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Comment by wyager | Hacker News Reader

The author completely misunderstands the value proposition of both gold and Bitcoin. Neither of them is valuable because of “intrinsic value” - both derive approximately all of their value from monetization. If gold was only valuable for its physical uses, it would be worth a negligible fraction of its current value.

Also, comparing the price of gold to the rate of inflation doesn’t make any sense. The derivative of the price of gold should be compared with the rate of inflation, or the price of gold vs some adjusted value of a dollar.

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37% of all gold minded each year is used in electronics despite it’s current price. Which means if gold stopped being used as a currency or jewelry it’s value would crash in the short term, but still remain high long term.

In a very real way it’s inherently worth more than copper or steel. Though that only makes it valuable as a hedge not an investment.

And let's not forget jewellery - some people still like wearing gold rings or bracelets.

The demand for gold jewelry is in very large part due to its price and scarcity. You don't see people flaunting their cubic zirconia jewelry even though it's optically at least as nice as diamond.

Exactly, I would argue that gold having some meaningful value to anchor the price is what allows it to function as a means of exchange.

Ideally though, we should use something else so that gold can be cheaper for electronics.

Bitcoin is an entirely different creature with absolutely zero intrinsic value, and only successful due to the momentum of being the first mover.

Of all the major cryptos in distribution, Bitcoin is one of the least advanced and most limited in functionality.

> I would argue that gold having some meaningful value to anchor the price is what allows it to function as a means of exchange.

Then please argue it; all evidence suggests otherwise.

> Ideally though, we should use something else so that gold can be cheaper for electronics.

Imagine if we had a form of money that didn’t permanently tie up a nonrenewable commodity… it could be based on, say, electricity consumption instead of permanently removing metal from usage!

> Bitcoin is an entirely different creature with absolutely zero intrinsic value, and only successful due to the momentum of being the first mover.

“Intrinsic value” is a totally economically nonsensical concept. Gold is also not valuable due to “intrinsic value”. They are both valuable due to monetization. Yes, this is based on “momentum”/impredicativity. No, that’s not a problem.

> Of all the major cryptos in distribution, Bitcoin is one of the least advanced and most limited in functionality.

There is literally no charitable interpretation of this statement that is true.

>> I would argue that gold having some meaningful value to anchor the price is what allows it to function as a means of exchange. >Then please argue it; all evidence suggests otherwise.

Gold value is uncorrelated from its means of exchange, sure

>> Ideally though, we should use something else so that gold can be cheaper for electronics. >Imagine if we had a form of money that didn’t permanently tie up a nonrenewable commodity… it could be based on, say, electricity consumption instead of permanently removing metal from usage!

So Bitcoin scarcity is a strength and commodity scarcity is a weakness? Let’s put aside the electricity needs commodities to, y’know, exist in the first place

>> Bitcoin is an entirely different creature with absolutely zero intrinsic value, and only successful due to the momentum of being the first mover. >“Intrinsic value” is a totally economically nonsensical concept. Gold is also not valuable due to “intrinsic value”. They are both valuable due to monetization. Yes, this is based on “momentum”/impredicativity. No, that’s not a problem.

Valuable due to monetisation is a creative babble, I’m not sure what it’s supposed to mean.

>> Of all the major cryptos in distribution, Bitcoin is one of the least advanced and most limited in functionality. >There is literally no charitable interpretation of this statement that is true.

Bitcoin’s value to you is what you can convert it to later, after convincing others and yourself to keep buying; your logic is tainted by this very conflict of interest. Good luck

If gold’s monetization demand disappeared overnight, 37% of its current demand is not sufficient to keep the price nearly as high as it is now.

> In a very real way it’s inherently worth more than copper or steel.

Can you explain what you mean by this? Usually when people say things like this they haven’t thought it through.

Gold is valuable because of its chemical properties, it is almost completely inert/rust-proof and one of the best conducting materials. It's a very useful material for electronic conductors for that reason.

Do you think most gold investors are hoping to turn their bullion into conductors?

Incidentally, Bitcoin is also rust-proof.

Gold has intrinsic value because it has uses (like conductors and jewelry). Bitcoin has no intrinsic value.

But without rust it is unsafe

Gold is very inert, yes, but it still gets beaten by copper when it comes to conductivity [0] which is why conductors are rarely ever made out of gold instead of merely gold-plated.

