Gold collapsing. Bitcoin UP.

[MarketNeutral]

If you'll permit me to add an asterisk to the gold commentary.....

Gold is up year to date, year over year, over the past five years, and over the past ten years, over the past twenty years, over the past fifty years, and over the past one hundred years.

Before the creation of the Fed? Well, that's a different story.

But gold is not really an investment in the traditional sense. It's a traditional asset.

My feeling is that trying to draw a distinction between 'investments' and 'assets' tends to simply muddy the waters in a lot of cases.  Particularly in times of change, and we are in one now as we were in the early 70's, following WW-II, and countless times before that.

Until the world's debt crisis is resolved, gold will appear to rise, because gold extinguishes debt and has no counter-party risk. I'm talking about decades of price discovery as debt continues to self-destruct.

Bitcoin is also an asset which is nobody's liability.  In my mind, BTC is much more like Gold than it is like the USD for this reason.  As someone who is light on liabilities, both BTC and PM's appeal to me very much.

It's been a long time since anyone was overtly burnt by this asset/liability issue so it is not front and center in people's minds.  (Actually, I would argue that people are covertly burnt by the issue all the time, but anyway...)  I have significant paranoia that the asset/liability thing could come to the for with rapidity, and any day.

Depending on who's crunching the numbers, the world's debt is near or above one quadrillion USD against a global net worth of between sixty-five and two hundred trillion USD. How many bitcoins is that?

Understand exponential growth and you understand the problem facing the debt-based monetary system.

Happily for TPTB, very few people do.

From the broadest possible macro perspective, the world's primary economic concern is reconciling actual economic output (taking into account resource depletion, resource distribution, demographics, etc) with a hopelessly unpayable global debt.

I'm not ruling out the possibility that things could limp along in current form for many years.  Even decades.  But I also feel that it is just as possible that it could collapse happen tomorrow.  As long as there is not an excessive opportunity cost in keeping my investments/assets in a form which is more immune from loss if some entity cannot honer their liabilities, I choose to largely do so.

There's no reason gold and bitcoins need to be mutually exclusive. They can function together quite well, I think.

This is a point that I've been trying to make forever.

I feel that Gold is a good 'reserve' but there are difficulties in 'exchange'.  Bitcoin, on the other hand, is great on the 'exchange' side of the spectrum, but I (seemingly alone) do not consider it a good 'reserve' currency.  Marry the two (or at least get them being regular fuck-buddies) and one has a very robust solution which would be relatively cumbersome for attackers to meddle with.

Excellent points! 

[1713866578]

1713866578

[1713866578]

1713866578

[MarketNeutral]

Bitcoin, on the other hand, is great on the 'exchange' side of the spectrum, but I (seemingly alone) do not consider it a good 'reserve' currency.  Marry the two (or at least get them being regular fuck-buddies) and one has a very robust solution which would be relatively cumbersome for attackers to meddle with.

why do u think it wouldn't fx well as a reserve currency?  nightly settlements btwn nations could occur in an instant unlike gold and no centralized warehouses for bullion would be needed.

Gold is the ultimate store of value and has been since the dawn of civilization. That's not going to change any time soon.

But I don't see any reason why, under the right conditions, bitcoin could not function as a reserve currency.

It wouldn't diminish gold's status at all. Both are decentralized and debt-free, so they complement each other quite well.

[cypherdoc]

Bitcoin, on the other hand, is great on the 'exchange' side of the spectrum, but I (seemingly alone) do not consider it a good 'reserve' currency.  Marry the two (or at least get them being regular fuck-buddies) and one has a very robust solution which would be relatively cumbersome for attackers to meddle with.

why do u think it wouldn't fx well as a reserve currency?  nightly settlements btwn nations could occur in an instant unlike gold and no centralized warehouses for bullion would be needed.

Gold is the ultimate store of value and has been since the dawn of civilization. That's not going to change any time soon.

this is true but times change.

It wouldn't diminish gold's status at all. Both are decentralized and debt-free, so they complement each other quite well.

