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Author Topic: Gold collapsing. Bitcoin UP.  (Read 2011305 times)
smooth
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December 03, 2014, 10:16:10 PM
 #18381

This makes it clear that we must be careful to distinguish between the ledger (a conceptual spreadsheet keeping track of who owns what percentage of the economic community known as "the Bitcoin ecosystem" and later perhaps just "the global economy") and the protocol for updating that ledger.

We're back to this silly idea of separating the currency from from the blockchain. You can't, they are one in the same.

This "ledger" rhetoric is a paraphrase of the false idea they are separable.

The system is the blockchain is the currency is the protocol is the ledger.

Yes you could. Not to say the currency can run without a blockchain. Of course it can't.

But you did not address the essence of ZB's argument which is that monoculture in currency is absolutely desirable. We don't want multiple ledgers of ownership where different, conflicting stakes are attributed to the same persons.

This ledger cannot "economically" fail, only the protocol updating it. If that happens, we could still "transfer" a picture of the ledger (who owns what) to a new protocol that will update it. So yes, if the blockchain fail, we could, theoretically, seperate the currency (ledger) and "attach" it to a new chain.

Well I disagree, and I think this is just part of the process of recognizing that you can't separate the protocol from the ledger. Otherwise, you could simply argue that we already have a ledger (fiat) and we should import that into the protocol. Which of course is exactly what the "bitcoin the protocol not the currency" folks are saying.

You need a new currency because the currency and the protocol are inexorably linked. Change the protocol and the currency also must change. For example, one might imagine (non-bitcoin) protocol that can't possibly work with a fixed money supply because it doesn't charge transaction fees at all.

You can't logically argue that "there is only one ledger" and still accept bitcoin because bitcoin is already creating a new ledger (as it must).
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December 03, 2014, 10:33:46 PM
 #18382

This makes it clear that we must be careful to distinguish between the ledger (a conceptual spreadsheet keeping track of who owns what percentage of the economic community known as "the Bitcoin ecosystem" and later perhaps just "the global economy") and the protocol for updating that ledger.

We're back to this silly idea of separating the currency from from the blockchain. You can't, they are one in the same.

This "ledger" rhetoric is a paraphrase of the false idea they are separable.

The system is the blockchain is the currency is the protocol is the ledger.

Yes you could. Not to say the currency can run without a blockchain. Of course it can't.

But you did not address the essence of ZB's argument which is that monoculture in currency is absolutely desirable. We don't want multiple ledgers of ownership where different, conflicting stakes are attributed to the same persons.

This ledger cannot "economically" fail, only the protocol updating it. If that happens, we could still "transfer" a picture of the ledger (who owns what) to a new protocol that will update it. So yes, if the blockchain fail, we could, theoretically, seperate the currency (ledger) and "attach" it to a new chain.

Well I disagree, and I think this is just part of the process of recognizing that you can't separate the protocol from the ledger. Otherwise, you could simply argue that we already have a ledger (fiat) and we should import that into the protocol. Which of course is exactly what the "bitcoin the protocol not the currency" folks are saying.

You need a new currency because the currency and the protocol are inexorably linked. Change the protocol and the currency also must change. For example, one might imagine (non-bitcoin) protocols that can't work with a fixed money supply because it doesn't charge transaction fees at all.

You can't logically argue that "there is only one ledger" and still accept bitcoin because bitcoin is already creating a new ledger (as it must).

The fiat ledger is devaluing the holding of its participants. It is corrupted, debased and cannot be "imported" onto a blockchain.

So yes, we do need a new currency in our transition from the fiat world.

Quote
Change the protocol and the currency also must change.

I don't see how this is even remotely true. The protocol is not only monetary parameters. Of course you would know this but it is equally encryption algorithms, amongst other things.

Assume, for example, that SHA-256 is broken, then the protocol would have to be changed but of course that does not result in a change to the currency.

I can absolutely champion "only one ledger" and accept Bitcoin because I believe that the current ledgers (money) are corrupted and do not serve the greater good. You are therefore correct that Bitcoin must create a new ledger and it is imperative that we protect it as the one and only and not be distracted by others unless a better one comes along.

