Gold vs bitcoin

[5grainsilver]

They are not comparable.

Gold has industrial and aesthetic use.  It has real world use outside of just being a store of value. 
Bitcoin is nothing.  It has one use, and that is to exist and be exchanged. 
 
Gold is unique.  There is not a system or method that can be used to create another metal that is like gold with its properties and scarcity.
Bitcoins themselves are unique, but they method used to create them can be duplicated by millions of computer savy people around the world.  Just change the name and start over.  IE Namecoins.

A good metaphor here is my feces.  Every time I produce one it is unique(scarce), but that by itself doesn't give it value.  It also takes me some good healthy food and nutrients to produce it.  But guess what?  That is my problem.  I can't convert that feces back to food so why would anyone care that it took me a $50 filet mignon to make it.  Doesn't matter to them.  That is kind of how I see bitcoins lol.   

Trying to compare bitcoins to gold is living in fantasy land. 

[MoonShadow]

They are not comparable.

Gold has industrial and aesthetic use.  It has real world use outside of just being a store of value. 
Bitcoin is nothing. 

Gold's industrial uses are negligible as compared to it's monetary use value.  Granted, if gold were the price of silver, there would be a lot of uses for it pop up, but realisticly one must consider the industrial use value and the monetary use value as independent variables.  All the industrial use value of gold provides is a backstop against catastrophic monetary value collapse, which bitcoin does not have.  Silver does have many industrial uses for which there is no viable alternative, which is not the case for gold's industrial uses.  For example, silver is both toxic to many forms of bacteria, making it a valuable medical material; while also being fairly non-toxic to human life, contrary to almost all other heavy metals.  Gold is not toxic either, but nor does it have any other chemical properties of note, since it's non reactive.  This does make gold a good choice for conductive connectors, particularly in corrosive environments, but there are other solutions that exist for that.

[CurbsideProphet]

Diversification is always a good idea.  It also happens to be one of the things the deflationistas overlook.  Even if you think bitcoin has a bright future, it's not very prudent to put everything you have saved into it.  Just as it wouldn't be prudent to put everything into gold, silver, or some stock or a particular bond.

Exactly.  There are some here that are way too black and white.  You don't have to be long Bitcoin and short everything else, there is such a thing as a happy medium.  Bitcoin is still an experiment in its infancy. 

[5grainsilver]

They are not comparable.

Gold has industrial and aesthetic use.  It has real world use outside of just being a store of value. 
Bitcoin is nothing. 

Gold's industrial uses are negligible as compared to it's monetary use value.  Granted, if gold were the price of silver, there would be a lot of uses for it pop up, but realisticly one must consider the industrial use value and the monetary use value as independent variables.  All the industrial use value of gold provides is a backstop against catastrophic monetary value collapse, which bitcoin does not have.  Silver does have many industrial uses for which there is no viable alternative, which is not the case for gold's industrial uses.  For example, silver is both toxic to many forms of bacteria, making it a valuable medical material; while also being fairly non-toxic to human life, contrary to almost all other heavy metals.  Gold is not toxic either, but nor does it have any other chemical properties of note, since it's non reactive.  This does make gold a good choice for conductive connectors, particularly in corrosive environments, but there are other solutions that exist for that.

You are correct.  I think my other point is much more important though.  I am referring to the fact that the bitcoin system can be replicated over and over again to create an identical product with a different name.  The only thing scarce about bitcoin is the name bitcoin.  Is that enough?  I find it on the edge of impossible for it to last long term, but I could certainly be wrong.  I honestly hope I am wrong but I just don't see it happening. 

[Torminalis]

The bitcoin system is the miners, you can't just fabricate a new community and for that reason it will be very hard to compete with Bitcoin unless you have a compelling improvement.

[MoonShadow]

They are not comparable.

Gold has industrial and aesthetic use.  It has real world use outside of just being a store of value. 
Bitcoin is nothing. 

Gold's industrial uses are negligible as compared to it's monetary use value.  Granted, if gold were the price of silver, there would be a lot of uses for it pop up, but realisticly one must consider the industrial use value and the monetary use value as independent variables.  All the industrial use value of gold provides is a backstop against catastrophic monetary value collapse, which bitcoin does not have.  Silver does have many industrial uses for which there is no viable alternative, which is not the case for gold's industrial uses.  For example, silver is both toxic to many forms of bacteria, making it a valuable medical material; while also being fairly non-toxic to human life, contrary to almost all other heavy metals.  Gold is not toxic either, but nor does it have any other chemical properties of note, since it's non reactive.  This does make gold a good choice for conductive connectors, particularly in corrosive environments, but there are other solutions that exist for that.