But Bitcoin accomplishes everything that gold did when it was the reserve currency of the world.  in fact, i'd argue Bitcoin would function better in today's Internet Age.  using both would be redundant and i think if left to its own, the "market" would choose the more efficient means of performing the reserve currency function and that would be Bitcoin.

[tvbcof]

Bitcoin, on the other hand, is great on the 'exchange' side of the spectrum, but I (seemingly alone) do not consider it a good 'reserve' currency.  Marry the two (or at least get them being regular fuck-buddies) and one has a very robust solution which would be relatively cumbersome for attackers to meddle with.

why do u think it wouldn't fx well as a reserve currency?  nightly settlements btwn nations could occur in an instant unlike gold an no centralized warehouses for bullion would be needed.

Several reasons:

1)  I do not consider Bitcoin to be reliable under what most people consider 'success'.  I do not trust that the infrastructure needed to support the solution under heavy usage worldwide will be maintainable under coordinated attack.

2)  A beauty (in my opinion) of Bitcoin is that it operates at the pleasure of the user base....but user bases can be fickle.

[cypherdoc]

Bitcoin, on the other hand, is great on the 'exchange' side of the spectrum, but I (seemingly alone) do not consider it a good 'reserve' currency.  Marry the two (or at least get them being regular fuck-buddies) and one has a very robust solution which would be relatively cumbersome for attackers to meddle with.

why do u think it wouldn't fx well as a reserve currency?  nightly settlements btwn nations could occur in an instant unlike gold an no centralized warehouses for bullion would be needed.

Several reasons:

1)  I do not consider Bitcoin to be reliable under what most people consider 'success'.  I do not trust that the infrastructure needed to support the solution under heavy usage worldwide will be maintainable under coordinated attack.

2)  A beauty (in my opinion) of Bitcoin is that it operates at the pleasure of the user base....but user bases can be fickle.

take a look at this: https://bitcointalk.org/index.php?topic=78403.msg874553#msg874553

[tvbcof]

why do u think it wouldn't fx well as a reserve currency?  nightly settlements btwn nations could occur in an instant unlike gold an no centralized warehouses for bullion would be needed.

Several reasons:

1)  I do not consider Bitcoin to be reliable under what most people consider 'success'.  I do not trust that the infrastructure needed to support the solution under heavy usage worldwide will be maintainable under coordinated attack.

2)  A beauty (in my opinion) of Bitcoin is that it operates at the pleasure of the user base....but user bases can be fickle.

take a look at this: https://bitcointalk.org/index.php?topic=78403.msg874553#msg874553

Looks like Gavin is saying that 'they' could retro-actively code up something which I've previously argued should be put in place and tested and ready to go pro-actively (namely, user-optional black lists.)

But I'm not even talking about 51%-type attacks in my comments.  What I am referencing is that significant network bandwidth and a fairly complex 'supernode' arrangement will be needed for transmission if/when Bitcoin gets big.  Both such solutions would be, in my opinion, challenging to maintain in the event of a coordinated attack by the various corp/gov entities which will probably always have their hands on the levers of the global infrastructure.

[cypherdoc]

Both such solutions would be, in my opinion, challenging to maintain in the event of a coordinated attack by the various corp/gov entities which will probably always have their hands on the levers of the global infrastructure.

you gotta learn to think big.  what if gov'ts decide it's in their best interests to adopt Bitcoin?

[tvbcof]

Both such solutions would be, in my opinion, challenging to maintain in the event of a coordinated attack by the various corp/gov entities which will probably always have their hands on the levers of the global infrastructure.

you gotta learn to think big.  what if gov'ts decide it's in their best interests to adopt Bitcoin?

Remember a guy they used to call Saddam Hussein?

Seriously, thinking that any government is likely to support Bitcoin in any serious or long term way strikes me as a total pipe dream and quite unlikely, and basing any sort of nest-egg on the necessity of such an eventuality is not wise.

