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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1805174 times)
Peter R
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September 08, 2014, 07:06:16 PM
 #11781


Yep!  Heard it straight from the Braintree CEO's mouth.  It was nice to hear him discuss how the bitcoin protocol solves structural problems with the legacy payment systems that are holding back their users and merchants.   

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September 08, 2014, 07:08:46 PM
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You both agree that the simplicity of taking delivery of bitcoin is what is going to protect it from the same fate as gold. I think it's a reasonable observation, but so far we've seen no evidence of that happening. The general public, and even some outstanding members of our early adopter community, have repeatedly lost bitcoin entrusted to a third party. The general feeling I get from normal folk when I talk about bitcoin is that it's too complicated, and they'd rather have someone else holding it for them and allowing access with a nice GUI or credit card analogue. This is what gave me pause; Outside of the people in threads like this, everyone wants a 3rd party to hold their bitcoin, and they may or may not care about solvency or audits. These are things that they don't really have a grasp of. With the majority of the world made up of people like this, how can we expect the industry NOT to capitalize on them? We can shout about private keys and audits all day long, but to an outside observer, we sound like the gold bug stackers ranting about physical coins.

I think you might very well be right in your observation. I do however like to note two things:

1. Even if Bitcoin, is only better than gold and takes 80% of it's value, that's a hell of lot higher market value than it is today
2. It's easier to request delivery so it will at least happen more often than currently with gold. If it happens more frequently there won't necessarily be no naked short selling, but there will be less of it, limiting the manipulation of Bitcoin when compared to gold.

I'm curious whether history will repeat itself and the possession of Bitcoin will be made illegal in a developed country at a point in the future. At least it's easier to hide Wink

Haha, thanks wachtwoord, for these encouraging notes. I agree with your assessment, and it is reassuring to think that even if the bitcoin ecosystem isn't perfect, it's technically better and has a lot of room left to grow before it supplants the current and even less desirable alternatives. I'm reminded of the "outrunning a bear" analogy, where you don't necessarily need to be able to run faster than a bear, just faster than everyone else, and it appears that we're on course for that, at the very least.
justusranvier
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September 08, 2014, 07:18:48 PM
 #11783

i think it's too late for them to try that.
I think it is too late for them to be successful at this, but I'm convinced they will make the attempt.

PayPal et al. can throw a lot of resources at UX and advertising (propaganda) designed to keep people from taking physical custody.

They can also get help with this from the IRS and other government agencies. We might see a situation where anyone who takes physical custody of their coins will be subject to merciless and endless legal harassment.

"Oops, sorry my hard drive malfunctioned and the back-ups spontaneously disappeared.  Just like Louis Lerner and her 10 accomplices' did.

Then the entire computer was lost in an unfortunate boating accident."   Cry
Indeed. As I said, I don't think the attempts will be successful, but I also don't think people should underestimate the amount of damage that will be incurred by those attempts.

After all, Hollywood and the recording industry lost the filesharing wars years ago, but they're still causing problems every now and then.
thezerg
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September 08, 2014, 07:28:04 PM
 #11784

So, if we ignore for a minute, the properties of gold that make it less attractive than bitcoin, and purely focus on the limited nature of each one; Why isn't gold acting as a store of value in a QE economy? Why is it not guaranteed profit to take out a huge low interest loan, and buy gold?

If there is an answer to that, why doesn't it apply to bitcoin?

Gold truly is the barbarous relic. It can be shorted to hell with naked contracts (big banks can sell what they don't own) and it is very inefficient in the digital age. How can it compete with instant and cheap value transfers like bitcoin (for which naked short selling does not currently exist)?

As we've said before, bitcoin is assuming the position historically held by gold. Bitcoin is Gold's Black Swan. Just remember to take possession of your private keys.

Appreciate the response Steve. To delve a little deeper, I realize that gold is a "barbarous relic" and inconvenient to use, which is why I was ignoring those facets for this particular comparison. Surely a clumsy, less efficient, hassle of a commodity will still rise in value relative to a paper currency issued in unlimited supply?

If naked shorts really are the answer to what keeps gold value in check, then my next question would be what keeps bitcoin protected from entities offering naked short selling? I realize that if everyone acts responsibly, that won't be a possibility, but that's never happened before, so I'm not counting on it.