Gold's industry use remains negligible in the great scheme of things and only a very small fraction of its value is derived from its industrial uses. It's valuable but not that valuable.

[0] https://www.bluesea.com/resources/108/Electrical_Conductivit...

Gold’s industrial use is low because of it’s high price not it’s utility. Drop it’s price by say 95% long term and it’s use by industry would dramatically increase, and mining would tank. Eventually after the already mined gold was used up it’s value would shoot back up.

Conversely, this means it’s value as a hedge is also going to stay. Some can take gold today burry it in a hole and know it’s going to still be valuable when they or their descendent pulls it out of the ground in 50 years. It’s not going to appreciate they way stocks do, but it’s also not going to 0 the way stocks occasionally do either.

Yes, there's certainly a floor on the price because it's a useful and rare element. But how much higher would it be than the $10/lb that bismuth sells for because it's also useful and rare.

If gold stopped being used as a store of value, we could use the gold uselessly stored in vaults (~80% of all potential mineable gold on Earth) to make things. Even if 1% of gold reserves were sold off each year that's far greater than the current industrial demand and the price would crater.

In theory that could happen in the short term yes, but the rate of gold used in electronics isn’t fixed. Crater the price and usage skyrockets which could eat up the supply within a lifetime. At which point the price increases again.

Which means gold is a long term store of value, which prevents extreme cratering of it’s value. Thus preventing the situation described.

The gold lease rate is not nothing. Gold is valuable as collateral. Bitcoin is literally bits ready to be piped into /dev/null but gold is not that.

Gold’s value as a financial instrument does not come from its physical properties, except insofar as those properties can be emulated by Bitcoin (e.g. corrosion resistance).

You can drive a truck to a vault and pick up your gold. Try emulating that with bitcoin. You can't use burned computer cycles as a door stop or to make jewelery. Just because people speculate in gold doesn't give bitcoin legitimacy because they speculate in that. Gold has value as a financial instrument because it is tangible, it is something bitcoin can never be.

> You can't use burned computer cycles as a door stop

Is your understanding that people value gold because they can use it to fashion a door stop?

If the price of gold hit zero, you would still have a lump of pretty, malleable metal.

When bitcoin hits zero, what exactly will anybody actually have? At least with other manias like tulip bulbs you could grow a flower.

You can't even wipe your bum with bitcoin.

And? Do you think the fact that having a “lump of pretty metal” if demand disappears is what makes gold valuable?

Yep. Bitcoin value is nothing more than a collective illusion. I especially like the marketing aimed at rubes who think "proof of work" means value creation in the same way as ore mining. Its an elaborate scam without parallel in history. When its over and the illusion disappears, people will still value gold but will delete their wallets.

Well I’m glad you’re so smart that you can see through the illusion that’s fooled all the rubes :)

After all, it’s inconceivable that your model is incomplete - you’ve given such a good argument for where gold derives its value, after all - you can make door stoppers out of it!

> "proof of work" means value creation in the same way as ore mining

You’re at least as silly as your own strawman, because ore mining doesn’t “create value” at all. You’ve fallen into the same trap that a lot of people with folk economics fall into - https://en.wikipedia.org/wiki/Labor_theory_of_value

If I was smart I would have stopped under-estimating the stupidity of the average rube and bought a pile of useless Bitcoin back when it first became a meme. I don't consider myself to be particularly smart but I do know a scam when I see one. If somebody already mined the first coins everybody getting involved afterwards is either getting ripped off or will have to rip somebody off to get out before the realisation hits that what you are trading in is burned computer cycles and promises of a "new means of exchange" that doesn't actually work except for criminals activities.

What happens when a country abandons a fiat currency or devalues it via inflation, you end up with wheelbarrows full of worthless paper and nobody to take it. yet at some point it was valued highly and people hoarded in mattresses and were happy to exchange goods for it.

I like to think about it this way: People stop worshipping a particular god and the whole religion disappears, leaving nothing but stories. Nobody makes material sacrifices to that god any more, the temples fall into ruin, the high priests run out of money since their temples are no longer supported and followers move on to something else.

c.f. https://en.wikipedia.org/wiki/Zurvanism

Gold however has been sought after for thousands of years and still has uses outside of being a very inefficient currency (super compact boat ballast? why not). Bitcoin does not, can not and never will.

Theoretically, gold could be piped into a black hole which is the physical equivalent of /dev/null. :-)

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