10 years ago;  that housing was not a stable market, and also about its likely next direction.

[tabnloz]

The so called "gold bugs" have been right all along, just none of those guys know enough about bitcoin to articulate why.  The fact is, bitcoin does NOT function as a store of value, period.  The way bitcoin is designed pigeonholes it into acting as a settlement layer, and what is the #1 attribute needed for being a settlement layer?  ...being a store of value.  

A settlement layer has to compete with or beat gold as a store of value.  Bitcoin cannot accomplish that task so it has to do something else besides being a settlement layer or there is no point!

I agree that bitcoin is not a good enough store of value at the moment and it may never be. What chastens me is that despite all the strides forward bitcoin has made, many gold bugs still dismiss it off hand. For them it is still 2013, a ponzi, a pyramid, beanie babies, a scam, just electrons etc etc.

But no one expects (or expected) bitcoin, a digital currency that can only exist because of the internet, to be born fully formed. It had to survive & it has done so. I'd say it is becoming less volatile or at least a less risky proposition as a medium of exchange (see here http://boombustblog.com/blog/item/9277-reference-reggie-middleton-s-bitcoin-investment-risk-vs-reward-calculator-to-compare-btc-to-eur,-gbp,-gold-stocks). Maybe as it matures and expands (and network security & price increase with it) it will become a SoV?

It may never outdo physical gold, but it should have a shot at being the online, digital version of it. It may never be a long term store of value a'la gold, but as an asset of limited supply in an insecure, untrustworthy digital world it is a good bet to increase in value. If that increase in value becomes more stable & measured as the ecosystem expands, who's to stay it can't be a digital SoV counterpart to physical gold?

[OROBTC]

...

On the other hand, I have to salute all of those who predicted BTC price would get higher than gold (now 2.5% higher than gold price).  So even with its higher volatility, BTC investment/speculation has been shown to be a good bet until now.

This really proves little, other than what I have long written: buy gold and BTC.  Safer, and you get a real prospect of making nice gains in one or the other (maybe both if the US$ goes down).

Armstrong addresses gold and Europe (but not Bitcoin) today at his blog:

https://www.armstrongeconomics.com/blog/

TL;DR

Maybe you should not invest in Europe....

[r0ach]

Something I find funny about the economics of bitcoin:

The real interesting question is what is actually happening when the price of bitcoin skyrockets:  Let's use a wild example and say bitcoin went to $100,000.  This would be inflating the general money supply assuming people were buying things directly with bitcoin.  You are placing in a dollar substitute, kind of like counterfeiting (not the greatest term, but best example I could think of).  The overall effect is more money in the system.

Since nobody is buying things with bitcoin directly, it remains a derivative of the USD like almost all other fiat currencies.  This also makes bitcoin constrained by things like dollar liquidity shortages, etc, where federal reserve monetary policy is essentially bitcoin monetary policy.

[iamnotback]

I entirely agree.  This is always the same law: predictions are difficult if they concern the future.  It is the crypto equivalent of Malkiel's thesis, that there's no "smart investor" that *systematically* can outsmart the market, and that in the long run, monkeys playing on the stock market do just as well as hedge fund managers.
 
But of course, on every time slice, there are lottery winners, who think they have something special.

Well not in the small of uniqueness, but as I presume you know, there are ordered repeating patterns in chaos on the large aggregate perspective, i.e. the Sun rises every day and humans have on the average a consistent lifespan and age of maturation. I believe Martin Armstrong taps into this order to increase his odds of being correct about the future macro environment.

https://en.wikipedia.org/wiki/Attractor#Strange_attractor

[iamnotback]

@r0ach, @OROBTC, @STT, and @tabnloz, regarding the recent discussion...

In short, the value of money is the public CONFIDENCE or expectation of the ability that others find it valuable as a store-of-value and/or unit-of-exchange. Bitcoin's confidence current derives primarily from expectations of its future utility, not its current utility. Although Bitcoin's volume is only 1/30,000th of the SWIFT system, it provides enormous utility as value transfer system of greater degrees-of-freedom in that it is unimpeded by top-down barriers, such as nation-state borders and different legal regimes. But the confidence in Bitcoin is limited to those who are smart enough to understand that utility, which is under appreciated by the masses and Bitcoin doesn't have the ability to scale to something that the masses could experience first hand. Yet I can tell you that I already know how to improve blockchains so they can fulfill their destiny. The necessary design is already sitting in an unpublished whitepaper already stored online for safe keeping. Thus @r0ach's complaints against crypto-currency are historic perspectives not forward looking.

