Gold collapsing. Bitcoin UP.

[cypherdoc]

the silverbox update (comparison from the beginning of this thread, March 13th, 2012, gold=1690, Bitcoin=5.4):

Bitcoin:  +1076%

Gold:  -5%

GPL:  -33% silverbox long

Diff:  +1081% advantage Bitcoin and growing

[1713256615]

1713256615

[1713256615]

1713256615

[1713256615]

1713256615

[1713256615]

1713256615

[1713256615]

1713256615

[notme]

the silverbox update (comparison from the beginning of this thread, March 13th, 2012, gold=1690, Bitcoin=5.4):

Bitcoin:  +1076%

Gold:  -5%

GPL:  -33% silverbox long

Diff:  +1081% advantage Bitcoin and growing

that math right? should we not be over 1111?

If you are looking at GPL as baseline, yes.  If you are using gold spot price, he is correct.

[cypherdoc]

If you are looking at GPL as baseline, yes. 

lol!

[cypherdoc]

the silverbox update (comparison from the beginning of this thread, March 13th, 2012, gold=1690, Bitcoin=5.4):

Bitcoin:  +1120%

Gold:  -5%

GPL:  -33% silverbox long

Diff:  +1125% advantage Bitcoin and Growing

[rpietila]

Umm.. sorry to disturb, but:

why was it gold, that you are denominating bitcoin in? Why not silver, or stocks, or RE?

cypherdoc, the creator of this thread sold most of his metal (correct me if I'm wrong) in 2011 swapping it for bitcoins. He has been "propagandizing" that bitcoin would outperform gold and has substantial (in my mind) arguments. Some of them are contained in this article: http://web.archive.org/web/20120403154846/http://bitcoinmedia.com/bitcoin-vs-metals

I think cyperhdoc had mostly gold and less other metals. That probably answers the question?

Thank you. I also remember in our investment club we debated in Jan 2011 about the merits of Bitcoin vs. Silver. I was the one supporting silver.

Had I not won the debate, perhaps more of us would have invested in bitcoins back then, and we would be a formidable force in shaping the new economic landscape, instead of a sorry collection of old farts that tries to buy its share now...

[miscreanity]

Had I not won the debate, perhaps more of us would have invested in bitcoins back then, and we would be a formidable force in shaping the new economic landscape, instead of a sorry collection of old farts that tries to buy its share now...

Don't feel too bad - considering the difficulties had trying to convince the anti-goldbug pseudo-goldbugs of Bitcoin's merits, those in this thread still have some time left to acquire quite a nice amount.

And what happened to silverbox? The last post was last year. Hopefully the holdings haven't been sold, as they're very close to becoming rather valuable.

[cypherdoc]

Had I not won the debate, perhaps more of us would have invested in bitcoins back then, and we would be a formidable force in shaping the new economic landscape, instead of a sorry collection of old farts that tries to buy its share now...

Don't feel too bad - considering the difficulties had trying to convince the anti-goldbug pseudo-goldbugs of Bitcoin's merits, those in this thread still have some time left to acquire quite a nice amount.

And what happened to silverbox? The last post was last year. Hopefully the holdings haven't been sold, as they're very close to becoming rather valuable.

i wasn't going to respond to his comment referencing you (though i thought about it) but since you did i'm not going to let you get away with this one.

the reason i started the 2 gold threads going back to August of 2011, Gold: I smell a trap and this one, was to try and convince younger ppl around here as to the merits of what i had already done; sell gold and silver and buy Bitcoin.  while i admit the entire story is not in yet, i think it's crystal clear now that this was the winning strategy.  

you were the major impediment to this strategy from day one.  who was my major detractor during these 2 long thread debates?  you.  the way i recollect our ongoing debate was that you initially thought Bitcoin was a good idea but only for a minor, long shot speculative investment.  your emphasis was, and has always been that gold was a better play.  as the years have gone by and Bitcoin has shot up in price, while gold has stagnated and gone down, only now have you openly advocated Bitcoin as a superior investment.  and even then with some trepidation.  it's my feeling that you have swayed alot of followers of my threads from buying Bitcoin when it was much cheaper.  and to their detriment and my frustration.  sorry but that's how i see it.

that is my recollection and i can tell by several comments from long time followers of these 2 threads that they wish they had bought Bitcoin much earlier, as did i.

[Melbustus]

I've followed both threads from the beginning.

Cypher, I'm sure you're right that miscreanity dissuaded people from selling gold (to buy bitcoin or otherwise). That is, of course, unfortunate for people's wallets, as it turns out.

