12 ms·

I had trouble understanding bitcoin myself, and therefore stayed away from it, but what made me understand it, if shinny metals and compressed carbons pieces ha

by down 9y ago

I had trouble understanding bitcoin myself, and therefore stayed away from it, but what made me understand it, if shinny metals and compressed carbons pieces have huge markets, eg. gold has a cap of 7 trillions and bitcoin is just 150 billions, and just work why bitcoin would not also work, even when you buy gold jewellery or diamonds, in the back of your mind is the resell value, (hedge against inflation), not that they look much better than a fake, or the coated version. Maybe in US inflation isn't a problem but in my country until a few years 7% inflation was low, although maybe the official inflation is low, but as far as I know asset prices have gone up due to quantitative easing.

wpietri 9y ago
An important difference: gold and diamonds have significant non-financial use. The majority of gold mined each year, for example, goes to jewelry and industrial use. And the track record for that demand runs back millennia.
- down 9y ago
  gold industrial use is like 10%, jewelry as just a fancier way to store gold, so 90% of gold is so valuable because is valuable, and for so many years, meaning something can be valuable without intrinsic value, aka bitcoin.
  - vasilipupkin 9y ago
    I disagree. Gold is valuable because physical commodities and physical things, like jewelry, etc. tend to track inflation over time. As an investment, gold is terrible. Just look at the chart of gold prices over a long period of time.
    - hackinthebochs 9y ago
      >Gold is valuable because physical commodities and physical things, like jewelry, etc. tend to track inflation over time. I don't know how to read this other than as stating the same thing with different words, i.e. "tracking inflation" is just another way of saying that its valuable.
      - vasilipupkin 9y ago
        Well, what I mean is, physical things tend to track inflation. That doesn't make them great investments. I'm not sure it's fair to assume the same properties for bitcoin, but supposing bitcoin is like gold - gold is actually not a great investment.
  - wpietri 9y ago
    Non-financial use is the majority of gold demand: https://www.statista.com/statistics/299603/gold-demand-by-sector/ https://www.statista.com/statistics/299603/gold-demand-by-se... Jewelry is definitely not just a fancier way to store gold. How many people do you know that sold their wedding rings when prices spiked? I don't think intrinsic value is a meaningful term. Gold has been valued for millennia because it is very useful for making pretty things. And the price has been high for a long time because the supply of it is low.
- IkmoIkmo 9y ago
  You've got the causal relationship flipped. Gold isn't valuable because it's used in jewellery. It's used in jewellery because it's considered valuable. There was a time when we hadn't the technology to produce aluminium in significant quantities like we do in today's factories, and it was more expensive than gold. And for that reason, it was used in jewellery, expensive cutlery and even the Washington monument. Gold is mostly valuable for its scarcity and the way our culture has used scarce metals as a store of value, not because of its intrinsic value as a metal. Today we can create artificial scarce tokens digitally, before using a centralised party to manage the ledger, today in a decentralised manner. Who knows whether gold's status will last, or in fact bitcoin's. Perhaps the noble notion of decentralisation won't be valued by markets in the end, perhaps there's no reason to respect one token's value for its scarcity when you can programmatically create a million clones on a single computer. I've been a bitcoin enthusiast for half a decade, but the past few years I've seen a major decline in genuine interest in bitcoin other than as a get rich quick scheme. We used to have lots of cool and fun things going on, now it's bland and boring. People forget bitcoin's only value is its decentralised nature, yet the price increases don't reflect any significant growth in capturing the value of decentralisation, at all.
  - vasilipupkin 9y ago
    gold is also used in jewelry because jewelry made out of gold looks good, right? it's not pure scarcity, certain physical properties of it make it attractive, correct?
    - joeschmoecad 9y ago
      You can make something that looks identical with cheaper alternatives or even synthetic materials. Same with diamonds (see cubic zirconia). Thus, it is not the actual properties that make them desirable as jewelry. It is solely the fact that they are valuable that people want them for jewelry.
      - vasilipupkin 9y ago
        hmm, perhaps, but historically you couldn't and so this combination of historical data, etc. as well as physical properties is what gives it value. But, yes, because of the issues you are talking about, going forward we should expect gold to be a bad investment, not a good investment.
- cloakandswagger 9y ago
