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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1940588 times)
smooth
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November 28, 2014, 11:25:43 PM
 #18121

Bitcoin is fundamentally different because its supply is defined a priori at the protocol level; no resources need to be consumed to verify scarcity.  

I'd also add this. The resources are needed in part to maintain the integrity of the protocol. Without secure mining the protocol is useless.

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November 29, 2014, 11:46:44 AM
 #18122

Sunday is a big moment for gold.

It has been hovering lately and a no vote will probably see it tumble.

Bitcoin OTOH has been a little uppish.

If gold dumps on a 'no' vote and btc maintains or rises, this may finally signal the divergence that Cypher has been calling for.
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November 29, 2014, 12:29:08 PM
 #18123

Very soon everyone here is gonna realize we don't need no stinkin SC's nor do we need no stinkin gold.
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November 29, 2014, 02:52:33 PM
 #18124

Cypherdoc I'm curious what your thoughts are on Counterparty, if you have any at all...
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November 29, 2014, 03:16:51 PM
 #18125

Cypherdoc I'm curious what your thoughts are on Counterparty, if you have any at all...

+1!
Cypherdoc, Peter R. and the other cracks in this thread: what is your opinion?

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November 30, 2014, 03:07:04 AM
 #18126

Perhaps but also in the larger trend collapsing faith in the paper markets. It is not the perceived value of the metal that is dropping but the perceived value of the paper contract. The fact that the backwardation exists is a sign that the holders of the metal don't trust the integrity of the futures.

this is what all the goldbugs want you to believe.

it was the paper market that allowed the elevation to today's values in the first place. 

it's over.
Could you please elaborate a bit on that?

Paper = more supply, how more supply can make prices higher?

leverage
Makes sense.

Also access to markets.  Paper gold made it possible to invest with a click of a button in your trading account, in IRAs, 401ks, and funds.  It opened a huge market.  If paper breaks away from physical, there will presumably be an underlying upwards pressure (why physical is breaking away) but this will be countered by a downward pressure as the closure of paper markets limit access to gold back to those willing to hold phys.  Hopefully, some of the 100% backed funds will actually turn out to be 100% backed, in which case the paper markets may not close -- at the end of the day, some of the paper will still be around, and others will have force-converted to USD "payable for all debts public and private".

But the act of forced-conversion (conversion without actually buying physical gold, thus driving the price up) might tarnish paper gold's shine as longs realize that they hold all the risk of a downside squeeze with none of the rewards of the same on the upside.

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November 30, 2014, 03:51:49 AM
 #18127

Sunday is a big moment for gold.

It has been hovering lately and a no vote will probably see it tumble.

Bitcoin OTOH has been a little uppish.

If gold dumps on a 'no' vote and btc maintains or rises, this may finally signal the divergence that Cypher has been calling for.

I think surveys are already showing a 50% in favour of gold backing to the Swiss will not go ahead.    The market will have already kept track of the likelyhood of such things and I dont believe that much of the recent gold rise is really to do with this vote. 
When scotland was voting it had some surveys showing it was possibly viable to go ahead with its split.  It kicked up quite alot of dust before the vote.   Basically the surprise now would be if the swiss vote was yes and we have a big surprise move to the upside possibly.
I also dont think it will occur, the population are not especially frightened of their tracking Euro or general moves.  On general principle it would be best to go ahead but most people now see gold as archaic, any change to that attitude would be major news worth investing in
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November 30, 2014, 04:22:32 AM
 #18128

I think physical mining is the largest determination.   Paper or futures contracts is more short term effect, certainly possible but not why gold has fallen for so long now.
The largest buyer of gold is China.  The largest producer of gold is China and also I think the largest importer and maybe largest store of gold would be China.   China has reported they have no increase in gold holdings, they dont export any gold and they operate the most mining but it amounts to nothing according to them.    That dynamic whatever is happening there, is far more significant then what Chicago or London is upto

https://www.bullionstar.com/blog/koos-jansen/total-chinese-gold-reserves-nearly-16000t/
http://www.businessinsider.com/gold-reserves-by-country-2012-8?op=1&IR=T
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November 30, 2014, 04:26:37 AM
 #18129

If nobody is going to back their currency with gold, then there's no reason not to hyperinflate your currency. Let's see how much QE Switzerland will enjoy! Global hyperinflation here we come!

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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November 30, 2014, 04:26:53 AM
 #18130

I think physical mining is the largest determination.   Paper or futures contracts is more short term effect, certainly possible but not why gold has fallen for so long now.
The largest buyer of gold is China.  The largest producer of gold is China and also I think the largest importer and maybe largest store of gold would be China.   China has reported they have no increase in gold holdings, they dont export any gold and they operate the most mining but it amounts to nothing according to them.    That dynamic whatever is happening there, is far more significant then what Chicago or London is upto

Hmm. Agreed.