Also, just to clarify a bit, I wasn't trying to compare gold to bitcoin, I believe bitcoin is superior in this role. I was comparing each to dollars, and wondering how we can expect bitcoin to clear the hurdles that gold failed to do, when they are both using the same approach.

Gold can only function properly if the majority of people demand delivery of physical metal. If the majority do not demand delivery of physical then it becomes possible to fractionalize gold and artificially increase supply by selling paper. Essentially the scarcity property of gold breaks down unless the majority of people take physical delivery.

This is why FDR's executive order banning physical possession was so effective at breaking the gold standard, after 2 generations the majority no longer demanded physical possession, but see paper products as "gold". It also is why the "gold bugs" vision is never realized, you need the majority of the population to demand physical and reject paper. If only 1% of the population regularly buys gold eagles, then banks can continue to sell paper for a long time.

The advantage for bitcoin is it is just so easy to take delivery. Any smartphone app can do so in seconds, and there is no reason not to. If people who adopt bitcoin for the most part use bitcoins directly then we just might fix the problems gold ran into.

My suspicion is this is how bitcoin will be attacked though, with regulation that drives adoption out of individually held wallets and into coinbase type online services by making compliance easier with online services. From there it becomes easier for online services to fractionalize bitcoin same as gold...

It is much easier to demand delivery of Bitcoin, or at least proof of reserves.

Thanks rocks and notme.

You both agree that the simplicity of taking delivery of bitcoin is what is going to protect it from the same fate as gold. I think it's a reasonable observation, but so far we've seen no evidence of that happening. The general public, and even some outstanding members of our early adopter community, have repeatedly lost bitcoin entrusted to a third party. The general feeling I get from normal folk when I talk about bitcoin is that it's too complicated, and they'd rather have someone else holding it for them and allowing access with a nice GUI or credit card analogue. This is what gave me pause; Outside of the people in threads like this, everyone wants a 3rd party to hold their bitcoin, and they may or may not care about solvency or audits. These are things that they don't really have a grasp of. With the majority of the world made up of people like this, how can we expect the industry NOT to capitalize on them? We can shout about private keys and audits all day long, but to an outside observer, we sound like the gold bug stackers ranting about physical coins.

I agree that most people are fools and they will continue to entrust their asset to third-parties but I also think that it will be very difficult for entities to conduct naked short sales of bitcoin without being called on the carpet for it (squeezed). The assumption is that most of the bitcoins are already in private hands and not bankster hands making it much harder for the manipulations to take place. Of course, I could be wrong.

My optimistic opinion is that counterparty risk failures in the legacy banking system will drive bitcoin adoption along with the awareness of the importance of taking possession of one's assets.


Someday entrusting Bitcoin to third parties will not be such a disaster.  In fact it will be a sound redundancy strategy to store some of your wealth that way just in case your computer and your backups die or someone tries to physically beat the coins out of you.  For example, large retail stock brokers in the USA have generally been pretty responsible safeguarding stock shares (of course there have been some issues, especially in mutual funds). 

However, this is very different from trusting a recently incorporated company with 5-20 employees operating halfway around the world in a different legal jurisdiction with an asset that has still not been unambiguously recognized worldwide as property.

rocks
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September 08, 2014, 08:02:07 PM
 #11785

Thanks rocks and notme.

You both agree that the simplicity of taking delivery of bitcoin is what is going to protect it from the same fate as gold. I think it's a reasonable observation, but so far we've seen no evidence of that happening. The general public, and even some outstanding members of our early adopter community, have repeatedly lost bitcoin entrusted to a third party. The general feeling I get from normal folk when I talk about bitcoin is that it's too complicated, and they'd rather have someone else holding it for them and allowing access with a nice GUI or credit card analogue. This is what gave me pause; Outside of the people in threads like this, everyone wants a 3rd party to hold their bitcoin, and they may or may not care about solvency or audits. These are things that they don't really have a grasp of. With the majority of the world made up of people like this, how can we expect the industry NOT to capitalize on them? We can shout about private keys and audits all day long, but to an outside observer, we sound like the gold bug stackers ranting about physical coins.

I agree that most people are fools and they will continue to entrust their asset to third-parties but I also think that it will be very difficult for entities to conduct naked short sales of bitcoin without being called on the carpet for it (squeezed). The assumption is that most of the bitcoins are already in private hands and not bankster hands making it much harder for the manipulations to take place. Of course, I could be wrong.

