Saxo Bank CEO: Bitcoin Faces Serious Challenges (Needs Link To Real Assets)

[gollum]

"I think Bitcoin will face serious challenges in the long run,
although I believe such digital currencies could have a place in the economy in more well thought-through structures with values better linked to real assets.
...
Anything in the financial space that can be regulated will be regulated. Get used to it! This will also apply to digital currencies. But regulation could be their ticket to real acceptance and success — and should therefore not be seen only as a negative."

• Bitcoin faces regulatory challenge as it gains traction
• Price volatility could scare away serious investors
• Refined digital currency models could ultimately surpass Bitcoin

Lars Seier Christensen Lars Seier Christensen
co-founder & CEO / Saxo Bank A/S

Source: https://beta.tradingfloor.com/posts/bitcoin-faces-serious-challenges-isn-only-game-town-1387698956
Republished: http://www.zerohedge.com/news/2014-02-10/saxo-bank-ceo-bitcoin-faces-serious-challenges-needs-link-real-assets

As I also have mentioned many times the weakness of bitcoin is:
Bitcoin is basically FIAT.

What the world need is a crypto currency that is linked to physical assets such as gold, or financial assets such as obligations, stocks, ETF's or derivatives.

Maybe Ripple, MasterCoin, Protoshares, NXT or something new will become the established asset linked crypto currency.

[1714227644]

1714227644

[Siegfried]

How to link a cryptocurrency to a physical or financial asset without centralized control? Decentralization is one of the main features of bitcoin. If people want a centrally-controlled digital currency, they can continue to use digital dollars, euros, etc. Government fiat currencies are not linked to any physical or financial assets either. It seems to me that that doesn't really matter.

Bitcoin the currency is linked to bitcoin the network, and the capabilities of that network are very useful and much better than anything offered by the traditional banking system. That to me seems like more than enough "intrinsic value" to sustain bitcoin.

[justusranvier]

Bitcoin the currency is linked to bitcoin the network, and the capabilities of that network are very useful and much better than anything offered by the traditional banking system. That to me seems like more than enough "intrinsic value" to sustain bitcoin.

Of course it is. That's why they are so scared.

As long as Bitcoin as existed, there's been a FUD campaign running to convince the clueless that Bitcoin's greatest strength - lack of counterparty risk - is actually a weakness that needs to be "fixed" by backing it with something.

[pungopete468]

As I also have mentioned many times the weakness of bitcoin is:
Bitcoin is basically FIAT.

What the world need is a crypto currency that is linked to physical assets such as gold, or financial assets such as obligations, stocks, ETF's or derivatives.

Maybe Ripple, MasterCoin, Protoshares, NXT or something new will become the established asset linked crypto currency.

Bitcoin doesn't have to be backed by these things because it's not government issued...

Backing of a currency is only necessary when nations are dealing with other nations.

Bitcoin transactions on a P2P basis are backed by the legal system; if you scam somebody you are breaking the law and will be responsible for your actions...

Banks are insured because you entrust your wealth to somebody other than yourself. Insurance is for protection against a central authority stealing your money... Bitcoin doesn't suffer the same problems that require these assurances...

[gollum]

Bitcoin the currency is linked to bitcoin the network, and the capabilities of that network are very useful and much better than anything offered by the traditional banking system. That to me seems like more than enough "intrinsic value" to sustain bitcoin.

Of course it is. That's why they are so scared.

As long as Bitcoin as existed, there's been a FUD campaign running to convince the clueless that Bitcoin's greatest strength - lack of counterparty risk - is actually a weakness that needs to be "fixed" by backing it with something.

Nobody will force you to stop bitcoin even if a gold-backed crypto currency becomes accepted as the no.1 coin.
The market is big enough for all of us.

[Lauda]

What the world need is a crypto currency that is linked to physical assets such as gold, or financial assets such as obligations, stocks, ETF's or derivatives.

Maybe Ripple, MasterCoin, Protoshares, NXT or something new will become the established asset linked crypto currency.

Nobody needs this. That kind of kills the point of crypto.

[justusranvier]

What the world need is a crypto currency that is linked to physical assets such as gold, or financial assets such as obligations, stocks, ETF's or derivatives.

Maybe Ripple, MasterCoin, Protoshares, NXT or something new will become the established asset linked crypto currency.

Nobody needs this. That kind of kills the point of crypto.

That's what they want. The only question is how many people they'll be able to fool.

[gollum]

What the world need is a crypto currency that is linked to physical assets such as gold, or financial assets such as obligations, stocks, ETF's or derivatives.

Maybe Ripple, MasterCoin, Protoshares, NXT or something new will become the established asset linked crypto currency.

Nobody needs this. That kind of kills the point of crypto.

That's what they want. The only question is how many people they'll be able to fool.

