Bitcoins: The future of money?

[Anh_Minh]

If worse comes to worst, put some in a sock and mug people with it.

[kuroishinigami]

So gold's intrinsic value is only around peeble's?

[Irenicus]

kuroishinigami: gold plays a different role in the market to equities and bonds.

The other assets are dynamic -- they represent not just the capital, human and material, but also the expectation of profit, the flow of money, the dynamic growth in value. Companies change directions and outlook all the time, and the stock prices, eventually, move with them. Gold isn't like that; it's a static investment. It is just capital.

Gold is even different from the typical commodities trade, because while gold has industrial uses, by and large the gold market doesn't exist because it's used in computers, but because of the artificial value assigned to it by people. It's bad to generalize, but I'm going to do it anyway -- people invest (not trade) in gold for one and one reason: they think the economy is going to tank and they're hedging against it.

///

On topic, I still don't understand how Bitcoin's finite-ness would allow it to somehow replace the modern Central Bank fiat. I know Bitcoin believers like to say the deflation trap is overrated, but I don't think they get that the fundamental characteristic of the ideal currency -- currently impossible -- is to never suffer volatility in value, but rather to always proportionally match the real value of things. Meaning, if the economy grows by 3%, and you have 3% more currency floating around at the right place, friction and market inefficiency is minimized and the currency is successful in doing what it's meant to do: facilitate transactions of real value.

Central Banks don't always get it right. They can get it very, very wrong. Moreover, market inefficiency is always there and incredible fortunes are made taking advantage of it. But at least CB-driven fiat money is theoretically capable of that ideal state, where as Bitcoin outright isn't. If it survives to reach that ceiling, it is basically trapped in a permanent deflationary spiral unless the Bitcoin-using economy stays static or shrinks.

[kuroishinigami]

Originally Posted by Irenicus

kuroishinigami: gold plays a different role in the market to equities and bonds.

The other assets are dynamic -- they represent not just the capital, human and material, but also the expectation of profit, the flow of money, the dynamic growth in value. Companies change directions and outlook all the time, and the stock prices, eventually, move with them. Gold isn't like that; it's a static investment. It is just capital.

Gold is even different from the typical commodities trade, because while gold has industrial uses, by and large the gold market doesn't exist because it's used in computers, but because of the artificial value assigned to it by people. It's bad to generalize, but I'm going to do it anyway -- people invest (not trade) in gold for one and one reason: they think the economy is going to tank and they're hedging against it.

///

I completely understand this point, but the point I was trying to get across to SH wasn't this. My point is, IMO, gold is very different from bitcoin(which actually in concept is close to real paper money, only not regulated) in that if all else fail(people somehow magically stop investing in gold as hedging tools), gold will still have bottom line value/exchange rate because it has intrinsic value(still has real use) unlike bitcoin, which is just 1 and 0 data intrinsically(can't be used for anything else). It doesn't matter how low gold price will be if it happen, which will certainly be much lower than gold's current price(again IMO, it won't go lower than zinc, but market price can be fickle), but at least it will still have value instead of becoming a complete trash like unused bitcoin.

Is it worth buying gold at its current price for only its intrinsic value? Definitely not. But will it still have value if someday it's left as investment tool? IMO, yes. I likened this in stock to stock and futures contract. Gold is like stock, if it fails and company goes bankrupt, you still have the company asset that will be liquidated as your bottom line return(with company asset being the intrinsic value in this analogy). Bitcoin is like futures contract. If the seller of future contract is unable to fulfill the agreement, you get nothing because the contract itself is just a piece of paper priced by the agreement of both side. It's a crass(and probably inaccurate) analogy, but I hope I get my point across.

[SaintessHeart]

My point is that gold only has a value because people give it a value, in that past, it has something what I called "transaction utility", which means that it DOES have utility measured not by consumption, but rather by a benchmark for exchange. But like anything else perceived to have an utility, it has value.

Like gold, it will have value as long as people use it for transaction and it is exchangeable for cash. Sort of like currency swaps except without the interest rate.

[kuroishinigami]

That might be the case currently, because the "transaction utility" value of gold far exceed its intrinsic value. By that line of thinking, let's assume that this "transaction utility" value of gold suddenly went down to zero tomorrow, do you think gold will be priced to zero after that(basically being thrown away as trash) or will it be priced at its intrinsic value(around the price of the things it can substitute as)? IMO, the second case will happen, hence the difference with bitcoin and paper money where the first case will happen.

[SaintessHeart]

Originally Posted by kuroishinigami

That might be the case currently, because the "transaction utility" value of gold far exceed its intrinsic value. By that line of thinking, let's assume that this "transaction utility" value of gold suddenly went down to zero tomorrow, do you think gold will be priced to zero after that(basically being thrown away as trash) or will it be priced at its intrinsic value(around the price of the things it can substitute as)? IMO, the second case will happen, hence the difference with bitcoin and paper money where the first case will happen.

It will go down to zero. Remember white tulips? The market gives it the price it wants to.

Henceforth the quote "respect the market".

P.S There is a humourous book that is worth reading since we on the topic of "useless stuff given a value by silly people". Dabbling in futures and reading this would probably give you an idea of what gives value to the stuff that is being traded.

[Anh_Minh]

There will always be a market for gold paperweights!