I have a lot of hope for (and have a lot of) Bitcoin, but as I've stated before, I view it as a long-shot gamble with the potential for an enormous payout.  Unlike PM's which I don't have to think about, capitalizing on Bitcoin (which again, I do not expect as a given or even very likely) will require a good bit of attention and nimbleness.

A crypto-currency or solution based on the principles is, I feel, a potentially revolutionary world changing (for the better) development, but I am currently of the mindset that Bitcoin itself is not really the one which could do so.  At least not in many of the possible scenarios which the future holds and/or not by itself.

[cypherdoc]

Both such solutions would be, in my opinion, challenging to maintain in the event of a coordinated attack by the various corp/gov entities which will probably always have their hands on the levers of the global infrastructure.

you gotta learn to think big.  what if gov'ts decide it's in their best interests to adopt Bitcoin?

Remember a guy they used to call Saddam Hussein?

Seriously, thinking that any government is likely to support Bitcoin in any serious or long term way strikes me as a total pipe dream and quite unlikely, and basing any sort of nest-egg on the necessity of such an eventuality is not wise.

I have a lot of hope for (and have a lot of) Bitcoin, but as I've stated before, I view it as a long-shot gamble with the potential for an enormous payout.  Unlike PM's which I don't have to think about, capitalizing on Bitcoin (which again, I do not expect as a given or even very likely) will require a good bit of attention and nimbleness.

A crypto-currency or solution based on the principles is, I feel, a potentially revolutionary world changing (for the better) development, but I am currently of the mindset that Bitcoin itself is not really the one which could do so.  At least not in many of the possible scenarios which the future holds and/or not by itself.

check this out:  https://bitcointalk.org/index.php?topic=79285.msg881546#msg881546

[miscreanity]

Has this been posted? What do people think? http://www.youtube.com/watch?v=tj2s6vzErqY

Exactly spot-on. Maloney has been saying for a decade what took me a few years to discover mostly on my own. I wish I'd happened across his work in 1999.

But gold is not really an investment in the traditional sense. It's a traditional monetary asset.

FTFY

The whole post was well put.

There's no reason gold and bitcoins need to be mutually exclusive. They can function together quite well, I think.

This is a point that I've been trying to make forever.

I feel that Gold is a good 'reserve' but there are difficulties in 'exchange'.  Bitcoin, on the other hand, is great on the 'exchange' side of the spectrum, but I (seemingly alone) do not consider it a good 'reserve' currency.  Marry the two (or at least get them being regular fuck-buddies) and one has a very robust solution which would be relatively cumbersome for attackers to meddle with.

Yes!

why do u think it wouldn't fx well as a reserve currency?  nightly settlements btwn nations could occur in an instant unlike gold and no centralized warehouses for bullion would be needed.

Why settle for nightly?

Gold is the ultimate store of value and has been since the dawn of civilization. That's not going to change any time soon.

this is true but times change.

Yes, and here's a major reason why, although it won't happen immediately: Off-Planet Economics

Several reasons:

1)  I do not consider Bitcoin to be reliable under what most people consider 'success'.  I do not trust that the infrastructure needed to support the solution under heavy usage worldwide will be maintainable under coordinated attack.

2)  A beauty (in my opinion) of Bitcoin is that it operates at the pleasure of the user base....but user bases can be fickle.

This is where I think merged mining could be more important than some consider. The hashing capacity of an attack on the Bitcoin network may also provide the power necessary to maintain alternate blockchains, so unless there is sufficient power to overwhelm multiple blockchains at once, it would be possible for assets in one chain to move to another that is not under attack; lateral movement, like Whack-A-Mole.

you gotta learn to think big.  what if gov'ts decide it's in their best interests to adopt Bitcoin?

Transition from an existing power base is almost never a choice, but a forced occurrence.

[tvbcof]

+> I don't trust Bitcoin as a reserve currency for...

Several reasons:

1)  I do not consider Bitcoin to be reliable under what most people consider 'success'.  I do not trust that the infrastructure needed to support the solution under heavy usage worldwide will be maintainable under coordinated attack.