My optimistic opinion is that counterparty risk failures in the legacy banking system will drive bitcoin adoption along with the awareness of the importance of taking possession of one's assets.

One key advantage for bitcoin is the ability to use signatures to create proof of reserves. For example the questions of "How much gold does the FED have?" and "How much of that is leased in the open market?" are questions that apparently are too difficult to answer for the past 80 years.

However, with bitcoin it is easy to automatically on a per-month/day/hour/minute basis prove your reserves and that there is a 1-to-1 relationship with custodial assets. I hope that due to the ease of this, it will be demanded by bitcoin owners. This simple aspect can go a long way towards preventing the gaming that gold has allowed.

Yes Steve that is a great point. The initial distribution of coins in the "the people" and not "the banks" will go a long way towards preventing manipulation. Over time however this initial distribution can switch back to the banks though...

My suspicion is this is how bitcoin will be attacked though, with regulation that drives adoption out of individually held wallets and into coinbase type online services by making compliance easier with online services. From there it becomes easier for online services to fractionalize bitcoin same as gold...

i think it's too late for them to try that.  

the good thing about the mtgox hack is that it's now forced the community into performing Bitcoin audits via the hashing trees.  i don't think legacy payment processors like Paypal will be able to just get away w/o the same auditing as awareness is now high regarding the importance of this.

My point was more related to the effect government regulation can force on the community, instead of what the community demands itself.

For example, a federal version of a BitLicense together with an overly aggressive IRS, could effectively outlaw private ownership of bitcoin without actually having to enact an FDR style order. The tax and regulatory compliance issues could be layered on in such a complicated manner, that even individuals who try to be compliant are brought to court for tax evasion, money laundering, etc, etc. This would create an environment where only large established entities with legal teams hold bitcoin directly, and most people simply view it as too much of a hassle (or are too scared).

This is why fighting back against BitLicense and establishing an open legal precedent for bitcoin are imperative today IMHO.
cypherdoc
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September 08, 2014, 08:17:47 PM
 #11786

Android winning:

rocks
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September 08, 2014, 08:23:19 PM
 #11787

Android winning:



It is a good thing Microsoft was able to get their Trojan horse Stephen Elop into Nokia in 2011.

Making that call to drop Android and 100% back Windows was a clear winner, that is if by winning we mean stealing Nokia's phone division for free.
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September 08, 2014, 08:26:35 PM
 #11788

Android winning:



It is a good thing Microsoft was able to get their Trojan horse Stephen Elop into Nokia in 2011.

Making that call to drop Android and 100% back Windows was a clear winner, that is if by winning we mean stealing Nokia's phone division for free.

I own Nokia stock and I was pretty thrilled with the deal (I also own MSFT though Wink)

rocks
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September 08, 2014, 08:30:07 PM
 #11789

Android winning:



It is a good thing Microsoft was able to get their Trojan horse Stephen Elop into Nokia in 2011.

Making that call to drop Android and 100% back Windows was a clear winner, that is if by winning we mean stealing Nokia's phone division for free.

I own Nokia stock and I was pretty thrilled with the deal (I also own MSFT though Wink)

I owned Nokia stock at the time also.

The reason you (and many others including myself) were thrilled with the sale was because for Nokia it shed off a massively unprofitable division and unlocked the value in the other parts, causing a moderate price increase.  

What would have resulted in a much larger price increase, was if Nokia took their amazing phone capabilities to produce the best Android phones and given Samsung some real competition. Then you would have had those other divisions plus a profitable phone division.
cypherdoc
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September 08, 2014, 08:34:00 PM
 #11790

Pantera Capital and gold:

https://cdn.panteracapital.com/wp-content/uploads/Pantera-Bitcoin-Letter-August-2014-2.pdf
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September 08, 2014, 08:46:33 PM
 #11791


It is a good thing Microsoft was able to get their Trojan horse Stephen Elop into Nokia in 2011.

Making that call to drop Android and 100% back Windows was a clear winner, that is if by winning we mean stealing Nokia's phone division for free.

Nokia's Maemo os was light years ahead of Android with over a 2 year head start and an amazing community, it was out well before iOS and destined to be an open phenomenon, until the moment trojan horse Elop joined Nokia and the project was outcast - fed to an Intel partnership, and it was re-branded as meego os, where Nokia contribute a total of 2 development engineers to the project and killed the development after the hardware team completed the 5 device.