That said, I, for one, found the back and forth between the two of you to be *extremely* valuable. In the original thread, I was struck by how deeply you both analyze, and how much you agree on, yet how you reached strong opinions that were 180 degrees apart with regard to inflation/deflation and gold. Thus, your investment theses were completely different. It was a great jumpstart to my own thinking to be able to watch you two duke it out.

I have an expensive CS and Econ degree from a top college, and I must say, the discussion in both of these threads has been far more stimulating and insightful than anything I learned in my formal education (with regard to econ anyways; CS was solid).

Cypher, I just read your letter/post from March 2012 that I somehow missed a year ago. Funny, I was making some of those arguments to friends the other day; so I'm in decent agreement with your thesis; eg, there can only be one gold...and it's not gold anymore. Gold has plenty of inertia, sure, but it actually isn't a good money anymore. It hasn't been for decades, ever since humanity has needed to transact over non-trivial physical distances. Gold satisfies all the usual properties of a good medium of exchange (scarce, durable, divisible, fungible, etc), but I'd add an additional required quality due to the nature of modern society: INtangible. Being intangible opens the door for the currency's transactibility to be independent of physical distance, which is key in modern times.

Tangible money has been insufficient for decades, which is why humanity developed money surrogates (paper money, both pegged and un-backed) on top of the historical money (gold, silver). The increasingly apparent inadequacies of paper-money (eg, unlimited supply and reckless management) have given strength to the notion that gold is still good money, but the reality for gold in modern times is that it cannot serve as money without a surrogate. Sure, it can "back" the surrogate, but someone is responsible for the peg, and the peg will be moved to suit the whims of the day.

What's needed is a currency with gold's traditional properties PLUS intagibility. Such a thing needs no surrogates, and is therefore superior.

I think there will be a slow (or not so slow!) shift from gold to cryptocurrency over the next few decades. As people my age (~30) are just getting to a point in life where we've accumulated a little wealth and are looking around at ways to protect it, we won't have the "it has to be physical or it has no value" mental wall that many in older generations do. We grew up with computers and the internet; they've always been central to our lives. We will compare things like bitcoin to gold and wonder why one would pick the latter (unless it's much cheaper). In a world that includes bitcoin, gold looks increasingly like a relic to the internet generation.

[lebing]

Nice post Melbustus

[rpietila]

Well done, Melbustus.

I would like to add the argument that was instrumental in my "winning" (by popular vote, but it was full of silverbugs anyway, so by looking at the future I lost big time) the debate back then before the first runup:

- In the era of physical elements as money, the laws of physics dictate that only a certain number of elements exist, and the laws of economics dictate that after one gains the highest stocks-to-flows ratio, it is virtually impossible for anything else to surpass it. At least during the known history, gold has overcome all competition and is now 10-100 times more valuable than its nearest competitor, silver.

- In the era of digital elements as money, the laws of economics work as before, rendering it virtually impossible for a new entrant blockchain to gain enough traction. The existing money loves the low inflation of Bitcoin, and it is already in a dominant position. If you offer an alternative with even less inflation (to the theoretical maxim of 100% premined coins), you have hard time convincing anyone to buy your coins. If you offer a linear growth rate in coins, or exponential with a small exponent, or whatever really, the entrants must weigh between entering into Bitcoin with less than 100% lifetime inflation remaining, or to your untested high-inflation coin. There is hardly room in this for anything except pump and dump schemes, barring new invention.

- And THIS is the key. 5 years ago, or even now, for that matter, only a small number of people grasped how a cryptocurrency would work. If it is set to overtake gold in the next 20 years, who knows what the next thing will be. People can invent anything. The Pandora box is opened, and the world will not be the same as in the 1800s any more. If you invested in gold and silver, as they are now in realistic valuations, you have the long-term opportunity of making 0% real return with 100% security of your investment. (The room was full of astute and wealthy people, who understand that any long-term real growth rate above 4% involves huge risk, and that the tax laws are so strict, you will most likely end up losing in real terms, no matter what mainstream investment you buy or forgo buying.) If you buy into a cryptocurrency, in all probability it will be scrapped in the future and the only way you make your money back, is if you do it full time to decide when it is the time to jump off the ship into the next big thing. Cryptocurrencies are fine for extreme speculation but they will not be money in the immediate future. Investing a % of your wealth into speculation is all fine, but they will not threaten gold and silver or be any substitute for them. [Applause.]

[cypherdoc]

Well done, Melbustus.

I would like to add the argument that was instrumental in my "winning" (by popular vote, but it was full of silverbugs anyway, so by looking at the future I lost big time) the debate back then before the first runup:

- In the era of physical elements as money, the laws of physics dictate that only a certain number of elements exist, and the laws of economics dictate that after one gains the highest stocks-to-flows ratio, it is virtually impossible for anything else to surpass it. At least during the known history, gold has overcome all competition and is now 10-100 times more valuable than its nearest competitor, silver.