"I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash." Hal Finney, Dec. 2010
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December 03, 2014, 10:45:52 PM
 #18383

This makes it clear that we must be careful to distinguish between the ledger (a conceptual spreadsheet keeping track of who owns what percentage of the economic community known as "the Bitcoin ecosystem" and later perhaps just "the global economy") and the protocol for updating that ledger.

We're back to this silly idea of separating the currency from from the blockchain. You can't, they are one in the same.

This "ledger" rhetoric is a paraphrase of the false idea they are separable.

The system is the blockchain is the currency is the protocol is the ledger.

Yes you could. Not to say the currency can run without a blockchain. Of course it can't.

But you did not address the essence of ZB's argument which is that monoculture in currency is absolutely desirable. We don't want multiple ledgers of ownership where different, conflicting stakes are attributed to the same persons.

This ledger cannot "economically" fail, only the protocol updating it. If that happens, we could still "transfer" a picture of the ledger (who owns what) to a new protocol that will update it. So yes, if the blockchain fail, we could, theoretically, seperate the currency (ledger) and "attach" it to a new chain.

Well I disagree, and I think this is just part of the process of recognizing that you can't separate the protocol from the ledger. Otherwise, you could simply argue that we already have a ledger (fiat) and we should import that into the protocol. Which of course is exactly what the "bitcoin the protocol not the currency" folks are saying.

You need a new currency because the currency and the protocol are inexorably linked. Change the protocol and the currency also must change. For example, one might imagine (non-bitcoin) protocols that can't work with a fixed money supply because it doesn't charge transaction fees at all.

You can't logically argue that "there is only one ledger" and still accept bitcoin because bitcoin is already creating a new ledger (as it must).

The fiat ledger is devaluing the holding of its participants. It is corrupted, debased and cannot be "imported" onto a blockchain.

So yes, we do need a new currency in our transition from the fiat world.

Quote
Change the protocol and the currency also must change.

I don't see how this is even remotely true. The protocol is not only monetary parameters. Of course you would know this but it is equally encryption algorithms, amongst other things.

Assume, for example, that SHA-256 is broken, then the protocol would have to be changed but of course that does not result in a change to the currency.

Fair point, not all changes. But certainly some changes must include changes to the ledger.

Quote
I can absolutely champion "only one ledger" and accept Bitcoin because I believe that the current ledgers (money) are corrupted and do not serve the greater good. You are therefore correct that Bitcoin must create a new ledger and it is imperative that we protect it as the one and only and not be distracted by others unless a better one comes along.

Yes, that is exactly the point. If the premise is that bitcoin catastrophically fails then there might be "a better one" that doesn't fail. And yes that includes monetary properties but not only monetary properties

As I said earlier, gold has not had a fixed supply, including over the thousands of years that was cited as it being something close to a monetary standard. ZB did not address this. So the historical example of gold does not support the premise that bitcoin can serve as a universal monetary standard. The experiment of a fixed supply monetary standard has never been run, and certainly not run repeatedly to determine the range of outcomes.

Bitcoin may work great, we will see. Or it may fail. Investors are rational in attaching a non-zero probability to "a better one comes along."



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December 04, 2014, 12:23:45 AM
 #18384

Like you pointed out, there's a fundamental difference between the transfer of a bitcoin, and the transfer of a token that represents a claim on some external-to-the-blockchain property.  In the later case (asset-backed tokens), all that is transferred is ownership (and ownership is really a social construct, valuable only to the extent that one's society is willing to enforce property rights [as control of the property in question remains a physical problem]).  In the former case (bitcoin), what's transferred is control itself.



Thank you. This is brilliant stuff.

Going back to this interesting area. Agreed with above.

There seems to be a greyscale in the amount of the social trust needed to enforce off-blockchain rights, depending upon the type of asset involved.
An example where the blockchain token can have good control in the physical world is where physical keys exist, such as car keys or house keys. If physical keys are made smart, activated by a verification signature from the same private key which controls the recipient bitcoin address, then cars and houses can respond only to their new owners. Usage rights pass with the bitcoin transaction.