2)  A beauty (in my opinion) of Bitcoin is that it operates at the pleasure of the user base....but user bases can be fickle.

This is where I think merged mining could be more important than some consider. The hashing capacity of an attack on the Bitcoin network may also provide the power necessary to maintain alternate blockchains, so unless there is sufficient power to overwhelm multiple blockchains at once, it would be possible for assets in one chain to move to another that is not under attack; lateral movement, like Whack-A-Mole.

I think it was you who was potentially interested in my 'bakcoin' idea some months ago.  I hacked out some material around that time, but have been off on other completely unrelated interests since and have not touched it.  I'd have to do (much) more work before presenting it as an alternate crypto-currency or whatever, but here's what I've got for those who might be interested:

  http://bakcoin.org

[cypherdoc]

take a look at this:  https://bitcointalk.org/index.php?topic=79285.msg887490#msg887490

[tvbcof]

take a look at this:  https://bitcointalk.org/index.php?topic=79285.msg887490#msg887490

By my two-second calculations, if about half of the worlds population were using Bitcoin and making 2 transactions per day, a flat average would be about 70,000 transactions per second.  To account for peaks which one typically finds in network service use, better bump that up to about 250,000 transactions/sec.  Then one must consider the potential for DOS attacks.

Contrast this with the .25  (aka 1/4) transactions/sec at the current high.

As currently implemented, Bitcoin scales until it fails then that's all she wrote.  Ultimately I would be more comfortable with a solution which anticipated 'sharding' of some sort, and it seems logical and workable to combine this with a multitude of crypto-currencies each tuned to offer various advantages to their user base.

Of course the 'money changers' would have a hey-day in such an environment, but that fine.  Probably open systems would develop to make things less costly for end-users.  Some guy had a link to such a project a while ago.  I think it was on Docmeister's Bitcoin-2 post.

[cypherdoc]

take a look at this:  https://bitcointalk.org/index.php?topic=79285.msg887490#msg887490

By my two-second calculations, if about half of the worlds population were using Bitcoin and making 2 transactions per day, a flat average would be about 70,000 transactions per second.  To account for peaks which one typically finds in network service use, better bump that up to about 250,000 transactions/sec.  Then one must consider the potential for DOS attacks.

Contrast this with the .25  (aka 1/4) transactions/sec at the current high.

As currently implemented, Bitcoin scales until it fails then that's all she wrote.  Ultimately I would be more comfortable with a solution which anticipated 'sharding' of some sort, and it seems logical and workable to combine this with a multitude of crypto-currencies each tuned to offer various advantages to their user base.

Of course the 'money changers' would have a hey-day in such an environment, but that fine.  Probably open systems would develop to make things less costly for end-users.  Some guy had a link to such a project a while ago.  I think it was on Docmeister's Bitcoin-2 post.

actually the way i see it evolving is that Bitcoin would take the place of gold similar to the gold reserve system we had up until 1971. 

[tvbcof]

take a look at this:  https://bitcointalk.org/index.php?topic=79285.msg887490#msg887490

By my two-second calculations, if about half of the worlds population were using Bitcoin and making 2 transactions per day, a flat average would be about 70,000 transactions per second.  To account for peaks which one typically finds in network service use, better bump that up to about 250,000 transactions/sec.  Then one must consider the potential for DOS attacks.

Contrast this with the .25  (aka 1/4) transactions/sec at the current high.

As currently implemented, Bitcoin scales until it fails then that's all she wrote.  Ultimately I would be more comfortable with a solution which anticipated 'sharding' of some sort, and it seems logical and workable to combine this with a multitude of crypto-currencies each tuned to offer various advantages to their user base.

Of course the 'money changers' would have a hey-day in such an environment, but that fine.  Probably open systems would develop to make things less costly for end-users.  Some guy had a link to such a project a while ago.  I think it was on Docmeister's Bitcoin-2 post.

actually the way i see it evolving is that Bitcoin would take the place of gold similar to the gold reserve system we had up until 1971. 

That is the way I would like to see it evolving and at one time had hoped to see it evolving, but cannot see a mechanism for that to transpire at this point in time (thus my thought experiments on 'bakcoin'.)

Essentially Bitcoin is just to good as an exchange currency and there is no practical way to stop people from using it.

I think that there is a possibility that within the space of hours, the problem Bitcoin could face is how to discourage users rather than encourage them, and do so in a way that preserves the reputation of the solution.  If such an event happened it would correspond to a failure of other currencies and would occur at the time when the Bitcoin solution was needed the most.

[notme]

This is a pretty nice chart:

Here's another one:

[cypherdoc]

take a look at this:  https://bitcointalk.org/index.php?topic=79285.msg887490#msg887490

By my two-second calculations, if about half of the worlds population were using Bitcoin and making 2 transactions per day, a flat average would be about 70,000 transactions per second.  To account for peaks which one typically finds in network service use, better bump that up to about 250,000 transactions/sec.  Then one must consider the potential for DOS attacks.

Contrast this with the .25  (aka 1/4) transactions/sec at the current high.

As currently implemented, Bitcoin scales until it fails then that's all she wrote.  Ultimately I would be more comfortable with a solution which anticipated 'sharding' of some sort, and it seems logical and workable to combine this with a multitude of crypto-currencies each tuned to offer various advantages to their user base.

Of course the 'money changers' would have a hey-day in such an environment, but that fine.  Probably open systems would develop to make things less costly for end-users.  Some guy had a link to such a project a while ago.  I think it was on Docmeister's Bitcoin-2 post.

actually the way i see it evolving is that Bitcoin would take the place of gold similar to the gold reserve system we had up until 1971. 

That is the way I would like to see it evolving and at one time had hoped to see it evolving, but cannot see a mechanism for that to transpire at this point in time (thus my thought experiments on 'bakcoin'.)

Essentially Bitcoin is just to good as an exchange currency and there is no practical way to stop people from using it.

I think that there is a possibility that within the space of hours, the problem Bitcoin could face is how to discourage users rather than encourage them, and do so in a way that preserves the reputation of the solution.  If such an event happened it would correspond to a failure of other currencies and would occur at the time when the Bitcoin solution was needed the most.

actually you're right, Bitcoin is an excellent transactional currency as well as a store of value which makes it unique among monetary experiments and it's prospects so bright as far as i'm concerned.

gold has history as a store of value but lacks transactional flexibility and may have become obsolete with the advent of the Internet. 

as i understand the old gold standard, individuals would lend their gold holdings to the nations that treated their fiat currencies with respect.  if those countries got out of hand by resorting to the printing press, these same individuals would yank their gold holdings out of those countries thus decreasing it's reserves and providing a disciplinary hammer to those profligate nations.  it was a self regulating system according to free market principles and worked well as far as i can tell.

why couldn't the same system be set up with Bitcoin replacing gold?

[miscreanity]

I think it was you who was potentially interested in my 'bakcoin' idea some months ago.  I hacked out some material around that time, but have been off on other completely unrelated interests since and have not touched it.  I'd have to do (much) more work before presenting it as an alternate crypto-currency or whatever, but here's what I've got for those who might be interested:

  http://bakcoin.org

Yes, it was me

I'll have to revisit the topic again.

take a look at this:  https://bitcointalk.org/index.php?topic=79285.msg887490#msg887490

Velocity ought to be a potential accelerant for a given asset's valuation; i.e. as more transactions are performed using Bitcoin at a stable exchange level, its unit value will eventually follow.

By my two-second calculations, if about half of the worlds population were using Bitcoin and making 2 transactions per day, a flat average would be about 70,000 transactions per second.  To account for peaks which one typically finds in network service use, better bump that up to about 250,000 transactions/sec.  Then one must consider the potential for DOS attacks.

Contrast this with the .25  (aka 1/4) transactions/sec at the current high.

As currently implemented, Bitcoin scales until it fails then that's all she wrote.  Ultimately I would be more comfortable with a solution which anticipated 'sharding' of some sort, and it seems logical and workable to combine this with a multitude of crypto-currencies each tuned to offer various advantages to their user base.

Of course the 'money changers' would have a hey-day in such an environment, but that fine.  Probably open systems would develop to make things less costly for end-users.  Some guy had a link to such a project a while ago.  I think it was on Docmeister's Bitcoin-2 post.

Artificial caps are currently in place. Those won't be necessary forever. Also, hardware (esp. optical switching) is advancing at a rate that will provide the Bitcoin network with more than sufficient capacity to handle the volume described.

Bitcoin scalability issues are not an all-or-nothing proposition. At a maximum rate, further increases in volume will cause a growing backlog. It will become readily apparent, and existing artificial restrictions can be lifted. Further down the road, additional capacity can be added - processing, storage, and bandwidth. Existing dynamics are not the same as what the focus will be as the network matures.

That is the way I would like to see it evolving and at one time had hoped to see it evolving, but cannot see a mechanism for that to transpire at this point in time (thus my thought experiments on 'bakcoin'.)

Essentially Bitcoin is just to good as an exchange currency and there is no practical way to stop people from using it.

I think that there is a possibility that within the space of hours, the problem Bitcoin could face is how to discourage users rather than encourage them, and do so in a way that preserves the reputation of the solution.  If such an event happened it would correspond to a failure of other currencies and would occur at the time when the Bitcoin solution was needed the most.

There's no reason to stop people from using Bitcoin. As suggested earlier, I think velocity influences a nascent monetary asset's valuation, and therefore its growth. A transition point is then reached once a saturation level (escape velocity?) is attained, whereupon the asset shifts from primarily (or even exclusively) transactional to a growing storage purpose. That's basically the making for a bubble, like tulips; they didn't have any way of being a store of value, though.

If you imagine slowly pouring water into a large glass cylinder, the water first spreads out to fill the bottom, then begins to rise as the volume expands in the direction of least resistance. Juxtapose the water with Bitcoin and my view is that the latter is filling a container representing the 21mm unit limit (base of container) and network capacity in hardware support (height of container). In this sense, the initial growth phase is two-dimensional. Scalability would be an additional dimension limited by the height of the container.

If the container's limits are exceeded, there will certainly be spillover but not a collapse - the container is made of cryptography that hasn't been compromised & the hardware it runs on. That excess would simply flow into other containers (fiat, gold, etc), generating an increased dynamic of scarcity for Bitcoin, assuming most alternatives remain as feeble as fiat currencies. Any over-exuberance would be tempered, resulting in a self-correcting equilibrium for the Bitcoin network, although how rapidly that happens depends on the how far the capacity overshoot is.

The velocity/volume issue could be equated to the problem of transporting & storing physical precious metals. Realistically and practically, only so much can be moved or held at any given time. Development of a high capacity "backbone" is already occurring naturally among some of the largest mining operations, which is one way scalability can be managed. It wasn't the end of the Internet and it won't be the end of Bitcoin, because neither are static.

actually you're right, Bitcoin is an excellent transactional currency as well as a store of value which makes it unique among monetary experiments and it's prospects so bright as far as i'm concerned.

gold has history as a store of value but lacks transactional flexibility and may have become obsolete with the advent of the Internet. 

I wish more people would get this! That would make for destructive growth, though... le sigh - patience.

as i understand the old gold standard, individuals would lend their gold holdings to the nations that treated their fiat currencies with respect.  if those countries got out of hand by resorting to the printing press, these same individuals would yank their gold holdings out of those countries thus decreasing it's reserves and providing a disciplinary hammer to those profligate nations.  it was a self regulating system according to free market principles and worked well as far as i can tell.

why couldn't the same system be set up with Bitcoin replacing gold?