Elop's legacy is killed maemo more than preventing the adoption of android. Maemo was a fully functioning open Linux os on amazing hardware.

If it wasn't for Elop I may never have found Bitcoin as it filled the void back in 2011 when maemo died.  Cheesy I still think Elop pulled the biggest corporate back door swindle in history.

Thank me in Bits 12MwnzxtprG2mHm3rKdgi7NmJKCypsMMQw
cypherdoc
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September 08, 2014, 09:04:19 PM
 #11792

here's another way to look at it:

wachtwoord
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September 08, 2014, 09:10:26 PM
 #11793

here's another way to look at it:



Let me see: proprietary vs not proprietary. I wonder who wins Wink

rpietila
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September 08, 2014, 09:20:28 PM
 #11794

I still think Elop pulled the biggest corporate back door swindle in history.

It is quite certain he did, after one week at the helm anyone with a brain knew that he was a planted mole, here in Finland where Nokia used to be a big company. But is it really the biggest such trick? Whoaa, Finland makes records Smiley

rocks
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September 08, 2014, 10:32:12 PM
 #11795


Thanks for sharing. This is really a great point in the article:

Quote
Unfortunately for gold, it is relatively stagnant in terms of its use. It does have a few industrial applications, and generally gold has been a hedge against market fear and fiat currency inflation. Mostly, gold acts as a crude storage of historically-induced, market imposed value.

In comparison, bitcoin is remarkably different — its market ecosystem is unique compared with all other contemporary forms of value (e.g., gold, fiat money, and barter systems cannot “teleport” arbitrary-sized value between individuals, nor do they come with third-party ledgers). Bitcoin is anything but a crude storage of value, and the “intrinsic value” of bitcoins is readily apparent. In comparing the varied “protocols” inherent to gold and Bitcoin, the key differences become clear:

In short: The "protocol" nature of Bitcoin enables it's functionality to continue to expand and grow over time, both in terms of the functionality of the protocol (ex: multisig) and in terms of services layered on top (ex: online wallets, open bazaar, etc). This is superior over gold where it's functionality is largely fixed and static. Granted gold's functionality worked very well in the pre-digial era of thousands of years, but in the digital era we can do better.
marcus_of_augustus
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September 09, 2014, 01:21:53 AM
 #11796


Thanks for sharing. This is really a great point in the article:

Quote
Unfortunately for gold, it is relatively stagnant in terms of its use. It does have a few industrial applications, and generally gold has been a hedge against market fear and fiat currency inflation. Mostly, gold acts as a crude storage of historically-induced, market imposed value.

In comparison, bitcoin is remarkably different — its market ecosystem is unique compared with all other contemporary forms of value (e.g., gold, fiat money, and barter systems cannot “teleport” arbitrary-sized value between individuals, nor do they come with third-party ledgers). Bitcoin is anything but a crude storage of value, and the “intrinsic value” of bitcoins is readily apparent. In comparing the varied “protocols” inherent to gold and Bitcoin, the key differences become clear:

In short: The "protocol" nature of Bitcoin enables it's functionality to continue to expand and grow over time, both in terms of the functionality of the protocol (ex: multisig) and in terms of services layered on top (ex: online wallets, open bazaar, etc). This is superior over gold where it's functionality is largely fixed and static. Granted gold's functionality worked very well in the pre-digial era of thousands of years, but in the digital era we can do better.

... you mean, like it is a new form of money? ...  like digital gold?

adamstgBit
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September 09, 2014, 01:23:39 AM
 #11797


Thanks for sharing. This is really a great point in the article:

Quote
Unfortunately for gold, it is relatively stagnant in terms of its use. It does have a few industrial applications, and generally gold has been a hedge against market fear and fiat currency inflation. Mostly, gold acts as a crude storage of historically-induced, market imposed value.