This is not watertight as physical locks can be changed, but the principle exists for the blockchain to hold access to some external assets, particularly other digital assets.


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December 04, 2014, 03:39:53 AM
 #18385

Interesting discussion and analysis on the possibly of Russia backing the rubble with gold and reinstituting a gold standard.

http://www.goldmoney.com/research/analysis/russia-s-monetary-solution
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December 04, 2014, 04:35:58 AM
 #18386

Interesting discussion and analysis on the possibly of Russia backing the rubble with gold and reinstituting a gold standard.

http://www.goldmoney.com/research/analysis/russia-s-monetary-solution

Chances of that happening are about 0.5%. This is worthless hype.

Bro, do you even blockchain?
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December 04, 2014, 04:41:05 AM
 #18387

Interesting discussion and analysis on the possibly of Russia backing the rubble with gold and reinstituting a gold standard.

http://www.goldmoney.com/research/analysis/russia-s-monetary-solution


I don't understand how a gold-standard could be considered credible. Whether it's the Switzerland, Russia, China, or anywhere, how is it not obvious that after implementing a gold-exchange standard at some fixed peg, they'll eventually just move or eliminate the peg?

Not only is it obvious in theory, but there's historical precedent.

Pegs don't work. Clinging to the idea that a peg somehow conveys credibility is ludicrous.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
Cryptoasset rankings and metrics for investors: http://onchainfx.com
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December 04, 2014, 04:46:54 AM
 #18388

It's not for me, but I feel https://bitreserve.org/ has a very solid business model.

Their new "Gold" card is quite interesting for gold bugs, I would think. https://bitreserve.org/en/our-vision/gold To me this all seem pointless but I can see some people liking the idea.

The transparency model is impressive and I believe, and hope, that this practice will be made a standard in the industry.




"I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash." Hal Finney, Dec. 2010
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December 04, 2014, 04:46:59 AM
 #18389

Like you pointed out, there's a fundamental difference between the transfer of a bitcoin, and the transfer of a token that represents a claim on some external-to-the-blockchain property.  In the later case (asset-backed tokens), all that is transferred is ownership (and ownership is really a social construct, valuable only to the extent that one's society is willing to enforce property rights [as control of the property in question remains a physical problem]).  In the former case (bitcoin), what's transferred is control itself.



Thank you. This is brilliant stuff.

Going back to this interesting area. Agreed with above.

There seems to be a greyscale in the amount of the social trust needed to enforce off-blockchain rights, depending upon the type of asset involved.
An example where the blockchain token can have good control in the physical world is where physical keys exist, such as car keys or house keys. If physical keys are made smart, activated by a verification signature from the same private key which controls the recipient bitcoin address, then cars and houses can respond only to their new owners. Usage rights pass with the bitcoin transaction.

This is not watertight as physical locks can be changed, but the principle exists for the blockchain to hold access to some external assets, particularly other digital assets.



Isn't the problem that at some point there will have to be some centralization for smart contracts to link up with physical objects IRL?

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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December 04, 2014, 05:07:32 AM
 #18390

Assume, for example, that SHA-256 is broken, then the protocol would have to be changed but of course that does not result in a change to the currency.
Probably not the best example.
This would be a pretty big change to the currency.  At minimum a lot of it could change hands against the will of the owners.
This would be an emergency hard fork that would not be a simple change.
It would destroy every current mining operation and force a complete restart there from CPU-GPU-FPGA-ASIC progression.

I know some notable speakers use this example as one of the "there are no problems we can't solve" message, but this would in fact truly wreck havok on Bitcoin.

Fundamentally though I'd agree with the broader point that not every protocol change is necessarily a change to the currency.  Many would be entirely seamless to users.  This just isn't one of those.

FREE MONEY1 Bitcoin for Silver and Gold NewLibertyDollar.com and now BITCOIN SPECIE (silver 1 ozt) shows value by QR
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December 04, 2014, 05:15:42 AM
 #18391

Assume, for example, that SHA-256 is broken, then the protocol would have to be changed but of course that does not result in a change to the currency.
Probably not the best example.
This would be a pretty big change to the currency.  At minimum a lot of it could change hands against the will of the owners.
This would be an emergency hard fork that would not be a simple change.
It would destroy every current mining operation and force a complete restart there from CPU-GPU-FPGA-ASIC progression.

