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Comment by brador | Hacker News Reader

Gold is based on something tangible and useful. This minimizes it's maximum drop. A safety net if you like. Bitcoin does not have this, so when/if it crashes it can hit 0.

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Only a small fraction of the price of gold is based on its utility. It's price is basically purely speculation (as is bitcoin's).

But you are right in that it does have a floor that bitcoin does not have.

Air is also useful, but you can't claim that there's a minimum price for air. If a cheap way was found to extract gold from seawater, gold would still be as useful, but its price would plummet.

But it would still not drop to zero.

I'm sure that there will soon be a minimum price for fresh air in smog-choked cities like Beijing.

If someone ever does find a way to extract gold from seawater economically, I wonder what kind of economic contractions would occur? As gold goes down people would lose billions while other safe assets like real estate would go through the roof. If we too-heavily rely on crypto-currencies, the same could certainly happen.

> I'm sure that there will soon be a minimum price for fresh air in smog-choked cities like Beijing.

http://www.cnn.com/2015/12/15/asia/china-canadian-company-se...

Thats seagold, not Tifanny quality!

The long term value of gold is based on the price of mining new ounces of gold. Likewise, the long term value of Bitcoin is based on the price of mining new coins, which is based on the mining network.

The only way Bitcoin would go to zero is if a fatal architecture fault is found, which is quite unlikely.

But isn't there a maximum number of bitcoins to be mined? Eventually the price of mining new coins becomes infinite.

yes, this is an oft-reversed causation. The price of bitcoin is determined by the same thing the price of everything is determined by in a market system. What the current supply of bitcoins is and what the current demand for those bitcoins is. The "cost" of mining doesn't even enter into the picture.

How mining does enter into the picture is the ingenious way that difficulty auto-corrects. If bitcoin prices plummet and the cost to mine them is more than they are worth, many miners will drop out, and the difficulty to mine them will get easier, until the difficulty stabilizes around a place where it is slightly profitable to mine them -- this is why mining has always been a race to the bottom and why eventually economies of mining scale (server farms, etc) would beat the person with 4 GPUs running in their basement.

The long term value of gold is based on price fixing.

Crazy conspiracy talk? Not according to Reuters:

http://www.reuters.com/article/deutsche-bank-lawsuit-metals-...

Fortunately Bitcoin is immune to such things /s

"The only way Bitcoin would go to zero is if a fatal architecture fault is found, which is quite unlikely."

Or if people just forget about it and move to something else. At least gold has some physical properties that make it useful for things.

There is already a fatal architecture flaw - someone owning 51% of the mining power could reck havoc. We just need some way for someone to make enough money out of bitcoin's failure.

That problem also exists with 'normal' currencies.

Someone owning 51% mining power could reak havoc by falsifying transactions... Could they control the price in general?

They could take all the coins. All of them.

Also, when gox tried to blame "transaction malleability," people rightly saw that as a ruse.

But when people said transaction malleability was a non-issue, they were quickly proven wrong when someone used it to DOS the network.

But that was quickly swept under the rug, down the memory hole in the bitcoin community.

Actually, Bitcoin is having some pretty serious problems at the moment. The stability is surprising.

https://www.cryptocoinsnews.com/block-size-halving-bitcoin-n...

It's almost like it's being artificially propped to prevent panic selling.

What problems?

...click the link.

I did, it's a massive distortion of non-issues. What are the _actual_ problems?

Basically, the current block size limit of 1MB isn't sufficient for the current volume of transactions. Some transactions aren't making it into blocks in real-time and have to sit waiting in a queue to be processed. This leads to delays in processing commercial payments, which in turn threatens Bitcoin's viability as a mainstream currency.

Some people argue the issue could be easily fixed by simply raising the block size limit, but others disagree and believe that would become too costly in bandwidth and processing capacity for miners, so AFAIK there's still no consensus on a resolution.

A couple other good explanations: http://rusty.ozlabs.org/?p=535 https://medium.com/@octskyward/the-resolution-of-the-bitcoin...

However the two changes required for full lightning network, segwit and checksequenceverify, are either in the process of being merged or already released and waiting for mining activation. And lightning scales waaaaaay better than any block size increase that we'd reasonably see.

The scaling issue is settled. Bitcoin transactions will scale off-chain with payment channel solutions like lightning.

The reasoning "because we will scale it off-chain, on-chain scaling is a waste of time" must stop because it's so stupid. They are not mutually exclusive.

They are exclusive at this time. We have entirely exhausted the capacity for on chain scaling. There are technologies that might improve that situation, but until they are tested we cannot precommit to using the gained space.

Isn't this a fundamental change in the economic expectations as proposed by the system's creator, who planned to increase onchain capacity as far back as 2010?

https://bitcointalk.org/index.php?topic=1347.msg15366#msg153...

I don't know the mind of the Satoshi I wouldn't care to. Bitcoin is an algorithm with empirical properties that are discovered, not created. It is what it is and we need to deal with that. (I would also be dubious of anyone's beliefs regarding bitcoin in 2010. There's a lot we didn't know then.)

I think LN will become highly centralized very quickly.

https://www.reddit.com/r/btc/comments/4fj2m9/ill_predict_tha...

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