You are correct.  I think my other point is much more important though.  I am referring to the fact that the bitcoin system can be replicated over and over again to create an identical product with a different name.  The only thing scarce about bitcoin is the name bitcoin.  Is that enough?  I find it on the edge of impossible for it to last long term, but I could certainly be wrong.  I honestly hope I am wrong but I just don't see it happening. 

The hard part to replicate about bitcoin is the community.  It took two years to build up the community, and I think that it would be difficult to replicate that just by tweaking the code a bit and starting a parrallel blockchain.  That said, anyone is welcome to try it.  If it has features that make it superior to bitcoin, it would probably eventually win.  However, they must be features that are obviously superior to a large percentage of the Internet using population.  I don't really think that is going to happen, myself.  Bitcoin is already very resiliant to attack as well as increasingly useful to Joe Android User in 1st world nations.  There are competing smartphone clients that allow in person transactions (with Internet available) and I don't think it's a far leap before smartphones can transact in person sans Internet via Dash7, ad-hoc wifi or NFC.  Nor do I think we are very far from a system that caters to regular cell phones via SMS or the like, a la M-Pesa; which is actually a huge leap for people in 2nd & 3rd world urban areas, although it might not be quite so useful for 1st world urban areas such as Toyko.  Still, it seems to work out pretty well in NYC.

[Melbustus]

Gold's industrial uses are negligible as compared to it's monetary use value. ...

+1. I'm sick of people arguing "Gold is money because it has intrinsic value due to industrial uses....etc, etc." That's absurd. Probably 99% of gold's value is non-industrial; ie, its scarcity and other properties (historical inertia, being a huge one). Does it really matter if 1% versus 0% of some scarce item's value comes from industrial applications? Not really, people...

[Peter Lambert]

Gold is good for making shiny things, electrical components, and written records that will last centuries. Bitcoin is good for transfering value from one person to another over the internet.

Maybe a good idea would be get some gold, roll it into sheets, encode your bitcoin wallet onto it and then bury it in a secure box where only you know how to find it?

[Melbustus]

...Bitcoin is good for transfering value from one person to another over the internet....

This is only relevant if you think there's a non-trivial possibility of humanity reverting to a state where electronic transactions are not possible (or are rare), versus continuing to progress towards just about every transaction being electronic.

[MoonShadow]

Gold is good for making shiny things, electrical components, and written records that will last centuries. Bitcoin is good for transfering value from one person to another over the internet.

Gold isn't a very good conductor, really.  Both silver and copper are better.  The only property that gold bests the others on, with regard to electronics, is that gold does not corrode.  Thus, gold's conductivity is the same whether it is encased in a protective plastic insulation or spends 100 years at the bottom of the sea.  The written records thing isn't particularly special either.  Lead is just as useful as a archival print medium as gold is, and under the right conditions, hemp paper is superior to both.

[MoonShadow]

...Bitcoin is good for transfering value from one person to another over the internet....

This is only relevant if you think there's a non-trivial possibility of humanity reverting to a state where electronic transactions are not possible (or are rare), versus continuing to progress towards just about every transaction being electronic.

Considering the shear efficiency of a digital instant message, SMS, an email, or the like; all of which are protocols that can use any form of IP connection as transport infrastructure, including modems over ham radios; I consider the breakdown of bulk transportation a more likely event than the persistant breakdown of the Internet.  It's become so important and so effective a form of communication, that every urban area in the world is going to have someplace in the city supported by some group of people to maintain an effective connection to the rest of the world digitally.  Even if that just means that some places can only get 14.4 kbaud over a well protected ham radio setup powered by a solar array scrounged from those highway traffic displays.  Even a mad max scenario still has the fiber optic cables in the ground, so nothing short of a human extinction level event is going to stop the Internet now, and in not much longer, that will include Bitcoin.  Hell, there are already ham radio sats that use IP protocol.  If it can run on an android phone, bitcoin can probably run on a satelite.

[CurbsideProphet]

The hard part to replicate about bitcoin is the community.  It took two years to build up the community, and I think that it would be difficult to replicate that just by tweaking the code a bit and starting a parrallel blockchain.

The community is relatively small and two years is not all that long.  See what Facebook did to MySpace as an example.  And MySpace was significantly more entrenched in the mainstream public than Bitcoin currently is but that didn't make much of a difference.   

That said, anyone is welcome to try it.  If it has features that make it superior to bitcoin, it would probably eventually win.  However, they must be features that are obviously superior to a large percentage of the Internet using population.

I agree.

I don't really think that is going to happen, myself.

