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Comment by woodall | Hacker News Reader

>Gold is intrinsically similarly useless as bitcoin.

That is incorrect on many levels. Gold has applications in MANY things. I bet the device you used to type out that comment has a bit of gold in it.

The comparison to BitCoin and paper money makes more sense, but it doesn't. This is because BitCoin has no one backing it. If the dollar drops, well the US is backing it; and they will be forced to deal with the consequences. If someone pulls the rug out on BitCoin- might never happen, but who knows- then no one is responsible. BitCoin is a fun game, and that is all it should be. Such rapid deflation will not go on forever.

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> That is incorrect on many levels. Gold has applications in MANY things.

We still have a more gold that it is put productive uses. Gold reserves/production ratio is 60. No other commodity comes even close. So most of the world's gold is similarly useless as bitcoin, and more will be if some day gold will be re-monetized.

But, maybe, a better analogy would have been, dollar (outside of USA) is similarly useless as bitcoin.

There are a lot of raw resources that we have excess of; some call it reserve. To try and explain the reason gold is so much is a ridiculous task. Practical uses(better than copper in some applications) and non-practical uses(it looks good on me). To compare BitCoins to gold is a horrible analogy to even begin with.

All curious over here. What other commodity a reserves/production ratio of at least 5? (the usual ratio is, at best 1)

So?

>Gold has applications in MANY things.

Yes, but that's not what makes it so valuable. This was discussed elsewhere but copper, for example, has many more industrial uses than gold but because it's not this one special metal it isn't worth as much. Essentially, there are real applications for gold but those alone do not account for its high value.

Take Macs for example. The hardware does not warrant the price tag; same for the OS. Most of it is marketing and perceived/symbolic value(I'll use these terms interchangeable). Gold gets its value from many sources.

Gold is expensive not only because of its applicational value(medical, space, electronics) but also its perceive value(jewelry, shiny, ect). BitCoins are perceived value.

Also, gold is used in different conditions than copper. Remember copper oxidizes which increase resistance and can even stop a circuit from functioning.

I think the price of gold is ridiculous- 1,500GBP a lbs- but it still has real value with some of that perceived- social status- value tacted on.

http://www.youtube.com/watch?v=lONRZNCuZc4 starts around 1:30

I am not a gold advocate, but a raw resource enthusiast. Copper and its alloys are 100% recyclable and very easy to do! However, gold is not as easy to recycle as copper; and usually very harmful. I think mining is horrible, but there are reasons to the madness. ...until there is a better way.

http://pubs.usgs.gov/gip/prospect1/goldgip.html

Your analysis makes sense without the tortured analogy to PC fanboyism. Macs are not in asset bubble, they are a product people enjoy, and pay a premium or aesthetics or peace of mind or lack of competition from an equivalent product, not because they hope to trade the Mac for something else later.

Just like gold :)

> Such rapid inflation will not go on forever.

Isn't it deflation if you can buy more with the same amount of the currency?

Corrected. Sorry about that.

> If someone pulls the rug out on BitCoin- might never happen, but who knows- then no one is responsible.

How might someone go about doing this?

Actually quite easily. If your nation bans the trading of bitcoins for the official state currency, then you have a problem. Regardless of the fact that bitcoins can be transferred w/o outside observation is irrelevant if you can't purchase or trade for goods and services. And at that point, you're either black market, or you're fucked.

Well, as long as not all nations ban trading bitcoins for official state currency it doesn't completely screw things over. I simply trade my bitcoins for Vietnamese dongs or whatever and then exchange my dongs for dollars.

No, the collapse is more likely to happen on its own. At some point the massive increase in value must draw to a close. What happens then? Big bitcoin holders no longer have an incentive to hold onto their millions of dollars' worth of bitcoins "Hmm, time to sell some of these bitcoins". Millions of bitcoins hit the market and find no buyers at the quoted price. All of a sudden the price is a lot lower, folks panic, drives prices even lower.

In an asset where the only incentive to hold the asset is the massive increase in value, panic selling happens as soon as it looks like the massive increase has gone flat. The steeper the increase, the steeper the decrease. That makes bitcoin unlike gold.

Right, but then you are operating on a black market basis, because you're laundering money. If the problem gets bad enough the US starts banning dongs, or applying pressure on their government or what not.

Worse yet, laundering money on this basis will almost certainly come with an increased cost to trade through another currency, especially if there is legal risk to the parties doing the laundering.

It's not like laws will stop financial trading or traders, but if you're declaring your taxes as you're legally obligated, presumably there's still a paper trail indicating irregularities if you're funneling your bitcoins through dongs.

I've read that it's actually illegal for them to use your tax return as evidence against you in a criminal case, due to the Fourth Amendment.

Even if so, it is not going to excuse someone from increased scrutiny that leads to further evidence.

I'm not that intelligent, but a few folks on the BC forums and other places have brought up some great points:

1. Government shutdown

2. BitCoins P2P network is very vulnerable to denial of service attacks; ones that actually cost money!

3. Public Node can be tracked; no more anonymity.

4. Technical merits of the crypto implementation have not been fully tested; is there a possible flaw?

5. Social engineering and one-time inflation.

6. Unreliable and opaque banking organizations; no one is backing it.

There are many more, and they could all be fixed if bit coin was a centralized currency system, but it is not. It is too soon to say "BitCoin is ridiculous and will never work", but someone with a motive and means can definitely make a miners life hell.

https://en.bitcoin.it/wiki/Weaknesses http://forums.xkcd.com/viewtopic.php?f=8&t=69178

Here are some things BC has going for it though!

1. Distributed with no single point of failure.

2. No "mint"; could be a bad thing.

3. No individual company can be arrested and shut down.

4. "Anonymity"

2. BitCoins P2P network is very vulnerable to denial of service attacks; ones that actually cost money!

The guys developing Bitcoin should take a look at the Phantom protocol then, which is supposedly very resilient agaisnt DDoS attacks.

>If the dollar drops, well the US is backing it; and they will be forced to deal with the consequences.

http://en.wikipedia.org/wiki/Hyperinflation

Currencies made by governments routinely lose >99% of value in few weeks. How this "backing" helps if you lose everything? In my country it happened 15-20 years ago.

Also even US dollar drops every year.

Srsly. One of the many, many problems with government debt is that there is no collateral.

The government doesn't need collateral, they use yours.

Seriously, government debt is backed by the fact that the government has the legal right and the practical ability to confiscate as much of its population's wealth as it feels like. I don't like US government debt at all, but it's nowhere near the point at which the don't have the ability to pay it back.

Are you sure? He government can try to tax everything and use my PlayStation and house in Ohio to settle a debt to a Chinese citizen, but if it ends up destroying the US economy, there won't be any new wealth creation to tax, and that is where most government revenue comes from.

It is far more likely that US government will do what it and every other government always has done: either inflate the currency or default or declare war or some mixture thereof.

If the Feds start confiscating Ohioan playstations to payback chinese citizens, how long would it be until the states themselves revoke thair consent to be governed by the Feds? (See American Revolution, Articles of Confederation, and Confederate States of America),

There is no solution to the problem that currencies can become worthless. It is a fundamental aspect they have, because any commodity, artificial or otherwise, can become worthless. If change stopped, this might cease to be true, but in a world where in 100 years we may be seriously talking about the needs of our uploaded consciousnesses in the war against the bad AIs, or we may be a hunter-gatherer society again (and I'm using a 100-year-horizon just to highlight the problem but it's true on shorter timescales too), there simply isn't any safe, reliable value store.

woodall didn't say dollars won't hyperinflate. (S)He said the US "will be forced to deal with the consequences". Not the same.

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