Beyond Bitcoin: Truly Decentralized Banking | Hacker News Reader

Beyond Bitcoin: Truly Decentralized Banking

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73 pointscalafrax68 comments

"The embrace of Bitcoin is largely driven by dissatisfaction with the modern banking system but the designers and proponents of Bitcoin have made the fundamental and fatal mistake of believing that the problem with modern banking is that paper and digital money have no intrinsic value. Since digital coins must be created out of thin air the creators of Bitcoin developed an ingenious method of making coin creation take computational power, thus imposing a cost on creating new coins, and allowing them to limit the total circulation of coins. These measures give Bitcoin an intrinsic value (the cost of creating a new coin) and make inflation impossible by setting a hard limit on total currency issue."

This is just filled with misunderstanding. The purpose of mining is not to give intrinsic value to Bitcoin. It is to economically incentivize a fair system of transacting without centrality. The cost of mining is the price the Bitcoin system pays for distributed, trust-less consensus.

Just like fiat, Bitcoin has no intrinsic value. Just like fiat, Bitcoin is a bubble that seemingly never pops, because it is a collectively imagined means of transacting. A discussion of the disadvantages or advantages of Bitcoin should start with this understanding.

Yeah I was thinking the same thing, but that aside it's kind of like some reasoning they have to introduce their thesis. What do you think about that? Like a universal, self-granted credit/debt system?

> Like a universal, self-granted credit/debt system?

Not being sarcastic, but how does that work?

Something like Deror, perhaps?

http://deror.org/currency.html

If I create my own medium of exchange (MoE) it's only valuable to someone else if that MoE can be used to purchase goods or services from anyone in the system. What would incentivize Amazon or my local baker to accept my currency?

Actually, the purpose of mining gives Bitcoin value.

The value of gold and silver is that it is a store of value. In order to acquire those gold or silver, it required doing expeditions to search for where they are, it required heavy machinery to mine it out of the earth, it required human labor paid to mine them, it required factories to process them to purity, it required transporting them, etc...

All of that WORK is stored in the value of the gold or the silver to make it rare. This is why they are real money. Bitcoin digitally replicates this using computing power. This is important because essentially it ensures that a BTC has stored value. It is still currency but it ensure banks and the Federal Reserve cannot just print them digitally whenever they see fit.

"Bitcoin developed an ingenious method of making coin creation take computational power, thus imposing a cost on creating new coins, and allowing them to limit the total circulation of coins. These measures give Bitcoin an intrinsic value (the cost of creating a new coin) and make inflation impossible by setting a hard limit on total currency issue."

No, value does not come from rarity alone. Many things are rare but are not valuable.

> This is important because essentially it ensures that a BTC has stored value.

If people believe bitcoin has 0 value, then it will have 0 value, regardless of the work that was put into it.

I think the system is more complex in terms of feedback than that. A miner (Bitcoin or gold) makes a decision, based on the market value of their chosen commodity, and the cost of mining that amount, as to whether to mine or not. As the price goes up, there is a greater incentive to mine, and as the price goes down, there is less of an incentive to mine.

The core difference between Bitcoin and gold is that Bitcoin was designed from the get-go so that the more mining there is, the more secure the coin is. That is, mining makes all Bitcoins lose some value because more Bitcoins are created, but it makes them gain value because the network is more secure.

Gold, on the other hand, presents no such tradeoff -- the mining of gold makes gold less valuable by making there be more of it, but it in no way makes existing or past transfers of gold more resistant to tampering or anything like that.

There is some bidirectional feedback for Bitcoin, though it's hard to estimate the strength of that signal. But for gold, it definitely feels like you're talking about the tail wagging the dog.

One potential quibble. Fiat currency is given value also because the government can demand taxes in its fiat currency on threat of imprisonment or other government-backed sanctions, and thus come tax time, one better have some fiat's currency on hand. Thus it is a store of value beyond just general belief of its value..bitcoin does not have this.

Agreed, this reasoning about Bitcoin is entirely backwards.

Any discussion of the value of Bitcoin needs to address some of the unique properties is has as a network, namely resistance to Sybil attacks, a solution to the Byzantine Generals Problem, and Nakamoto Consensus.

This article is clearly from the point of view of an economist that doesn't understand in what ways Bitcoin is novel. Without understanding the value that Bitcoin presents, it's not surprising to find it lacking in value.

Don't think this is from the point of view of any sort of economist at all. Exhibit A:

> Inflation is synonymous with a decrease in the value of money which in effect means that inflation is a partial default on the debt contract that money represents.

> While it is true that pound-for-pound gold is more valuable than paper it is not true that gold has any other magical properties that make it any more useful as a currency.

I'm not a "gold aficionado" (author's term) but gold has plenty of "magical" qualities: it's fungible, divisible, universally recognized and easy to test, non-reactive, enduring, beautiful, scarce, and essentially indispensable for some industrial uses.

I agree. I felt he was stretching when trying to discredit golds "value".

There is a reason gold is and has been a "hard" currency.

>universally recognized

The value of gold is not universally recognized, and is inflated more from idolization than by its practical uses.

>When I was older, I learned what the fighting was about that winter and the next summer. Up on the Madison Fork the Wasichus (white people) had found much of the yellow metal that they worship and that makes them crazy, and they wanted to have a road up through our country to the place where the yellow metal was... Our people knew there was yellow metal in little chunks up there; but they did not bother with it, because it was not good for anything.

-Black Elk Speaks

People have used many things as "a token of delayed reciprocal altruism" in different times and locations. People in pre-Columbian North America used wampum and other items instead of gold for that token and, not surprisingly, would not find much value in a such a soft metal.

I meant "universally recognized" as in famous/known.

Using gold as a means of transaction below 100 USD becomes pretty hard. 1 dollar worth of gold is 1/40 grams. That is a tiny amount and you need a ~50 dollar scale to weigh that amount accurately.

Gold theoretically has all of these nice properties, but the practicalities get pretty messy.

As I recall there were people selling thin strands of gold laminated to cards at a past porcfest. I don't remember the min denomination though and you would have to trust the weight they say.

Planet Money Linertarian Paradise

They mentioned same thing about laminated gold.

Yeah it's just another form of trust based exchanges. And if you are going for trust based exchanges you can go debt based and be able to expand the supply to meet the demand.

The advantage of bitcoin is that you only need to trust public/private key, no miner controls 51% of the mining power & you aren't experiencing an extremely powerful and sustained sybil attack.

That is one reason why silver has been also used along side gold for thousands of years.

This is a pretty poorly researched and written article, but the core idea of switching to a trust-the-individual decentralized network is a solid one. It seems like we'll need a couple more advances before it's reasonable, but if you can move to a system where there is no ground truth, but rather a record of successful transactions or proof of stake/reputation in an identity then you only need to reach out to the global state to see if there are outstanding deals with an identity or broken promises.

The basic idea I've been floating is something like the following:

1) Alice generates a private/public key pair 2) Alice performs some work on their public key (e.g. low hash) 3) Alice finds Bob and promises to send 0.1 BTC to Bob's public address IFF bob performs publically verifiable service X (e.g. provides boolean assignment that satisfies some constraints or rejects the problem as unsolveable) 4) Both parties transmit the unsigned contract 5) Both parties reach out to trust brokers that tell them if either party has been involved in a broken promise, or has outstanding contracts greater than their current credit. Don't sign contract if thats the case 6) Both parties sign the contract (outstanding problem here, this needs to be atomic) 7) If contract goes well each party appends this to their record 8) If contract goes poorly offended party broadcasts this to the network and gains some portion of the lost reputation.

There are many outstanding problems that are not fundamental, but serious obstacles to writing this today. The ones that I know of off the top of my head are:

1) Need well understand exchange rate of reputation -> contract value (might be doable if you can buy reputation) 2) Need non-Sybil trust brokers (e.g. trust broker with rep >> contract value) 3) Atomic contract signing 4) contracts need to be publicly verifiable.

Any problems I am missing?

Two things bother me about Bitcoin and other cryptocurrencies:

1. The process of "mining" seems like arbitrary busywork that is ultimately a massive waste of computing power and electricity. At least Folding@home was contributing to scientific research. Is there any way around this? Incentivizing a bunch of computer geeks to build massive GPU clusters and waste tons of electricity mining for coins doesn't seem like a great idea.

2. Much of the "wealth" of these coins is concentrated in the hands of early adopters. This seems to be by design (due to the increasing difficulty of mining) and is not the result of actual economic activity, but merely because those early adopters started mining first.

Can anyone (more familiar with Bitcoin than I am) comment?

1. This is a common criticism, but probably shouldn't be. It would be nice if the activity of folding proteins offered the same proof-of-work, security attributes as, for example SHA256, but sadly it doesn't. As in all systems there are engineering tradeoffs involved and the mining functionality of a cryptocurrency, which literally secures that network, should probably choose the security-first sides of any tradeoff. Additionally, if the network has "value" (however you might like to define it...they clearly do as denominated in USD), then the activity of securing that value should not be considered a "waste", even if it doesn't also provide some other, secondary value.

2. As in any market, the early risk-takers (who, by virtue of being early in an unproven market, are also the biggest risk-takers) will be those granted the biggest reward if they are "right" (the market/product has value).

Yeah, 1 is exactly right, but hopefully Ethereum will be able to move to Proof of Stake [0].

[0 ]https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ

To your first point:

While there are definitely valid concerns with just how much energy we spend maintaining the bitcoin network and the blockchain, it's hard to call it wasted and it's definitely not busy work.

The energy we spend doing all the mathematical problems behind proof-of-work can be seen as an investment. In the blockchain there is a mathematically certain record of all transactions that have happened since 2008. While that may not sound all that impressive think of it like this: if a single entity was responsible for building that ledger, it would have taken less "energy", but that entity would have to be trusted by every participant transacting.

With the mathematical underpinnings of proof-of-work, we are instead spending energy to create that trust model inside the currency (network+blockchain) itself. Not busy-work.

Think of it like adding microchips to paper money for counterfeit detection. That is materials and energy spent creating a more trustworthy system.

There are certainly alternatives to the BTC proof-of-work that might make for a more efficient protocol, and they might win out in the end. That should be explored. But BTC mining has value.

@eduren, WRT "Think of it like adding microchips to paper money for counterfeit detection. That is materials and energy spent creating a more trustworthy system."

Building up merkle tree root, distributing the merkle tree, I agree, is like 'adding a microchip'. But what's not clear, at least to me, how does, specifically finding hashes with certain number of 'leading zeroes', helps with counterfeit detection?

Sorry if that confused you. You're right, the analogy kinda falls apart there.

I was hoping to illustrate to any less technical readers how integral the blockchain algorithms are to the security and integrity guarantees that bitcoin inherently has.

It helps detecting counterfeit blocks claiming some transactions never happened.

More specifically, it provides confidence that some minimum amount of energy must have been used to calculate that hash. As blocks n+1, n+2, ... are added, the amount of energy that must have been used to create an alternate history of transactions since block n increases. After a certain number of blocks have been added, the cost in energy to forge a longest chain that does not include some transaction (while that transaction does exist on the original chain) will eventually exceed the potential benefit gained by "stealing back" that transaction's BTC. Note that this doesn't guarantee such an attack doesn't happen, it just guarantees such attacks would be uneconomical.

Thus, the "energy waste" of mining is really more like a security limit on transaction amounts and latencies. As the energy used--more specifically, the cost of the energy used--for mining increases, Bitcoin becomes more useful for transferring larger amounts more quickly.

On 2 - I completely agree but much of the "validity" or "value" in bitcoin is there due to the incentive to get some. There would be little economic activity if there wasn't a perceived value and there is little to no perceived value if one doesn't think holding onto such a currency is a good investment. I don't think there's a way around it.

The main issue isn't solved by replacing fiat currency with a digital crypto currency. The problem that must be solved is how do you manage (the creation/destruction) of a medium of exchange in a manner that is equitable to ALL participants. The current system uses a combination of central banks, plain ole banks, and government bonds. I'd argue that their management hasn't met the goal of being equitable to ALL participants, however, I don't see how crypto currency improves on this.

It doesn't. It just puts a different set of people on top.

Bitcoin would be a very flawed currency. It has deflation baked into it's design.

Imagine if bitcoin was legal tender in the country. If my country produced 5% more goods and services in a year, but the bitcoin supply increases by just 1% due to the mining mechanism, resulting in deflation.

This means I am better off hoarding my surplus bitcoin, stashing it under the digital mattress, as I know it can buy more in the future. I won't spend it on goods and services, or risk it by investing in a company.

Most others would do the same. The reduction in demand for goods and services means companies would have to lay off workers or close down, causing unemployment. The reduction in investment will mean less companies starting up, and less coin for companies to invest in staff or equipment to increase efficiency.

All this will depress economic growth, and cause unemployment. Which in turn reduces demand even more, causing a reinforcing cycle of economic contraction. A great depression in other words. The similarity is apt, because the great depression was partly driven by the gold standard, which had the same dynamics as my hypothetical bitcoin economy.

So say your country produced 5% more goods, and the bitcoin supply increased 1% or even decreased. Production is higher than monetary supply increase.

Seems to me that sure, the cost of investment would rise in this deflationary scenario, but to assume this results in no investment is a foregone conclusion. Wouldn't you just get a new investment vs savings equilibrium? One that may be more aligned with responsible investments and purchases? Why is it a downward spiral? If saving is greater than investment than production wouldn't stay at 5%, it's ostensibly fall, reducing deflation, and making investment more appealing relative to saving.

Doubtless this 'target inflation' debate has raged for the past century. Does anyone have any book recommendations that explore these ideas?

Debts are denominated in money, if that money becomes more scarce, people will spend a lower fraction of their income on consumption articles out of fear of not making ends meet. At any point in time total spending equals total income, so this will reduce total demand inside the economy. If people's income diminishes, their debt-to-income ratio rises. This results in what is called a debt-deflation spiral.

Anybody else irked by the use of the word "myth" to mean "a position I am so confident is false that I'm now going to talk down to the opposition"

I appreciate this article because of how radical it is and I think it's worth thinking of different systems but, its sounds silly to me.

"If everyone issued their own money in a free market the free market would do what it always does which is regulate supply and demand."

I don't really have time to do a credit check on every person I interact with?

"When you swipe your card you are giving your consent for the merchant to obtain your credit score. The merchant’s system then decides whether or not to extend you credit based on your credit score and the credit policy the merchant has specified."

Really? With every transaction, such as in this example a coffee, your credit score would be checked? And who would do the checking? Would that be centralized?

I like Bitcoin but I think it faces a few challenges unrelated to this article: 1. It takes longer than 10 minutes to explain what value it provides to the average person (particularly in a Western country where their currency has not been devalued) 2. Its slow and cumbersome to move dollars onto an exchange in order to attain Bitcoin. 3. It's highly risky. I think it has plenty of intrinsic value reflected by the network of people willing to sustain it but at the end of the day, it's more like a stock than a currency. 4. There's no one to call if you lose your hash - no customer support, no backup. Does this really work well for most people? 5. And it now has a lot of competitors who offer a similar/better setup and want a piece of the pie...

I like bitcoin and gold, yet I don't think they have "intrinsic value". At least that's certainly not the main point. To me gold has no intrinsic value. It's just a metal. I can't eat it. I have on a personal level no use for it. It's terrible as a construction metal, I'm not interested in jewelry and there are probably many shiner alloys anyway. "Intrinsic value" is not the point, and I don't think money needs any such thing to be useful.

Money is a complex concept, but to me one of its functions is to be a tool for measuring value in economic exchanges. All other things being equal, the value of goods is inversely proportional to their amount. For instance if the amount of gold was suddenly multiplied by two, then the price of gold would drop by half.

Thus, to measure the value of goods, one needs to get an idea of its quantity. So you need to compare quantities. You thus need a fixed reference of quantity for comparison. Just as for measuring say length you need an object of fixed length somewhere to use as a reference.

That's why bitcoin proponents often also like gold : they are attracted by the idea of a fixed amount of money.

By contrast, most central banks pilot the amount of money in circulation in order to try to keep the price of goods stable. This is, imho, as absurd as changing the length of the meter because we've noticed that generations after generations people are getting taller and taller.

When prices vary, this is supposed to have a meaning in the economical sense. Prices are economical signals. Tempering with them defeats their purpose.

>By contrast, most central banks pilot the amount of money in circulation in order to try to keep the price of goods stable. This is, imho, as absurd as changing the length of the meter because we've noticed that generations after generations people are getting taller and taller.

Indeed, and this is why central banks are counter productive to automation.

The two primary goals of the Federal Reserve are to maintain stable prices and achieve maximum employment, despite the fact that automation is making goods and services better, faster, and cheaper and designedly eliminating the need for human labor.

Interesting concept, but there's only one paragraph explaining it with very little details after pages upon pages of handwaving theories about bitcoin and gold.

Would love to read a deeper dive into this concept.

> By offering short term credit to each other market participants will be able to engage in economic exchange without having to pay the cost of money.

I don't think this person understands bitcoin, currency, debt, or money.

> Bitcoin and other digital coins are at the peak of their hype cycle.

Why do you think they are at their peak?

It's referring to https://en.wikipedia.org/wiki/Hype_cycle which is meant to describe the pattern of hype -> disillusionment -> eventual larger-scale adoption that often accompanies new technologies. Seems like a fair estimate that it's near that peak given that Bitcoin has broadly reaching excitement around it but few similarly broad use cases as of yet.

But that pattern fits the 2014 peak and crash, and thus, now 'large scale adoption'.

Would you really argue that Bitcoin has "large scale adoption"? Most people aren't using it yet apart from cryptocurrency enthusiasts and currency speculators.

It's a bold (and I'd argue an incorrect) assertion to lead with and without providing evidence or supporting opinions.

If these sort of ideas interest you, you might want to check out Interledger:

https://interledger.org/

Great idea. Here comes an idea on how to implement it:

* Everybody (people and companies) trust their bank * All banks trust their central bank * All central banks trust SWIFT

This is effectively a chain of trust. Therefore, piggy back on this existing trust relationship and let SWIFT be the global CA, and let them sign all central banks certificates, and let all central banks sign all their banks certs, and now finally, let all banks sign all their account holders (=people and companies) certs.

This way, all people and companies only need the SWIFT root CA to verify the validity of a monetary decentralized transaction from a stranger, since the stranger can prove the issued IOU-note has been issued by a certain individual or company, since all banks have verified the identity of their customers (i.e KYC'ed them).

For anyone interested in the idea of using blockchain-based digital currency to create a competitive currency scheme, I wrote my undergrad thesis on this topic:

http://roymurdock.com/thesis/murdockthesis-final-2.pdf

Hayek, a famous Austrian school economist, had the same idea in the 1980s - remove control of currency from central banks and governments, and give it to private institutions, having them compete against one another. Digital currency removes a lot of the technical barriers to issuing a new currency, but technical barriers are not the main barriers to adoption.

This is really confused. Nothing has intrinsic value, but certain things have objectively-measurable properties that make them more suitable to be used as money.

Scarcity, fungibility, divisibility and portability are some of these properties. Mass adoption is another (because money effectively has "network effects"), but if a society widely uses a particular form of money when a better substitute is available, they will very likely switch at some point (see: dollarization).

Bitcoin and gold are both superior to fiat in terms of scarcity. (The author is correct that the gold supply grew massively at certain points in history, but there's very little chance of this happening again any time soon. That said, there's still a lot of Au in the earth's crust left to dig up and with modern mining techniques the global stocks grow at about 1.5% a year). Anyone with a lot of usd (or rmb or euros or whatever) puts it somewhere less prone to inflation (stocks, bonds, real estate). This means there's always a lot of fiat currency looking for a home - though people at the bottom don't see this over-abundance of money, it is visible in things like the crazy prices for premium real estate, the crazy size of tech acquisitions (everyone else is investing their money in FB/AMZN/GOOG/AAPL, so those guys have huge cash hoards with little opportunities to put them to use - so they buy many startups).

On top of that, bitcoin is highly divisible and very portable (it's easier to send btc around the world than gold or usd). A couple of years ago I saw nothing that could stop it long term. I've since become convinced that its weird supply formula makes the price inherently, permanently volatile. Longterm, the finite supply limit will incentivise everyone to hoard, causing the price to skyrocket - but if everyone hoards the amount traded will become so low that even a small amount leaving the hoards (as hoarders suddenly spend some of their overpriced btc) then causes a big price drop. This bouncing up and down incentivises people to stay away.

Gold, on the other hand, has ties to economic reality - if the price increases gold miners can mine more, and vice versa. This natural adjustment in supply dampens price swings. Unfortunately gold needs to be kept in a vault and can't be transferred easily (that said, for non-technical users, securing one's bitcoins appears equally difficult).

If someone made a cryptocurrency with a gold-like supply rate, that would have real world domination potential. Maybe some startup founder with the connections to pull this off is reading this - if so, take a look here for more theory: https://keithweinereconomics.com/2013/12/28/the-theory-of-in... (his argument is more complicated than those you may have encountered in libertarian/goldbug circles. It's not simply that the scarcity of gold means it will be more valuable long-term - it's the arbitrages that modulate the supply and thereby make it suitable as a store of value).

Writing this comment has gotten me thinking, so here's a few other thoughts on how this will pan out. I've read many different thinkers who write about such topics, and spent much time evaluating and integrating, so hopefully some stray reader will find this of value.