If Bitcoin does become even moderately successful, I don't see how it would not happen.  Where profit can be had, competition will grow.  I find it hard to believe that an open source project that has no protection (via patents, trademarks, etc.) would not garner competition.  The barriers to entry are just too low.

The two year headstart is also a bit of a misnomer.  Growth was rather stagnant for the majority of that time, with a high rate of growth over more recent periods.  Really Bitcoins major advantage is being first to market and having a small geek community base.  First to market doesn't matter if the model can be copied and the Bitcoin community is nominal in scale.  I'd be curious to hear of any serious barriers to entry by a competing crypto-currency because I don't see any.

[marcus_of_augustus]

Money, in its essence, is an information technology.

The informational content is value.

In hindsight, it will be obvious that the internet has come up with a superior form of money ... it may not be bitcoin though.

[MoonShadow]

The two year headstart is also a bit of a misnomer.  Growth was rather stagnant for the majority of that time, with a high rate of growth over more recent periods.  Really Bitcoins major advantage is being first to market and having a small geek community base.  First to market doesn't matter if the model can be copied and the Bitcoin community is nominal in scale.  I'd be curious to hear of any serious barriers to entry by a competing crypto-currency because I don't see any.

But I don't think that the model can be copied so easily as you might think.  Sure, one can take the code and compete, but then you are starting from a community much smaller than even Bitcoin.  As the system presently exists, security and value come from the network effects.  So any particular merchant or consumer is going to favor the established blockchain, even when he doesn't really know why this is in his own interests, because some will understand this, and the ignorant user will use whatever he has greatest exposure to.  This will always be bitcoin unless and until a competitor with a distinct advantage can be developed, and such an advantage cannot be one that bitcoin itself cannot reasonablely assimulate.  In the long run, I think that we will see both specialized parrallel solutions such as namecoin, and regional solutions.  Yet I think that they will all be tied back into the main bitcoin blockchain in some fashion that allows the other smaller chains to 'piggy back' on the security model of the main blockchain.  But then this kind of co-dependency also solidifies Bitcoin's main chain as the common thread, and thus bitcoin as the currency of international Internet trade.

[grondilu]

Money, in its essence, is an information technology.

The informational content is value.

In hindsight, it will be obvious that the internet has come up with a superior form of money ... it may not be bitcoin though.

Agreed.  It's quite a vague assertion, though.  But it has profound truth in it.  IMHO.

[jtimon]

But I don't think that the model can be copied so easily as you might think.  Sure, one can take the code and compete, but then you are starting from a community much smaller than even Bitcoin.  As the system presently exists, security and value come from the network effects.  So any particular merchant or consumer is going to favor the established blockchain, even when he doesn't really know why this is in his own interests, because some will understand this, and the ignorant user will use whatever he has greatest exposure to.  This will always be bitcoin unless and until a competitor with a distinct advantage can be developed, and such an advantage cannot be one that bitcoin itself cannot reasonablely assimulate.  In the long run, I think that we will see both specialized parrallel solutions such as namecoin, and regional solutions.  Yet I think that they will all be tied back into the main bitcoin blockchain in some fashion that allows the other smaller chains to 'piggy back' on the security model of the main blockchain.  But then this kind of co-dependency also solidifies Bitcoin's main chain as the common thread, and thus bitcoin as the currency of international Internet trade.

Merged mining is already developed and is going to start to be used soon. I think that is going to be very good for namecoin but not bad for bitcoin.

[enquirer]

Unlike bitcoin, gold could be easily forged
Will you tell the difference between 99.99 % and 99% gold?
That's one of the reasons gold was replaced by printed money in circulation

[Fakeman]

Unlike bitcoin, gold could be easily forged
Will you tell the difference between 99.99 % and 99% gold?
That's one of the reasons gold was replaced by printed money in circulation

Right, because paper money is impossible to counterfeit.  
I don't believe there are many counterfeiters who go to the trouble of making convincing fakes of gold bullion just to replace .9% of the gold with something else, unless you're talking about debasement by the official issuer. It's worth noting that tungsten and gold have almost identical densities though. Tungsten is very difficult to machine or cast but it can be formed using powder metallurgy techniques. That doesn't mean that a fake with high tungsten content would be undetectable, only that measuring the size and weight would not be enough. Then again, try doing anything with bitcoins without using sophisticated technology.

[JohnDoeZ]

Correction: Gold and silver are money, Bitcoins are currency.

Some expensive bio-weapons avaliable today :
If Those can buy these.
Then I will call it a currency!

[DavinciJ15]

  ...Keynes didn't say a single truth. 

"In the long run we're all dead"?

also...


As the inflation proceeds and the value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose.