Thoughts about Bitcoin versus Gold

AnacapAnacap Posts: 91 Copper ✭✭
edited March 2017 in About Gold
Bitcoin is better than gold at being gold, as it copies it's natural qualities in an abstract form and add on top extra features that make it even more useful, as it's cheaper to move and hoard without intermediaries.
The biggest flaw of bitcoin is it's speed of transaction, while it still outplays VISA fees and Goldmoney network, it's speed doesn't. It's trendign to get slower due to more transactions competing to be first. On top of being slow, there's an exploit to re-send the same coins with higher fees so that action takes place before the previosu one, and that "double spending effect" prevents real world bussiness from trusting payment notifications instantly, as the deal might not finally happen. Yet, there are solutions offered by third parties that bring a solution to this problem like BitGo, with a small 0,01% fee, still far from VISA for busisnesses.

It can also evolve to different code directions to increase block's limits, but doesn't seem too likely at this point.



It allows freedom and individual responsability of your own savings safety, which is something great.

By natural selection, the markets and history has discovered and choosen gold as solution for money, so it's marginal utility is that of a currency, top notch. Bitcoin tends there too, and adds on top of all that more utilities that make it even more practical as a mean to trading.

The problem with cryptocurrencies
One could point that Bitcoin qualities are not really scarce, its code can be copied and launched in form of diferent cryptocurrencies. All that incredible qualities are not that special then. The value of Bitcoin then becomes as a result of any other standarization event. The standard for something doesn't need to be the best thing possible, only the first to change the paradigms. That happens in nature and in the markets.

Will something else disrupt bitcoin from its place? Seems unlikely.

Will bitcoin reach the volatility of gold (1,2% average)? It might take 20 years for that to happen, and so for gold to get back where it was after this bad economic weather.
It's highly speculative due to it's rewarding design for early adopters, and it will keep being so as soon as it's inflation stops and more people world wide may start adopting it to run from wealth extraction.



What is your perception of risk for bitcoin?
Understanding our economic system and how central banks do social engineering, I personaly don't see it riskier than bonds or stockmarkets before a following recession kicks in haha

I don't see it seriously competing with gold on it's own value on what it does best for at least a bunch of decades. Then might be different.

Comments

  • 79Au19779Au197 Posts: 4,047 Gold ✭✭✭✭✭
    edited March 2017
    @Anacap

    "Tact is the art of making a point without making an enemy" ~ Isaac Newton

    So I need to be very careful in how I respond to your statements above.

    I pretty much disagree with all of your assertions about Bitcoin vs gold. Additionally I contend that founders @Roy Sebag and @Josh Crumb also disagree, based on their prolific writings on the topic in white papers and on Twitter. Most old timers on this board would also most likely disagree.

    Consider if you will that gold has a history in excess of 5000 years as money. Bitcoin and other cryptocurrencies can be measured in months.

    I also contend that the chart shown as evidence of low volatility for Bitcoin shows the exact opposite.

    Because gold has so many manifestations, I suggest that the actual discussion should be Bitcoin vs Goldmoney as both are new and technology dependent.

    Only time will tell.

    PS the Winklevoss Twins were soundly rejected in their attempt to establish a Bitcoin ETF.

    PPS That is not too say that speculation in Bitcoin can not be profitable - just make sure you have a chair when the music stops.

    Anyway those are my thoughts.

    Oh, one more thing … aspects of Bitcoin remind me of the Holland Tulip Bulb Bubble (although others have suggested that run-ups in the price of gold qualify as well - Harry Dent for one).

    http://www.investopedia.com/features/crashes/crashes2.asp
  • AnacapAnacap Posts: 91 Copper ✭✭
    edited March 2017
    @79Au197 Don't worry :smile:

    I agree gold history speaks for itself with an average of 1,2% volatility over the last century, beating all national currencies. Well, more than beating, it's the unit of measure of how corrupted these currencies have gone.

    And I point out the main difference between crypto and gold at the end of the day is that crypto can be replicated at will, iterated without limits and that doesn't happen with metals. Which is a key point to consider, blockchain tech's value can always be enjoyed without using the most popular and most expensive coin. So, in that sense, I said the first form of blockchain is the standard between all the clones, just because it's adoption happened earlier.

    Bitcoin design is extremely rewarding for early adopters, and that, on top of it's small transaction capacity per second makes a really weak scalability.

    Yet, in comparision with gold, you're not subjected to regulations. That's a key point if we consider the risk of confiscation.

    Gold preserves value for a fact.
    Bitcoin gives you financial fredom for a fact.

    A bitcoin transaction costs 4 cents and yet it may even be over 1000 times that price on the energy miners spent on it. Real sweat is burned into bitocin's value, not to pump it's price in demand but to mantain it's network, just as to mine an ounce of gold almost equals the gold ounce worth.

    Bitcoin grew the past year over 5 billion dollars in market cap while adding 1,5M coins
    While it spent 0,5 Billion dollars in electricity

    Obviously that's pretty far from gold too.

    Bitcoin is so hyped, you may compare that to tulips, but well, unlike these, there's value to it. The issue is, is it overpriced?

    Well, right now, I really think so. Will it be in the long run? Not really, It's market cap is small, 0.15% of Gold. And Gold's market cap has a lot of room for growth with economic turmoil, and so do crypto currencies.

    Each fresh new bitcoin from 2016 to 2017 has burned around 330$ in electricity costs. And now they're pricing at 1k $. All, not just the fresh new ones haha
    The thing is, it's likely to be overpriced in this very moment, but it won't be for too long anyway. Worthless? hell no. Nothing in common with tulips :wink:

    Let's see if I can make a client pay me with goldmoney or bitcoin first haha :smiley:
  • GMONEY1GMONEY1 Posts: 426 Silver ✭✭✭✭
    @79Au197 Too bad we can't like posts more than once... I'd give you a 5x-er on that one. :wink:

    my POV (as mentioned in the Ethereum post):

    Gold is money.

    Equities are risk assets. <<<< XAU/XAUMF
    Cryptos... Digital mediums of exchange with inherent risks. <<<<< bitcoin
  • GoldmattersGoldmatters Posts: 4,068 Admin
    @Anacap are you interested in a client paying you in gold through goldmoney? Do you have a Goldmoney business account?
  • GoldmattersGoldmatters Posts: 4,068 Admin
    Timely to this discussion:
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