Yes, basically bank runs without the possibility of bailouts because of the physical properties of gold. The same type of system is already developing with FPS&T/BS&T and others. Not to mention a growing infrastructure with equities, futures, options, and synthetic derivatives.

Satoshi opened Pandora's box

[tvbcof]

actually the way i see it evolving is that Bitcoin would take the place of gold similar to the gold reserve system we had up until 1971. 

That is the way I would like to see it evolving and at one time had hoped to see it evolving, but cannot see a mechanism for that to transpire at this point in time (thus my thought experiments on 'bakcoin'.)

Essentially Bitcoin is just to good as an exchange currency and there is no practical way to stop people from using it.

I think that there is a possibility that within the space of hours, the problem Bitcoin could face is how to discourage users rather than encourage them, and do so in a way that preserves the reputation of the solution.  If such an event happened it would correspond to a failure of other currencies and would occur at the time when the Bitcoin solution was needed the most.

actually you're right, Bitcoin is an excellent transactional currency as well as a store of value which makes it unique among monetary experiments and it's prospects so bright as far as i'm concerned.

I don't find this particularly unique to be honest.  Probably it's more common than not.  Shells with holes in them served the Native Americans admirably in their time.

I will agree that Bitcoin is a wonderfully capable exchange medium for our time...and I hope it pans out as a good store of value as well.  I must reiterate that I see limitations about exactly how capable it proves if called upon to live up to it's potential demand.

gold has history as a store of value but lacks transactional flexibility and may have become obsolete with the advent of the Internet.

If anything, I see the lack of transactional flexibility as a positive for a reserve store of value.  Things which can take flight easily tend to be easier to lose, and if one is dipping into one's reserves on a regular basis than one probably has other issues to deal with.

I would also argue that the Internet is significantly secondary to the telegraph and radio in terms of being a revolutionary step forward.  All pale compared to the printing press, and that pales compared to writing language itself.

as i understand the old gold standard, individuals would lend their gold holdings to the nations that treated their fiat currencies with respect.  if those countries got out of hand by resorting to the printing press, these same individuals would yank their gold holdings out of those countries thus decreasing it's reserves and providing a disciplinary hammer to those profligate nations.  it was a self regulating system according to free market principles and worked well as far as i can tell.

I think that most governments have had plenty of money of their own obtained through selling resources, imposing tariffs, etc.  Anyway, the gold standard can and has existed without government involvement, and with fractional characteristics.  To me, a 'gold standard' simply means that the net worth of an entity is based on how much gold they control.

why couldn't the same system be set up with Bitcoin replacing gold?

Probably could, but it would take some sort of incentive.  Something more compelling that 'cypherdoc hopes so.'

Gold is one of the few things that is even more simple than a stone ax.  That is a very appealing characteristic to me, and probably to a lot of other people on the face of the earth as well.

[Zibbo]

take a look at this:  https://bitcointalk.org/index.php?topic=79285.msg887490#msg887490

By my two-second calculations, if about half of the worlds population were using Bitcoin and making 2 transactions per day, a flat average would be about 70,000 transactions per second.  To account for peaks which one typically finds in network service use, better bump that up to about 250,000 transactions/sec.  Then one must consider the potential for DOS attacks.

Contrast this with the .25  (aka 1/4) transactions/sec at the current high.

As currently implemented, Bitcoin scales until it fails then that's all she wrote.  Ultimately I would be more comfortable with a solution which anticipated 'sharding' of some sort, and it seems logical and workable to combine this with a multitude of crypto-currencies each tuned to offer various advantages to their user base.

Of course the 'money changers' would have a hey-day in such an environment, but that fine.  Probably open systems would develop to make things less costly for end-users.  Some guy had a link to such a project a while ago.  I think it was on Docmeister's Bitcoin-2 post.

Vast majority of those 250000 transactions are going to be small transactions that need instant confirmation, which means they will not be handled directly by bitcoin network. There will be a bunch of payment processors who will provide instant confirmation functionality, and use bitcoin network itself to regularly balance the books between themselves.