Whereas, the confidence of goldbugs in gold is actually a historic perspective which is probably overconfident. The future of gold as a reliable settlement vehicle is dismal.

[r0ach]

Whereas, the confidence of goldbugs in gold is actually a historic perspective which is probably overconfident. The future of gold as a reliable settlement vehicle is dismal.

If it's so dismal, why can't you name a single counter-example to replace it?  You will find nothing to replace the noble metals in this regard.  Bitcoin is also a CURRENCY, not money, just like any attempt to replace bitcoin will also be a currency.  CURRENCY has never been a good investment on a long timeline ever.  Currency never holds value.  It doesn't matter if it's bitcoin or anonymint coin, they all implode to worthless.  They are RECEIPTS for money. 

An educated person can honestly state that bitcoin is almost like an attempt to scam people into redefining what the word "money" means when it can't even fulfill that role and can only be a currency in the first place.

[iamnotback]

Whereas, the confidence of goldbugs in gold is actually a historic perspective which is probably overconfident. The future of gold as a reliable settlement vehicle is dismal.

If it's so dismal, why can't you name a single counter-example to replace it?

I already did. My perspective is future oriented. Gold's dismal future is baked in regardless of whether a replacement is developed.

Currency never holds value.

Please distinguish between the corrupt seniorage system of fiat and that of correctly distributed crypto-currency.

Corrupt top-down controlled systems rot and decay. Decentralized paradigms are antifragile. Gold is no longer decentralized because it has lost its unit-of-account and unit-of-exchange usage, thus the market makers (for liquidity) are top-down controlled.

[r0ach]

Whereas, the confidence of goldbugs in gold is actually a historic perspective which is probably overconfident. The future of gold as a reliable settlement vehicle is dismal.

If it's so dismal, why can't you name a single counter-example to replace it?

I already did. My perspective is future oriented. Gold's dismal future is baked in regardless of whether a replacement is developed.

Your perspective, as I stated in the post earlier, is trying to convince people that a currency = money when it's not.  Anonymintcoin, just like bitcoin, will be a currency and not money.  Money is something that can't arbitrarily be changed by some guy on a random whim when he wakes up in the morning, like Luke Jr deciding he wants to alter the blocksize to some strange number, or change the security model to something else entirely.  Money can't transform to something completely different at random.  That's obviously not fungible or anti-fragile amongst millions of other issues (not that bitcoin is fungible in the first place).  

In the grand scheme of things, cryptocurrency is a complete waste of time and just people trying to fool themselves into thinking they can create money when all they're making is currencies.  Why is bitcoin not banned?  Because the govt loves people wasting their time with currency instead of having actual money.  That and the fact that it's designed as a 1984 tracking system by default.

[iamnotback]

just people trying to fool themselves into thinking they can create money when all they're making is currencies

Decentralized unit-of-account and/or unit-of-exchange are essential to decentralized store-of-value.

Don't conflate centralized fiat (what you name 'currencies') with those properties of money.

[r0ach]

Decentralized paradigms are antifragile.

The fact that bitcoin can be so called "upgraded", which really just means changed, means it's not anti-fragile by default.  Being able to be changed is a actually a bad thing that makes it not anti-fragile, or fungible, or money in the first place.  It's why crypto will always be cryptocurrency and never money.  We are all just fascinated by complex Rube Goldberg machines.  Obfuscate something to the nth degree until nobody knows what it's traits really are or what it's really doing.

Ok, time to pump this here coin.  Oh, what's that?  In order to believe it doesn't have value someone is required to have a computer science degree and then spend years dissecting it's traits in order to figure that out?  And even then, multiple computer science majors will have completely differing opinions because it's almost impossible to be a master in all required subjects?  Perfect, let's create an ETF before anyone discovers.

[iamnotback]

The fact that bitcoin can be so called "upgraded", which really just means changed, means it's not anti-fragile by default.

Agreed. But don't dismiss the future before it happens. Blockchains are only in the Pong and Pacman stage of maturity.

[tabnloz]

The fact that bitcoin can be so called "upgraded", which really just means changed, means it's not anti-fragile by default.

Agreed. But don't dismiss the future before it happens. Blockchains are only in the Pong and Pacman stage of maturity.

This is basically the essence of the argument; Roach is arguing historically, iamnotback arguing future-oriented (as per his Knowledge Age thesis)

What Gold already is, Bitcoin may become.