This is my vision:
Asset coins - will be regulated and linked to real assets, mostly gold. Their value will be guaranteed by respectable financial institutions and mints.
They will hold 95% of the total crypto market value, it's possible that billions of dollars invested in gold ETF's flows into gold backed cryptos.
These coins will have most of their values contributed to their linked asset, instead the "miners" will make money on transaction fees.
I would not be surprised if such coins have up to 1 trillion dollar in market cap within 10 years, if their usage becomes widespread as the primary way of buying gold.

Fiat coins - Coins with no real intrinsic value (bitcoin, litecoin,... 1000s of other altcoins) will have 5% of the market cap, and be used for shady business and by idealists like you. 5% of 1 Trillion dollars is still a huge number, it means a total market cap of 50 billion dollars for bitcoin, litecoin and other fiat coins. If BTC remains no.1 among fiat-coins it will have a price of 5000 $ - that's 10 times more than today. So why are you guys complaining?

[Holliday]

Bitcoin the currency is linked to bitcoin the network, and the capabilities of that network are very useful and much better than anything offered by the traditional banking system. That to me seems like more than enough "intrinsic value" to sustain bitcoin.

Of course it is. That's why they are so scared.

As long as Bitcoin as existed, there's been a FUD campaign running to convince the clueless that Bitcoin's greatest strength - lack of counterparty risk - is actually a weakness that needs to be "fixed" by backing it with something.

Nobody will force you to stop bitcoin even if a gold-backed crypto currency becomes accepted as the no.1 coin.
The market is big enough for all of us.

In my opinion, backing is a flaw, not a feature. I'm ready to watch an asset-backed crypto-currency compete with Bitcoin! Bring it!

[miketonic]

How to link a cryptocurrency to a physical or financial asset without centralized control? Decentralization is one of the main features of bitcoin. If people want a centrally-controlled digital currency, they can continue to use digital dollars, euros, etc. Government fiat currencies are not linked to any physical or financial assets either. It seems to me that that doesn't really matter.

Bitcoin the currency is linked to bitcoin the network, and the capabilities of that network are very useful and much better than anything offered by the traditional banking system. That to me seems like more than enough "intrinsic value" to sustain bitcoin.

So true. Why would he say that BTC has to linked to some real asset, when FIAT money isn't linked either?

[Lauda]

What the world need is a crypto currency that is linked to physical assets such as gold, or financial assets such as obligations, stocks, ETF's or derivatives.

Maybe Ripple, MasterCoin, Protoshares, NXT or something new will become the established asset linked crypto currency.

Nobody needs this. That kind of kills the point of crypto.

That's what they want. The only question is how many people they'll be able to fool.

This is my vision:
Asset coins - will be regulated and linked to real assets, mostly gold. Their value will be guaranteed by respectable financial institutions and mints.
They will hold 95% of the total crypto market value, it's possible that billions of dollars invested in gold ETF's flows into gold backed cryptos.
These coins will have most of their values contributed to their linked asset, instead the "miners" will make money on transaction fees.
I would not be surprised if such coins have up to 1 trillion dollar in market cap within 10 years, if their usage becomes widespread as the primary way of buying gold.

Fiat coins - Coins with no real intrinsic value (bitcoin, litecoin,... 1000s of other altcoins) will have 5% of the market cap, and be used for shady business and by idealists like you. 5% of 1 Trillion dollars is still a huge number, it means a total market cap of 50 billion dollars for bitcoin, litecoin and other fiat coins. If BTC remains no.1 among fiat-coins it will have a price of 5000 $ - that's 10 times more than today. So why are you guys complaining?

How about you read again what bitcoin is, what its benefits are, what it is useful for. They coin will kill all of that.

[520Bit]

What the world need is a crypto currency that is linked to physical assets such as gold, or financial assets such as obligations, stocks, ETF's or derivatives.

Maybe Ripple, MasterCoin, Protoshares, NXT or something new will become the established asset linked crypto currency.

Fortunately, we have Counterparty/XCP now:

https://bitcointalk.org/index.php?topic=395761.0

[Eastwind]

How to link a cryptocurrency to a physical or financial asset without centralized control? Decentralization is one of the main features of bitcoin. If people want a centrally-controlled digital currency, they can continue to use digital dollars, euros, etc. Government fiat currencies are not linked to any physical or financial assets either. It seems to me that that doesn't really matter.

Bitcoin the currency is linked to bitcoin the network, and the capabilities of that network are very useful and much better than anything offered by the traditional banking system. That to me seems like more than enough "intrinsic value" to sustain bitcoin.

I agree.

Bitcoin is linked to the whole network, internet. So that is the asset backing BTC.

[bitfreak!]

Depending on how you define the term "linked" you could say Bitcoin is linked to electrical energy because each coin requires some amount of computing power to generate.  That's another reason I don't particularly like proof-of-stake, it takes away that energy requirement.