I know some notable speakers use this example as one of the "there are no problems we can't solve" message, but this would in fact truly wreck havok on Bitcoin.

Fundamentally though I'd agree with the broader point that not every protocol change is necessarily a change to the currency.  Many would be entirely seamless to users.  This just isn't one of those.

and the good news is that SHA-2 seems to be holding up pretty well with no successor clearly in sight even tho SHA-1 has been proven to be insecure.  it also seems that these advancements come from the academic circles thru NIST competitions IIRC.  we should have plenty of warning that some breakthrough is on the horizon with a need for SHA-3.
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December 04, 2014, 05:22:20 AM
 #18392

Interesting discussion and analysis on the possibly of Russia backing the rubble with gold and reinstituting a gold standard.

http://www.goldmoney.com/research/analysis/russia-s-monetary-solution

Essentially Russia was previously backing it with oil (and nukes and taxation-or more broadly external and internal force and threat, just like any nation state).
So this is more akin to acknowledgment of adding gold to the basket.

FREE MONEY1 Bitcoin for Silver and Gold NewLibertyDollar.com and now BITCOIN SPECIE (silver 1 ozt) shows value by QR
Bulk premiums as low as .0012 BTC "BETTER, MORE COLLECTIBLE, AND CHEAPER THAN SILVER EAGLES" 1Free of Government
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December 04, 2014, 05:25:55 AM
 #18393

Technology solves problems. Bitcoin is digital. Soon my hot wallet is gonna do all of the accounting for me and I should have no problem reporting and conforming with the tax code.

Uh huh, sounds very user friendly.  Speaking of which, I really hate it when I have to calculate capital gains whenever I use my Visa.
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December 04, 2014, 05:54:09 AM
 #18394

Interesting discussion and analysis on the possibly of Russia backing the rubble with gold and reinstituting a gold standard.

http://www.goldmoney.com/research/analysis/russia-s-monetary-solution
I don't understand how a gold-standard could be considered credible. Whether it's the Switzerland, Russia, China, or anywhere, how is it not obvious that after implementing a gold-exchange standard at some fixed peg, they'll eventually just move or eliminate the peg?

Not only is it obvious in theory, but there's historical precedent.

Pegs don't work. Clinging to the idea that a peg somehow conveys credibility is ludicrous.

Yes.  Pegs are completely discredited in economics simply by their history of abuse.  It seems a poor choice of term to recycle for use to describe the Side Chain exchange process, but then... they didn't ask our opinion.  Wink

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December 04, 2014, 09:26:38 AM
 #18395

On monoculture and diversity...

TL;DR: Monoculture in protocols may introduce weaknesses; monoculture in a having a single ledger doesn't, and is pretty much the point of having money at all.

on bitcoin monoculture, an external to bitcoin point of view:

http://cointelegraph.com/news/113036/vitalik-buterin-challenges-the-idea-of-bitcoin-dominance-maximalism-op-ed




Vitalik is brilliant and understands code. Unfortunately, he doesn't fully understand money or human nature. I think that comes more with age/experience.

Yep you're right. Though, I have to say that reading his blog posts is always stimulating (lately he was quite prolific, 4 posts on ethereum blog in Nov alone).
E.g. after having read his "The Search for a Stable Cryptocurrency" I was
eventually barely able to understand what "seignorage shares" is Smiley

Bitcoin is a participatory system which ought to respect the right of self determinism of all of its users - Gregory Maxwell.
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December 04, 2014, 09:51:23 AM
 #18396

Interesting discussion and analysis on the possibly of Russia backing the rubble with gold and reinstituting a gold standard.

http://www.goldmoney.com/research/analysis/russia-s-monetary-solution

Essentially Russia was previously backing it with oil (and nukes and taxation-or more broadly external and internal force and threat, just like any nation state).
So this is more akin to acknowledgment of adding gold to the basket.