Perhaps both are right. Perhaps not. Perhaps Bitcoin will last for 5, 15 or 50 years or only another 5 minutes. I do think it is beneficial to everyone reading this thread that Roach & iamnotback are able to state their views so well.

Even if it only lasts my lifetime and never compliments Roach's 'noble metals', to be a relatively early adopter when the tide of progress seems to be transitioning to internet based in a risk worth taking. I think Roach is even saying this too (that Bitcoin may continue to rise in popularity/utility/price). I don't know if I'll be able to keep btc as btc for long term or if btc will ever evolve to SoV. Here's Vinny Lingham putting it way better than I ever could

https://vinnylingham.com/bitcoin-commodity-store-of-value-or-digital-currency-93457cd27c9c#.zc1y6hvdb

For me, I try to think in terms of risk/reward. My risk is extremely low and quantified while my reward is possibly life changing. I already have gold and am covered in the Roach eventuality.

[jbreher]

The fact that bitcoin can be so called "upgraded", which really just means changed, means it's not anti-fragile by default.  

On this point, you minsunderstand the definition of anti-fragile. By definition, in order to be anti-fragile, a thing must be able to evolve.

Things that are unchanging are capable of being non-fragile, but they are incapable of being anti-fragile.

[r0ach]

The fact that bitcoin can be so called "upgraded", which really just means changed, means it's not anti-fragile by default.  

On this point, you minsunderstand the definition of anti-fragile. By definition, in order to be anti-fragile, a thing must be able to evolve.

No, it does not.  Money is supposed to be boring - it's not supposed to "evolve" from a metal bar into a tarantula when you look away to the TV then back to it.  If it evolves it's not fungible, and what the hell is the molding force causing this evolution?  It's definitely not a nash equilibrium.  There would always be holdouts or people who want to evolve differently, and then the entire thing is just complete arbitrary nonsense of what cutoff level you set for voting.  That's mob rule, not anti-fragile.

Voting doesn't belong in money.  Voting is nothing but an attack vector.  It's like that sig you sometimes see that says "democracy is the original 51% attack".  A fork isn't an upgrade, it's an attack sanctioned by mob rule.  You have mob rule of the proletariat (users) vs oligarchy of capital owners (mining cartel).  The second these two factions have to come to the table against one another you probably just end up with a rough consensus attack and the whole thing blows up anyway because their interests are not aligned whatsoever.

If miners believe it's required to add inflation to bitcoin to fix the security model (which it probably is), then they would probably do something like that, while a giant portion of users wouldn't want their coins inflated and would switch to something completely different like proof of stake.  There is no fungibility, consistency, or anti-fragility in any of this.

[OROBTC]

...

This below definition and commentary re ANTIFRAGILE comes from Wikipedia (https://en.wikipedia.org/wiki/Antifragile) re N. N. Taleb's book:

"Taleb introduces the book as follows: "Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better".[1] Hormesis is an example of mild antifragility, where the stressor is a poisonous substance and the antifragile becomes better overall from a small dose of the stressor. This is different from robustness or resilience in that the Antifragile system improves with, not withstands, stressors, where the stressors are neither too large or small. The larger point, according to Taleb, is that depriving systems of vital stressors is not necessarily a good thing and can be downright harmful.

More technically, Taleb defines antifragility as a nonlinear response: "Simply, antifragility is defined as a convex response to a stressor or source of harm (for some range of variation), leading to a positive sensitivity to increase in volatility (or variability, stress, dispersion of outcomes, or uncertainty, what is grouped under the designation "disorder cluster"). Likewise fragility is defined as a concave sensitivity to stressors, leading a negative sensitivity to increase in volatility. The relation between fragility, convexity and sensitivity to disorder is mathematical, obtained by theorem, not derived from empirical data mining or some historical narrative. It is a priori".[2]"

The above is not directed at anyone in particular.  But, I have noticed sloppy definitions and use of words and concepts here at bitcointalk.

I am enjoying this discussion, but definitions matter, else we would be talking about different things assuming we were not.....

* * *

Taleb's book is extremely interesting, I need to read it again as it is dense material.

[r0ach]

That definition is somewhat like a theoretical geometric structure or material that gains strength the more pressure you apply to it.  Using that terminology for bitcoin is obviously wrong since Bitmain doubling their pools hash rate does not double the security of bitcoin lol.  So really, that specific definition does not apply to bitcoin or metals, only the colloquial version does.