In comparison, bitcoin is remarkably different — its market ecosystem is unique compared with all other contemporary forms of value (e.g., gold, fiat money, and barter systems cannot “teleport” arbitrary-sized value between individuals, nor do they come with third-party ledgers). Bitcoin is anything but a crude storage of value, and the “intrinsic value” of bitcoins is readily apparent. In comparing the varied “protocols” inherent to gold and Bitcoin, the key differences become clear:

In short: The "protocol" nature of Bitcoin enables it's functionality to continue to expand and grow over time, both in terms of the functionality of the protocol (ex: multisig) and in terms of services layered on top (ex: online wallets, open bazaar, etc). This is superior over gold where it's functionality is largely fixed and static. Granted gold's functionality worked very well in the pre-digial era of thousands of years, but in the digital era we can do better.

... you mean, like it is a new form of money? ...  like digital gold?

more like digital platinum which can morph into wtv "digital metal" is most desirable at the time.

STT
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September 09, 2014, 03:06:39 AM
 #11798

Quote
Unfortunately for gold, it is relatively stagnant in terms of its use.

Well evidentially not as gold usage has declined dramatically in the last century despite being used for millennia.   Certainly in proportion to the amount of cash used this is true, ie. western countries do not value gold where as eastern cultures may still retain and use gold in more regular set patterns still such as the Indian wedding season, etc
 If I estimate any great rise its likely a large reversal of this decline


Quote
This is superior over gold where it's functionality is largely fixed and static. Granted gold's functionality worked very well in the pre-digial era of thousands of years, but in the digital era we can do better.

No I think this is a fallacy.   Im all for technology but some things are constant like human nature and elemental properties.   Every generation thinks they can discard mistakes made previously as obvious and easily avoidable but we havent got past political bias and interference in economies yet.    
Gold is inverse in its function, so yea its nothing new but look at the world now and effects in progress.  Such as the ECB moves recently to increase the magnitude of negative rates and so on.    The need and possible usage for gold or any steady medium of exchange is rising in proportion to systemic failure implemented by unproductive elements of the economy like government or general beaurcarcy.   At some point they'll be so much crap the demand will break badly in favour of any competitive free medium of value exchange

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September 09, 2014, 04:23:05 AM
 #11799

Interesting days/weeks ahead. Just to add to all of the political uncertainty and dollar strengthening, we have the 9-11 anniversary and then CME telling us that after 9-15, no more market rigging is allowed. Right. And then 9-18 the Scottish independence ballot. Not to mention a new iphone. How could I forget that? They're rumored to be releasing a 5.5" iphone but even if I liked the iphone, a 5.5" display is just too small for me now. I could almost get excited about the new nokia 1525. I had a windows phone for a while and it honestly wasn't so bad. Metro is quite friendly in a phone environment. But I just bought a black market 6" chinese samsung rip off and even though it was intended to be just a back up, I've stopped using the Note.
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September 09, 2014, 04:31:03 AM
 #11800

In short: The "protocol" nature of Bitcoin enables it's functionality to continue to expand and grow over time, both in terms of the functionality of the protocol (ex: multisig) and in terms of services layered on top (ex: online wallets, open bazaar, etc). This is superior over gold where it's functionality is largely fixed and static. Granted gold's functionality worked very well in the pre-digial era of thousands of years, but in the digital era we can do better.
... you mean, like it is a new form of money? ...  like digital gold?

I see what you did there Wink

In all seriousness though, the phrase "digital gold" makes bitcoin sound to be a simple 1-for-1 replacement to gold in terms of functionality. But Bitcoin has the potential to be much more than that, which to me makes the term inaccurate. Of course the whole experiment is still quite likely to fail in the end and we have a long way to go before achieving "gold" status let alone "beyond gold" status.

No I think this is a fallacy.   Im all for technology but some things are constant like human nature and elemental properties.   Every generation thinks they can discard mistakes made previously as obvious and easily avoidable but we havent got past political bias and interference in economies yet.  

I agree that every generation is naive in the effect they can truly have, and that the vast majority of time are doomed to repeat the same mistakes, but there are fundamental shifts in technology that can and do have large permanent changes on society.

For example, the printing press lowered the cost of the written word which brought reading and later education to large segments of the population, steam and then gas combustion engines greatly increased the distances people could travel in a lifetime (previously most people did not travel far from their birth location), the Haber process to create ammonia for fertilizer is widely viewed as one of the most significant enablers of humanity's population boom over the past 100 years (though the guy also invented chemical warfare....).

Similarly modern computer technology has for all practical purposes eliminated the costs in storing and disseminating information. That will create permanent changes to society, although we don't really know how. Many of us here are betting on a significant and permanent change to the concept of money.
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