The other thing I've come to realise is that economics is one aspect of human society. It has a kind of permanent, fixed reality, despite being based on human decisions and actions, because the incentives humans face are universal and eternal (everyone needs to save, everyone needs to trade, even in a socialist dictatorship semi-regular economic activity continues on the black market). But the ideas that spread in a culture also count. If most people believe that the usd is money, and bitcoin and gold are for weirdos, then the usd can remain money for a long, long time. I thought that over time people would see the bitcoin price constantly rising (though unstably), and realise that they needed to buy in. (First the risk-takers and early adopters, then the more adventurous asset managers investing 0.5% of their funds, then the early majority, and so on). But with the recent price spike, I saw that though many people suddenly wanted to pile in, they had no understanding and little interest of bitcoin's fundamentals. They buy now and hope to sell before the next crash. Maybe some entrants will become long-term holders and help drive the price up - but not many. The btc market cap is around $50bn - tiny in the world of finance. If/when it approaches $1tn, things will get interesting. Our current world economic order (BW2) is a hacky fix from the 70s on an agreement made in the 40s. It suited the great powers of the time and was based on certain assumptions. Now the assumptions are proving wrong and the balance of power is shifting.

I don't believe in the mass automation/sustainable energy/basic income future most of the tech crowd is looking forwards too. I foresee two likely futures - one, a return to 19th century great power politics, as Putin hopes for - definitely not a utopia, but hopefully a world where at least some countries realise that freedom is the path to prosperity and advancement. The other, a darker world, where dictatorships (both in socialistic and nationalistic flavours) become dominant on every continent. In both scenarios the usd is likely to lose its status as the global reserve currency, but in neither scenario is bitcoin guaranteed to be the replacement.

> Gold is a less efficient form of money than paper and Bitcoin is an even less efficient form of money than gold.

I don't think that's true in most cases. I can more easily send someone $10,000 in Bitcoin than that amount in gold. And the larger the sum becomes, the easier it is to do that with Bitcoin.

You're not really transferring Bitcoin though, you're just adjusting a ledger of who owns what. There's nothing stopping you from doing the same thing with some gold, you could probably even create a setup where it is done at lower transaction costs.

Yes but with a gold ledger you'd have counterparty risk, because the ledger would refer to something outside itself. With Bitcoin the ledger is the currency.

> you're just adjusting a ledger of who owns what

That's what bitcoin is.

If marking the blockchain (ledger) is not the same thing as transferring bitcoin, then there is no such thing as transferring bitcoin, because there are no actual 'coins' stored anywhere (digital or otherwise).

> You're not really transferring Bitcoin though, you're just adjusting a ledger of who owns what.

If not this, what do you think a Bitcoin transfer looks like?

> There's nothing stopping you from doing the same thing with some gold

The custodian of the gold would be able to steal it from me at any time. I wouldn't actually be in possession of the gold, whereas I would be in possession of my Bitcoin keys.

Mt. Gox has proven that the custodian of your BTC can also steal it from you at any time.

Do not leave your coins on an exchange. Use a hardware or paper wallet that is physically secured.

Including Coinbase. (See stories of people having their coins stolen by subverting 2FA systems.)

The point is that physically sending the gold is not the equivalent sense of the word transfer in this case. There will of course be some differences, but the gold ledger is the best gold analog of a bitcoin transaction.

The question is a matter of trust in the correctness of any such ledger.

Bitcoin only exists as entries in a trustless ledger. The trustless ledger of gold is physical possession of that gold -- that's the only way that you can verify possession (or spend freely) without a mutually trusted third party.

Sure, that's a valid issue, but it's unrelated to my comment on the ease of changing ownership of an asset.

This greatly confuses the concept of ownership.

If I physically control gold, then I have some guarantees about that ownership. Someone can physically take it from me, but I can, at least, make that difficult.

If I own gold credits, then I must trust the holder of the physical gold, both to honor my credits and secure the gold.

If I own Bitcoin, it means I posses the private key that enables their spending. I have to trust the collective actions and incentives of the Bitcoin network, not a single party.

I think it's very clear that these are wildly different notions of ownership, and that they may be valued differently. Equating the transfer of gold credits to Bitcoins fails to account for these differences.

This article is painful to read. Author seems to have no familiarity with the space and should read some earlier work[1]

[1] http://archive.is/TSdxy

"Paper money is a significant technological advance over gold money"...Bullshit.

Gold is a commodity which marks a certain amount of labor and energy expended before it can be exchanged for other goods and services. Paper money is a debt note that represents a promise of labor and energy to be expended in the future.

So what happens when there's no demand for the already created paper? History has shown time and again; depression and war.

Rarity does not endow something with value. There are many things that are difficult to extract yet are not valuable.

I never implied monetary metals' value is due strictly to the energy it takes to extract from the ground.

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