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Comment: Re:Yes but (Score 1) 191

by seanadams.com (#38064460) Attached to: Researchers Locate Flaw In Bitcoin Protocol
No, it is certain physical properties that makes something useful as money (scarcity, durability, divisibility, fungibility, ease of identification, suitable for making denominated units (coins), not a gas that will escape when you open the jar, not toxic or radioactive). This is why gold and silver are money, but diamonds aren't, even though both are pretty and both have value. Diamonds are neither fungible nor divisible. This makes them are illiquid, and therefore bad money. Sure gold is pretty but most people don't look at their gold, it sits stored away in a vault.

Gold is *naturally* money. It's not something that humans had a say in. The best way to understand this is by the anthropic principle - what else could be money? There is no other substance with all the right properties. Silver, platinum, and palladium are the runners up - but they lack better identifiability, since the grey metals all look pretty similar.

The cultural significance and beauty were probably assigned after humans came to recognize it as a store of value. For example, aluminum was once highly valued due to its near non-exsitence in nature in its elemental form - more valued than gold even, until we figured out how to refine it. Bitcoin doesn't have aesthetics going for it, but it doesn't have to. Plenty of people think stocks and bonds are valuable for example, and there's nothing pretty to look at there.

So bitcoin has all the necessary monetary properties of gold, with the added advantage that it can be moved around electronically. So I would say it's actually far better money than gold (at least as far as market participants would be concerned - governments hate it). Yes there is a chicken and egg hurdle before it can gain widespread adoption as currency, but actually there is a plausible path to get it there. Already as I mentioned it is perfectly useful for foreign exchange including international wire transfers. This doesn't require it to have a particularly stable value as long as there are currency exchanges available to both parties. Money and currency are not the same thing... bitcoin is already money, even if it's not yet currency.

Comment: Re:Yes but (Score 4, Insightful) 191

by seanadams.com (#38059584) Attached to: Researchers Locate Flaw In Bitcoin Protocol
Bitcoin would be a lot more valuable if your currency held the promise of something. NO, this is exactly why government money fails. Whichever authority is responsible for that "promise" will simple renege after the currency has gained acceptance. They debase the money, becoming extremely powerful in the process, until eventually it becomes worthless. Then after everyone else is broke and they have all the real money, they do it again. When you mine bitcoins you aren't exactly "selling computer time", you are using your computer to produce a product. The person who buys your coins wants the coin as proof of work, not the cpu time itself. This is exactly the same model as gold mining, the point is that nobody can get more gold without incurring the cost to mine it. Gold doesn't have to "promise" anything except its inherent promise of being scarce (and its other monetary properties such as durability, divisibility, etc). Yes bitcoin is volatile but only because it is new. As it gains acceptable, the real promise that you will care about is the market in which people will let you trade it for stuff (even just forex is a great start). That does NOT require any authority to back the money. The whole point of bitcoin is that it is a scarce commodity, as opposed to a token or note.

Comment: Re:Slamming Bitcoin (Score 1) 279

by seanadams.com (#36872162) Attached to: Bitcoin Is Not Anonymous
> If Bitcoin could not be exchanged for other currencies, it would be worthless; it's value comes only from the fact that you can ultimately "cash out."

Why couldn't they be exchanged for goods and services? Sure you start with currencies because they are the most liquid, and bitcoin has a very speficially compelling utility in that it can be used for international transfers outside the banking system. However it is already finding uses apart from currency exchange.

As far as being otherwise "worthless" - the same is true of US dollars with one critical distinction: the value of bitcoins is set by the market, whereas the value of US dollars is dictated by fiat. Do you understand the difference? Nobody would accept US dollars were they not legally mandated as currency. Oil producing nations would not accept dollars unless we held a gun to their heads.

By contrast, the value of a bitcoin is decided only by the parties to a trade. And nobody can make more of them without incurring the expense to mine them. That is what makes it "sound money" like gold or silver. Except unlike precious metals they can be moved electronically.

It astonishes me how much people love to rip on bitcoin without understanding really the first thing about its purpose.

Comment: Re:folding@home etc (Score 1) 403

by seanadams.com (#36763544) Attached to: Bitcoin Mining Tests On 16 NVIDIA and AMD GPUs
It isn't supposed to be. It's not a store of energy. The energy cost is there to enforce the scarcity of the currency. Like gold, to get more you have to expend energy to mine it. Contrast US dollars which can be instantiated by the trillion with a few keystrokes. Yes the miners are presently being irrational (or stealing electricity) but they aren't going to keep losing money at it forever. If the price of bitcoins does not rise to parity with the energy input then mining activity will decrease - exactly the way the mining of anything is done.

Comment: Re:The same threats from banks... in 2008. (Score 1) 932

The default scenario you're describing doesn't sound much different than hyperinflation. I suppose it's nice that we have a choice, but I just don't understand the "raise the debt limit or else" mentality. More spending just postpones and magnifies the eventual collapse.

Comment: Re:Bitcoin to revolutionise economy (Score 1) 642

by seanadams.com (#36524400) Attached to: Bitcoin Price Crashes
You're being obtuse. I'm obviously referring to the difference between commodity and fiat money. Nobody would honor fiat notes if their use were not mandated by law and/or credibly backed by some issuing agency. Bitcoin, like gold or silver, requires NEITHER to work. It is a commodity whose value is set ONLY by the market.

To put it a slightly different way, if we must be legally coerced into using federal reserve notes then we are not "willing to trade in it" - we are being forced to recognize value that the instruments would not otherwise have. Do you see the difference?

Comment: Re:shitcoin (Score 1) 476

It's not so much a matter of being more easily transacted, as that it's peer to peer and does NOT use an issuing agency or reserve note / share model. Your poopcoins have counterparty risk, and the possibility for poopshares to be fraudulently issued in excess of actual holdings. This is really the central point of bitcoin which you've completely ignored in your analogy.

Comment: Re:Any small market will be volatile (Score 1) 476

As the other commenter says, you'll be able to the exchange your silver for another currency. However for trade, US pre-1965 coinage is ideal and easy to authenticate.

100 oz bars have been counterfeited but would fail even the most casual test - just weigh and measure to check density, or compare to photos available online. Better to use an ultrasonic tester which is something a silver dealer should be expected to have.

Power corrupts. And atomic power corrupts atomically.

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