- In the era of digital elements as money, the laws of economics work as before, rendering it virtually impossible for a new entrant blockchain to gain enough traction. The existing money loves the low inflation of Bitcoin, and it is already in a dominant position. If you offer an alternative with even less inflation (to the theoretical maxim of 100% premined coins), you have hard time convincing anyone to buy your coins. If you offer a linear growth rate in coins, or exponential with a small exponent, or whatever really, the entrants must weigh between entering into Bitcoin with less than 100% lifetime inflation remaining, or to your untested high-inflation coin. There is hardly room in this for anything except pump and dump schemes, barring new invention.

- And THIS is the key. 5 years ago, or even now, for that matter, only a small number of people grasped how a cryptocurrency would work. If it is set to overtake gold in the next 20 years, who knows what the next thing will be. People can invent anything. The Pandora box is opened, and the world will not be the same as in the 1800s any more. If you invested in gold and silver, as they are now in realistic valuations, you have the long-term opportunity of making 0% real return with 100% security of your investment. (The room was full of astute and wealthy people, who understand that any long-term real growth rate above 4% involves huge risk, and that the tax laws are so strict, you will most likely end up losing in real terms, no matter what mainstream investment you buy or forgo buying.) If you buy into a cryptocurrency, in all probability it will be scrapped in the future and the only way you make your money back, is if you do it full time to decide when it is the time to jump off the ship into the next big thing. Cryptocurrencies are fine for extreme speculation but they will not be money in the immediate future. Investing a % of your wealth into speculation is all fine, but they will not threaten gold and silver or be any substitute for them. [Applause.]

No wonder you feel bad.

[rpietila]

Well done, Melbustus.

I would like to add the argument that was instrumental in my "winning" (by popular vote, but it was full of silverbugs anyway, so by looking at the future I lost big time) the debate back then before the first runup:

- In the era of physical elements as money, the laws of physics dictate that only a certain number of elements exist, and the laws of economics dictate that after one gains the highest stocks-to-flows ratio, it is virtually impossible for anything else to surpass it. At least during the known history, gold has overcome all competition and is now 10-100 times more valuable than its nearest competitor, silver.

- In the era of digital elements as money, the laws of economics work as before, rendering it virtually impossible for a new entrant blockchain to gain enough traction. The existing money loves the low inflation of Bitcoin, and it is already in a dominant position. If you offer an alternative with even less inflation (to the theoretical maxim of 100% premined coins), you have hard time convincing anyone to buy your coins. If you offer a linear growth rate in coins, or exponential with a small exponent, or whatever really, the entrants must weigh between entering into Bitcoin with less than 100% lifetime inflation remaining, or to your untested high-inflation coin. There is hardly room in this for anything except pump and dump schemes, barring new invention.

- And THIS is the key. 5 years ago, or even now, for that matter, only a small number of people grasped how a cryptocurrency would work. If it is set to overtake gold in the next 20 years, who knows what the next thing will be. People can invent anything. The Pandora box is opened, and the world will not be the same as in the 1800s any more. If you invested in gold and silver, as they are now in realistic valuations, you have the long-term opportunity of making 0% real return with 100% security of your investment. (The room was full of astute and wealthy people, who understand that any long-term real growth rate above 4% involves huge risk, and that the tax laws are so strict, you will most likely end up losing in real terms, no matter what mainstream investment you buy or forgo buying.) If you buy into a cryptocurrency, in all probability it will be scrapped in the future and the only way you make your money back, is if you do it full time to decide when it is the time to jump off the ship into the next big thing. Cryptocurrencies are fine for extreme speculation but they will not be money in the immediate future. Investing a % of your wealth into speculation is all fine, but they will not threaten gold and silver or be any substitute for them. [Applause.]

No wonder you feel bad.

Well, I did diversify some into bitcoin, but most (at the time) did not buy any

[Melbustus]

Just FYI in case anyone missed it above, or a page or two back when molecular and cypher linked it:

http://web.archive.org/web/20120403154846/http://bitcoinmedia.com/bitcoin-vs-metals

Great article/post by cypher from March 2012. Must read if you're in this thread at all.