Edit: Like the Hunt brothers and silver. You corner the market, you crash it. Is this the idea?

Forgive my petulance and oft-times, I fear, ill-founded criticisms, and forgive me that I have, by this time, made your eyes and head ache with my long letter. But I cannot forgo hastily the pleasure and pride of thus conversing with you.
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November 30, 2014, 07:03:50 AM
 #18131

Bitcoin is fundamentally different because its supply is defined a priori at the protocol level; no resources need to be consumed to verify scarcity.  

I'd also add this. The resources are needed in part to maintain the integrity of the protocol. Without secure mining the protocol is useless.

Right, bitcoin mining is needed to secure the ledger and create consensus on the ordering of transactions.  Thus the resources consumed in the process are not "wasted" in the same sense they are with gold mining. Smooth, you're one of the best here with semantics and logic, and I'm sure you'll find something wrong with my arguments, but I think David Andolfatto's (St. Louis Fed VP) has made some important insights into bitcoin and the nature of money (and that I'm not clearly explaining my point of view).  

My original post on this topic was in defence of his critique of Willem Buiter's (Citibank Chief Economist) analogy between gold and bitcoin.

Quote from: David Andolfatto
The waste associated with mining gold is that in principle, gold money can be replaced by paper money (and please, do not give some weird “out of thin air” argument; see here.) Paper money, like Bitcoin, and unlike gold, is (near) costless to produce.

Readers here might be quick to correct David: "of course, bitcoins are costly to produce.  Satoshi said that the cost to produce them would tend to approach their market value…"  He half explains this later:

Quote from: David Andolfatto
Let me be clear about this. Bitcoin costs zero to produce. If one had control over the protocol, one could instantly and costlessly create as many bitcoins as one wanted. No environmental waste, no effort needed. The same is not true of gold.

And he's right: if one had control over the protocol, one could instantly and costlessly create as many bitcoins as one wanted…and issue a favourable amount to one's friends and to one's self!!  Andolfatto argues that "evil is the root of all money," or more accurately, that money is necessary because trust and information is not perfect.  So what would happen "if a benevolent and omniscient God" had control of the protocol"? Well then this God could issue the bitcoins to the population of the world in a way the results in the optimal distribution to achieve some "best happiness" or some such notion as deemed appropriate by His Benevolence.  In such a case, the cost to produce each bitcoin would be identically zero (and the resulting distribution of wealth would be equal to or better than what will actually play out over the next decade).

When viewed through this lens, bitcoins are costless to produce.  The resources consumed by the miners are not spent on the bitcoins themselves, but rather on the fact-finding mission to determine how these entries in our global ledger should best be distributed across the world's population2.  And, since we unfortunately don't have access to a benevolent and omniscient God to help us fill in the blanks1, this fact-finding mission plays out as bitcoin's proof-of-work mining competition.  

So, the resources consumed during bitcoin mining solve an informational and trust problem only.  If "evilness"=0 and if information was perfect, then the cost to produce bitcoins would be zero.  On the other hand, the production of gold is a physical problem and its cost and environmental impact would always be significant and would not depend (to a great extent) on information or on trust.

TL/DR: bitcoin > gold.

1I'd argue that the fiat experiment that began at Bretton Woods was a result of conviction that we could emulate the decisions my hypothetical "benevolent of omniscient God."  A conviction that I believe is fading away.  But the fiat experiment was at least half right: money doesn't have to be costly to produce (like gold is), provided information and trust is perfect (it's just that we aren't trustworthy and perfect information is not possible).  

2In the post-distribution stage of bitcoin, mining remains non-wasteful.  If "evilness"=0, then nobody attempts to double spend or attack the network.  In such a world, there's no need for mining, because everyone is honest and nodes can hold hands and take turns publishing blocks.  So in a utopian world, no resources are required to verify transactions.  In the real world, resources are consumed to the extent that "evilness" exists.  Once again, the resources are consumed to solve a problem of information and trust, not to perform some physical action.  We must waste a certain amount of resources simply to dis-incentivize economic agents from acting maliciously.

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November 30, 2014, 07:17:13 AM
 #18132

This gold mining argument still seems a bit silly and perhaps circular to me. We use gold (a rare and difficult-to-mine substance) for the same reason we need Bitcoin mining: to replace fragile trust. If everyone were trustworthy, we could use shiny pebbles instead of gold coins. No resources would be needed to "mine" pebbles, you just pick them up off the ground. Everyone would be trusted not to pick up pebbles he didn't deserve, and only obtain them through trade or in some other socially approved manner (perhaps as a form of "guaranteed minimum income", every person would be allowed to pick up one pebble per day.

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November 30, 2014, 07:20:30 AM
 #18133


Quote from: David Andolfatto
Let me be clear about this. Bitcoin costs zero to produce. If one had control over the protocol, one could instantly and costlessly create as many bitcoins as one wanted. No environmental waste, no effort needed. The same is not true of gold.