[gollum]

Depending on how you define the term "linked" you could say Bitcoin is linked to electrical energy because each coin requires some amount of computing power to generate.  That's another reason I don't particularly like proof-of-stake, it takes away that energy requirement.

I can never claim back the energy that was consumed during mining.
What I want is a coin where I at any time go and claim a certain asset, may it be 1 oz gold, 1 Apple share or 1 KwHour of energy.

You guys are so into bitcoin that you have forgotten why it was invented in the first place.

Major reasons to invent bitcoin:
-A digital alternative to physical money
-No need for a trusted third party to transfer money
-No need for a trusted third party to prevent double spending

Now it's time to let bitcoin or a new alt-coin evolve to the next step:
Become a public ledger for any kind of contract and be able to trade with those contracts online without the need of a trusted third party.
The value of a contract will of course depend on a trusted third party (issuer), but you will never need the trusted third party to store or transfer the contract.

The technical difference between bitcoin and "asset coin":
-Field for the public key of the issuer of the contract, Perth Mint for example.
-Field for contract details describing what the holder of the coin can claim from the issuer, for example "1 oz Gold".

You will still be able to trade an empty coin (value for issuer and contract not set) but empty coins will probably trade for cents, not for $1000.

[bitfreak!]

I can never claim back the energy that was consumed during mining.

Sure, but that doesn't mean it's not "linked" to the cost of the electricity used to generate the coins. What you are talking about is a coin "backed" by a real world asset with "intrinsic value". But it's impossible to safely back a cryptocurrency with a real world asset because like you said, we must trust the entities claiming to hold the assets. Cryptocurrency is supposed to be trustless, the moment you add centralized trust to the network you go back to square one. But I do agree there could be some value in a coin liked you described, but it's not the "next step" in cryptocurrency, it's simply a different breed of cryptocurrency which would have its own use cases. I don't see why you feel so strongly that one must replace the other, or what ever it is you're trying to say.

[gollum]

I can never claim back the energy that was consumed during mining.

Sure, but that doesn't mean it's not "linked" to the cost of the electricity used to generate the coins. What you are talking about is a coin "backed" by a real world asset with "intrinsic value". But it's impossible to safely back a cryptocurrency with a real world asset because like you said, we must trust the entities claiming to hold the assets. Cryptocurrency is supposed to be trustless, the moment you add centralized trust to the network you go back to square one. But I do agree there could be some value in a coin liked you described, but it's not the "next step" in cryptocurrency, it's simply a different breed of cryptocurrency which would have its own use cases. I don't see why you feel so strongly that one must replace the other, or what ever it is you're trying to say.

I think you misunderstood me.
Nothing needs to replace bitcoin, we simple add text fields for each coin to be used for the issuance of contract, something like "colored coins".
Those fields may or may not be used. You can still trade "clean" bitcoins, while people like me prefer to trade with "colored" bitcoins with gold contracts in them.

[apetersson]

(deliberately ignoring the hairsplitting between currency/money here)

money emerges if there is no backing. the fact that it is considered valuable without backing MAKES it money.

only very few assets have achieved this in the past. silver, gold, fiat paper money, bitcoin. are about the only things that come to mind.

[davidgdg]

The technical difference between You will still be able to trade an empty coin (value for issuer and contract not set) but empty coins will probably trade for cents, not for $1000.

I don't understand. If you hold an asset coin and want to trade it, what do you use to pay the tx fee to the miner?

The answer is empty coin.

So if there is a big and active liquid market for asset coins then the value of empty coins will be high because without them you can't trade your asset coins.

[davidgdg]

I can never claim back the energy that was consumed during mining.

Sure, but that doesn't mean it's not "linked" to the cost of the electricity used to generate the coins. What you are talking about is a coin "backed" by a real world asset with "intrinsic value". But it's impossible to safely back a cryptocurrency with a real world asset because like you said, we must trust the entities claiming to hold the assets. Cryptocurrency is supposed to be trustless, the moment you add centralized trust to the network you go back to square one. But I do agree there could be some value in a coin liked you described, but it's not the "next step" in cryptocurrency, it's simply a different breed of cryptocurrency which would have its own use cases. I don't see why you feel so strongly that one must replace the other, or what ever it is you're trying to say.

I think you misunderstood me.
Nothing needs to replace bitcoin, we simple add text fields for each coin to be used for the issuance of contract, something like "colored coins".
Those fields may or may not be used. You can still trade "clean" bitcoins, while people like me prefer to trade with "colored" bitcoins with gold contracts in them.

Using the blockchain to create a digital asset register for bonds and other contracts (i.e. color coins or similar) is a great idea. But those assets (claims to gold etc) will not be money anymore than a share in a gold ETF is money. Only the empty coins will be money.