[kuroishinigami]

Originally Posted by SaintessHeart

It will go down to zero. Remember white tulips? The market gives it the price it wants to.

Henceforth the quote "respect the market".

P.S There is a humourous book that is worth reading since we on the topic of "useless stuff given a value by silly people". Dabbling in futures and reading this would probably give you an idea of what gives value to the stuff that is being traded.

Well, I guess we have to agree to disagree here, and last time I check, I think white tulips price is not zero even after the crash(well, it might be for a short while after the crash where there are oversupply). Last time I bought a bouquet, it cost me 60$(its intrinsic, or in this case artistic, value). Again, I don't argue that the price will go down significantly, just that it will still has value because it's not completely useless(can still be used for something). If gold price really drop to zero at that time, I will collect all the gold and sell it at 1/10 price of those metals used as corrosion coating to replace them and make a killing

You are absolutely right though how much the value of gold at that time will still be decided by the mass in the end, but this time, gold won't be valued by the mass by its investment value, but by its "usefulness value"

Originally Posted by Anh_Minh

There will always be a market for gold paperweights!

[AnimeFan188]

Hitman Network Says It Accepts Bitcoins to Murder for Hire:

"You can only access a site called the “Hitman Network” if you use an anonymous
router. But if you get there, a team of three alleged contract killers will entertain
your offer to kill someone, so long as the target is not a major politician or a child
under 16 years of age. The site does not take dollars or euros but bitcoins, the
electronic currency invented in 2009."

See:

http://www.thedailybeast.com/article...-for-hire.html

[speedyexpress48]

Originally Posted by AnimeFan188

Hitman Network Says It Accepts Bitcoins to Murder for Hire:

"You can only access a site called the “Hitman Network” if you use an anonymous
router. But if you get there, a team of three alleged contract killers will entertain
your offer to kill someone, so long as the target is not a major politician or a child
under 16 years of age. The site does not take dollars or euros but bitcoins, the
electronic currency invented in 2009."

See:

http://www.thedailybeast.com/article...-for-hire.html

Don't tell me Ulbricht hired these same guys for "hits"...

[SaintessHeart]

Originally Posted by speedyexpress48

Don't tell me Ulbricht hired these same guys for "hits"...

Isn't it so much easier to do it yourself? Make a cellphone bomb, wait till he is near a Muslim populated neighbourhood then trigger it. Thanks to Bush, it is so much easier to find a scapegoat! *sarcasm*

Why go through the hassle of bitcoins?

[Fireminer]

The story has ended!
Dark net marketplace Silk Road 'back online'
Read more at: http://bbc.co.uk/news/technology-24842410

[speedyexpress48]

Originally Posted by Fireminer

The story has ended!
Dark net marketplace Silk Road 'back online'
Read more at: http://bbc.co.uk/news/technology-24842410

Meh, most people have moved onto the newer black markets like Sheep and BMR anyways. Will be fun to "window shop" though...wonder if this is gonna be the p2p market that some people expected?

Oh hey...BTC hit $265/coin today...fuck, wish I bought earlier.

[willx]

So here's some interesting information on the "Bitcoin market" --

CHINACHINACHINACHINACHINACHINAAAAA -

[AnimeFan188]

Senate Hearing on Future of Bitcoin: Legal Tender or Criminal Enterprise?:

"The U.S. Senate held a hearing on the Internet-based Bitcoin currency on Nov. 18
revealing a U.S. government that is struggling with crafting policy to govern how the
virtual currency can be used in the United States."

See:

http://wizbangblog.com/2013/11/19/se...al-enterprise/

&

http://www.hsgac.senate.gov/hearings...ual-currencies

[speedyexpress48]

In all honesty, it'll probably cause a value crash in short-term but not much actual effect long term.

[Vallen Chaos Valiant]

Originally Posted by AnimeFan188

Senate Hearing on Future of Bitcoin: Legal Tender or Criminal Enterprise?:

"The U.S. Senate held a hearing on the Internet-based Bitcoin currency on Nov. 18
revealing a U.S. government that is struggling with crafting policy to govern how the
virtual currency can be used in the United States."

See:

http://wizbangblog.com/2013/11/19/se...al-enterprise/

&

http://www.hsgac.senate.gov/hearings...ual-currencies

I distinctively remember the claim that the greatest volume of crime based transactions are done with the US dollar? I don't know what the US government is trying to accuse Bitcoin of, consider that fact?

[sa547]

I am very skeptical about this, as I see this more as a get-rich-quick scheme, having prior experience with MMOs and rampant RMTs. Besides, I fear of a major crash due to overinflation.

BTW, I'll not be surprised if some Bible-thumpers discover this as one of the signs of the end-times.

[Vallen Chaos Valiant]

Originally Posted by sa547

I am very skeptical about this, as I see this more as a get-rich-quick scheme, having prior experience with MMOs and rampant RMTs. Besides, I fear of a major crash due to overinflation.

BTW, I'll not be surprised if some Bible-thumpers discover this as one of the signs of the end-times.

Bitcoin is designed to NOT have overinflation. There is a finite amount of Bitcoins and after that the price fluctuates only by adjusting the decimal places.

Sure, there are people speculating, and we don't know if the currency will survive long term, but you can't deny that Bitcoin's scarcity is something other attempts did not try.

As for the Bible Thumpers, it is always end times to them. They can't wait to die.