[cypherdoc]

the silverbox update (comparison from the beginning of this thread, March 13th, 2012, gold=1690, Bitcoin=5.4):

Bitcoin:  +1219%

Gold:  -5%

GPL:  -33% silverbox long

Diff:  +1224% advantage Bitcoin and Growing

[Melbustus]

- And THIS is the key. 5 years ago, or even now, for that matter, only a small number of people grasped how a cryptocurrency would work. If it is set to overtake gold in the next 20 years, who knows what the next thing will be. People can invent anything. The Pandora box is opened, and the world will not be the same as in the 1800s any more. If you invested in gold and silver, as they are now in realistic valuations, you have the long-term opportunity of making 0% real return with 100% security of your investment. (The room was full of astute and wealthy people, who understand that any long-term real growth rate above 4% involves huge risk, and that the tax laws are so strict, you will most likely end up losing in real terms, no matter what mainstream investment you buy or forgo buying.) If you buy into a cryptocurrency, in all probability it will be scrapped in the future and the only way you make your money back, is if you do it full time to decide when it is the time to jump off the ship into the next big thing. Cryptocurrencies are fine for extreme speculation but they will not be money in the immediate future. Investing a % of your wealth into speculation is all fine, but they will not threaten gold and silver or be any substitute for them. [Applause.]

I understand the passage above is from an old argument that you don't necessarily currently agree with, but it's still worthy of discussion.

The counterargument is that new invention can *likely* (though certainly NOT definitely) be incorporated into bitcoin. As a software-developer, I have an appreciation for how effectively and quickly impressive work can get done by a motivated set of talented developers. I think how the recent blockchain fork was handled demonstrates the point to a degree. No actual development/patching/code-changes took place in that particular incident, but it shows the ability of the community to manage situations that would negatively impact everyone if no technical action was taken. Bitcoin beautifully aligns incentives.

That said, some theoretical possibilities for improvement that may or may not be able to be incorporated into bitcoin, if they ever occur at all:
-- Instant confirmations. This would involve an alternate solution to the Byzantine Generals Problem in computer science. The proof-of-work distributed blockchain is a novel solution, but still requires a non-trivial timespan for the proof-of-work agreement to get done. Similar breakthroughs are unlikely; this has been a defined problem in computer science since at least the 1970s. Furthermore, my understanding is that Open Transactions in bitcoin will allow services to build on top of the blockchain which provide enhanced functionality such as insta-confirms. Yes, these services would be central points, but I'd be fine using them for day-to-day stuff, which still keeping most of my wealth in cold storage managed solely by me.
-- Something more energy-efficient than proof of stake. There are alt-coins for this, I believe, or at least proposals. Little traction (which says what the market thinks).
-- True anonymity. Benefits over bitcoin are likely small, since bitcoin can be used *almost* completely anonymously if someone is sufficiently motivated.
-- Easier scalability. Bitcoin is probably already entrenched enough that this is not sufficient to supplant it, even if bitcoin couldn't incorporate the theoretical new tech. Since bitcoin *can* theoretically scale (with improvements), the vested interest of those holding bitcoin probably wins.
-- Other monetary models. This is almost a moot point, because then we're not talking about something that can be called "digital gold", and is thus irrelevant for the purposes of this conversation.

[notme]

+1

Where were you a month ago when I felt Bitcoin had peaked at $22 and I sold some to buy gold coins and invest in old world products.
I put equal amounts in a Education Savings Plan, Gold coins and Bitcoin paper wallets, for my kids, thinking gold would outperform Bitcoin and it wasn't a fair comparison because Bitcoin was about to crash.  So a month has passed and Bitcoin is up over 300% so much for a Bitcoin correction?

I have always felt gold is old school, I changed my view when a friends' friend approaching retirement, has outperformed all competing investments, and all he did agenised everyone's advice was put his savings into Kruger Rands every month.

Needless to say I've changed my mind again. And it seems Bitcoins' the new gold.

Great for him.  However, he just got lucky on timing.

[cypherdoc]

the silverbox update (comparison from the beginning of this thread, March 13th, 2012, gold=1690, Bitcoin=5.4):

Bitcoin:  +1243%

Gold:  -5%

GPL:  -33% silverbox long

Diff:  +1248% advantage Bitcoin and Growing

[paraipan]

the silverbox update (comparison from the beginning of this thread, March 13th, 2012, gold=1690, Bitcoin=5.4):

Bitcoin:  +1243%

Gold:  -5%

GPL:  -33% silverbox long

Diff:  +1248% advantage Bitcoin and Growing

Cypher, you will soon need an unsigned integer to store that percentage 

[sunnankar]

Great for him.  However, he just got lucky on timing.

Good luck is when preparation meets opportunity.

[Spaceman_Spiff]

the silverbox update (comparison from the beginning of this thread, March 13th, 2012, gold=1690, Bitcoin=5.4):

Bitcoin:  +1243%

Gold:  -5%

GPL:  -33% silverbox long

Diff:  +1248% advantage Bitcoin and Growing

After hearing how you had to drag your precious metals to the dealer in several times, and you bought heavily into bitcoin at $2, I think I don't want to know what kind of wealth you have accumulated  . I am still dreaming of the faraway day I could buy a house with my profits. Congrats man !