And he's right: if one had control over the protocol, one could instantly and costlessly create as many bitcoins as one wanted…
If is for children and shitcoins. A fallacious argument and failed attempt at philosophy. If I could find an asteroid made of gold and catch it with a very big net I could crash the gold market.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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November 30, 2014, 07:52:16 AM
 #18134


Quote from: David Andolfatto
Let me be clear about this. Bitcoin costs zero to produce. If one had control over the protocol, one could instantly and costlessly create as many bitcoins as one wanted. No environmental waste, no effort needed. The same is not true of gold.

And he's right: if one had control over the protocol, one could instantly and costlessly create as many bitcoins as one wanted…
If is for children and shitcoins. A fallacious argument and failed attempt at philosophy. If I could find an asteroid made of gold and catch it with a very big net I could crash the gold market.

I think you're looking at this the wrong way.  He's saying this is a positive for Bitcoin, as it reveals Bitcoin's efficiency over something physical like gold.  I don't think he's trying to imply that this is a threat to Bitcoin's scarcity. 

Bitcoin is a more pure form of money than gold. 

Run Bitcoin Unlimited (www.bitcoinunlimited.info)
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November 30, 2014, 08:27:17 AM
 #18135

Quote from: David Andolfatto
Is there a cheaper way? The current protocol uses what is called "Proof of Work" and there is very much something like a common resource problem here, with "overinvestment" in computing power (relative to first-best). But the community is working on alternatives, like Proof-of-Stake. But at present, there appear to be trade-offs. Cheaper protocols are also less secure, at least for now. But I expect a big break through in the not to distant future.

From: http://andolfatto.blogspot.ca/2014/11/bitcoiners-surely-we-can-do-buiter-than.html?showComment=1417191644448

Ugh. No. David. Bad.

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November 30, 2014, 08:42:45 AM
 #18136

i highly recommend this text containing best of geopolitical porn to make warm feelings in the tommies for all the gold bugs out there..

http://www.gold-eagle.com/article/grandmaster-putins-golden-trap

"between 'lives' we all have a great laugh about the parts we have performed in the 'play', and look forward to and have great fun preparing the next chapters to act out."
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November 30, 2014, 03:35:35 PM
 #18137

i highly recommend this text containing best of geopolitical porn to make warm feelings in the tommies for all the gold bugs out there..

http://www.gold-eagle.com/article/grandmaster-putins-golden-trap

Good read, lays it out plain and simple, it is indeed checkmate!

Sound money ( gold and bitcoin included ) WILL break up to it's real price in the future.

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November 30, 2014, 03:42:09 PM
 #18138

...
Sound money ( gold and bitcoin included ) WILL break up to it's real price in the future.

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November 30, 2014, 03:50:21 PM
 #18139

...
Sound money ( gold and bitcoin included ) WILL break up to it's real price in the future.



Quite fitting, your GIF rebuttal has as much substance as fiat. Cheesy

It does look pretty though... weeee!

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November 30, 2014, 04:17:47 PM
 #18140

Cypherdoc I'm curious what your thoughts are on Counterparty, if you have any at all...

+1!
Cypherdoc, Peter R. and the other cracks in this thread: what is your opinion?

prior to SC's, i was vocal against CP and other Bitcoin 2.0 platforms as well as other altcoins.  but that was only b/c i see all these things converging to Bitcoin in the end as the one money that will rule all and b/c the asset enabling platforms are premature.

but now i perceive SC's as the greater existential threat b/c it involves Blockstream trying to enable a source code change that will enable their own business model.  not only do i consider that unfair, i consider it a threat to Bitcoin as Money as i've beaten to death.  i don't want to see intra-protocol speculation built into Bitcoin itself effectively converting it into a WoW trading platform.

given all that, CP and the others become merely competitors willing to compete with Bitcoin on a level playing field which i am all for.  they may even push Bitcoin to become better which is also good.  the 2500 BTC proof of burn was interesting with XCP coming out the other end into the CP platform.  i listened to one LTB podcast of the core dev who sounded intelligent.  Patrick Burns is involved whom i admire.  i wish him well altho i still think these alternative asset platforms are way too premature.

there is no way, imo, that these things can get going w/o Bitcoin establishing itself on the worldwide stage as a bonafide, apolitical, secure, time tested, and generally accepted form of money first and foremost.  all those other assets and altcoins are Bitcoin derivatives at best.  we need to grow the market cap orders of magnitude greater in size and bully our way onto the Forex exchanges and into the gold/silver markets.  that takes years and patience.  we need outsiders to have to "buy in" to BTC on MC to participate.  but the great thing is, we are doing it.  it's happening.  but for this to continue, we need to avoid politicizing and manipulating the source code rules so that outsiders can be confident they are not buying into another FedStream system.  Bitcoin has evolved to a public good and NO ONE should be allowed to manipulate it except for purposes of improving its core function as MONEY.
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