They could strengthen the ruble by selling some government property, buy rubles for the proceeds and destroy them, or, these days of debt, repay some debt or stop rolling it over. They could probably cut all taxes and run the government on selling land for a decade or so, while using the timeout to fire all government officials. It will be done if it is in the interest of the current powers, which it isn't.

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December 04, 2014, 11:27:48 AM
 #18397

One thing we have going for us though is greed. If there is money to be made holding your wealth in Bitcoin then people will gravitate toward that option.

Had the exact same thought last night. If a new form of sound money is created from nothing, the potential for the largest transfer of wealth in possibility humanity's history will be so tremendous that human greed will have the strongest influence of all. It would only take a few senators on the right committees aligned to Bitcoin's speculative waves, to gum up state attempts to block Bitcoin. They would position themselves as the good guys, but it would really just be greed.

Bitcoin is an auto-immune virus that diseases the incentive structure of the state. Gold couldn't do this, because it is too difficult to hold and transport gold without people finding out you have it. Once higher-ups figure out how to covertly hold bitcoins, the incentive structure disintegrates from the inside out.
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December 04, 2014, 11:33:01 AM
 #18398

The first wave of alts were simple clones, it was almost a given that network effects would hold them back here. However the next wave of alts are going to
a) come with real innovations and then
b) come with government sanctioned force


i think a) and b) are oxymorons.  force precludes the need to innovate.  thus Bitcoin will always have that advantage.  we've already seen the failure of MintChip due to just this dynamic.

Yes, I was saying they are different coins and different attempts. The first wave were the clones (which we've already had), the next wave a) will have some level of actual innovation, and the wave after that b) would be government attempts to resist Bitcoin and regain control.

the creation of USDCoin would be a tacit admission by the govt that Bitcoin has merit and, paradoxically to their wishes, money will always flow to that platform which treats it best.  that can't happen with an inflationary, violent coin.

It would be an admission by the government that Bitcoin has merit. It would also be sold to the public as having all the benefits of Bitcoin with all the security of government money. Given the history of money, this has worked. It did for the FED in the 1930's.

The very first thing to understand about Bitcoin is that its store of value function is at least an order of magnitude more important than its payment or remittance functions. Very roughly speaking, something like 90% of the value of Bitcoin is in something the government cannot possibly replicate without relinquishing control of the money supply. They could create digital money, but that wouldn't touch the lion's share of Bitcoin's value proposition.
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December 04, 2014, 11:48:01 AM
 #18399

This makes it clear that we must be careful to distinguish between the ledger (a conceptual spreadsheet keeping track of who owns what percentage of the economic community known as "the Bitcoin ecosystem" and later perhaps just "the global economy") and the protocol for updating that ledger.

We're back to this silly idea of separating the currency from from the blockchain. You can't, they are one in the same.

This "ledger" rhetoric is a paraphrase of the false idea they are separable.

The system is the blockchain is the currency is the protocol is the ledger.

You're not reading.

The Bitcoin protocol specifies the parameters of the ledger (including coin issuance schedule) and how it is updated, but that doesn't mean you can't have a different protocol that maintains the same ledger and issuance schedule but that accomplishes this task differently under the hood. This has nothing to do with the "separate the currency from the blockchain" meme that is floating around.

Mining fees do introduce some ambiguity if they are set extremely high by the protocol and somehow cannot be user adjusted, because the effect would be similar to changing the coin issuance schedule. But that seems a moot point because users would find a way around the default setting if fees were so high as to make a difference.
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December 04, 2014, 11:54:30 AM
 #18400

The very first thing to understand about Bitcoin is that its store of value function is at least an order of magnitude more important than its payment or remittance functions. Very roughly speaking, something like 90% of the value of Bitcoin is in something the government cannot possibly replicate without relinquishing control of the money supply. They could create digital money, but that wouldn't touch the lion's share of Bitcoin's value proposition.

I agree with this, but I think a better term for the value proposition is "neutral money", instead of "store of value".  Bitcoin eliminates trusted authorities.  If the system has trusted authorities, it does not compete with bitcoin.

I wrote a short article about this here: https://gist.github.com/weissjeffm/ab8e157e7d7943b07310
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