  Gold isn't worth $1.2K per ounce because of its "non-financial use", and has been valued throughout human history for its scarcity. I'm fairly certain kings weren't making crowns from the stuff 500 years ago because of its conductive properties.
  - lucozade 9y ago
    Mostly they were using gold because it doesn't readily tarnish and it's relatively easy to work. Scarcity was necessary, for sure. But definitely not sufficient.
  - kgwgk 9y ago
    But it was, in large part at least, because of its malleability. There were even scarcer materials that have never been used to make crowns.
mxwsn 9y ago
The rub is in "gold just works". It doesn't just work, there are reasons it has retained value for so long and reasons it might not forever. The intrinsic value of USD is it's the only currency you can use to pay taxes to the US government. The intrinsic value of gold is its industrial/commercial uses. The intrinsic value of bitcoin is a nearly incorruptable transaction ledger while also being trust less. None of these things "just work", some or all will fail eventually.
- Manglano 9y ago
  Gold in industrial applications will probably be used at atomic-scale in integrated manufacturing processes sometime within the next three years. If you look at an ATX motherboard from 2009 with an Intel processor and a MacBook Pro mainboard from 2017, the amount of material consumption to create a similar product has fallen dramatically. You can actually see Moore's Law, it's kinda beautiful.
- conanbatt 9y ago
  Again with the pay taxes thing. The duty to pay taxes cannot be the value of the usd. Lowering taxes would depreciate the coin!
- lallysingh 9y ago
  Not just taxes. The dollar says "This note is legal tender for all debts public and private." Useful to have when you're getting sued.
- bicubic 9y ago
  > and reasons it might not forever Is there historical precedent for something to be as widely accepted as gold, which isn't considered valuable today?
  - notdonspaulding 9y ago
    Aluminum was once worth more than gold. https://gizmodo.com/how-aluminum-cost-more-than-gold-1575564897 https://gizmodo.com/how-aluminum-cost-more-than-gold-1575564...
Manglano 9y ago
From an economic standpoint, Bitcoin is backed by generated electricity, computer hardware, and network trust. This is not dissimilar from the American Dollar, currently backed by the global energy economy and network trust. Here, the network is the US Treasury and the American public, depending on your analysis; Bitcoin's network is necessarily smaller but the opening of Futures trading suggests a vested interest in continued network growth by exchange operators. Consider the hedge on continued access to electricity and advanced technologies. What this is worth to the consumer (is currency a product? opinions vary) will vary, but diamonds without industrial use were valued at billions of dollars only 150 years ago. Large diamonds still carry multimillion dollar values, despite that a 32-karat diamond can be grown from carbon ash in a small plasma cell for only hundreds of dollars. Maybe even less if the laboratory is powered with a renewable energy source. The diamond was perhaps my favorite currency to study. It is an object historically backed partially by human fascination with light, partially by industrial demand, but the industrial demand was slowly diminished by the introduction of synthetic grit and stones. Despite the low cost of manufacturing a synthetic diamond for jewelry, they usually depreciate immediately--that may be a comment on the consumer's demand by those who practice valuation, or it may be that a "used" diamond is somehow worth less than a "newly discovered or grown" diamond. Impossible to say. Good talking to you!
- notyourday 9y ago
  US dollar is backed by : https://en.wikipedia.org/wiki/List_of_aircraft_carriers_of_the_United_States_Navy https://en.wikipedia.org/wiki/List_of_aircraft_carriers_of_t... and other things like that. Which is why even drug dealers that are hunted by the US trust US dollar.
  - Manglano 9y ago
    Yes, I know that. I lump the US military under "network trust."
  - tome 9y ago
    What does it mean for a currency to be backed by the military?

by down 9y ago

wpietri 9y ago

An important difference: gold and diamonds have significant non-financial use. The majority of gold mined each year, for example, goes to jewelry and industrial use. And the track record for that demand runs back millennia.

down 9y ago
gold industrial use is like 10%, jewelry as just a fancier way to store gold, so 90% of gold is so valuable because is valuable, and for so many years, meaning something can be valuable without intrinsic value, aka bitcoin.
- vasilipupkin 9y ago
  I disagree. Gold is valuable because physical commodities and physical things, like jewelry, etc. tend to track inflation over time. As an investment, gold is terrible. Just look at the chart of gold prices over a long period of time.
  - hackinthebochs 9y ago
    >Gold is valuable because physical commodities and physical things, like jewelry, etc. tend to track inflation over time. I don't know how to read this other than as stating the same thing with different words, i.e. "tracking inflation" is just another way of saying that its valuable.
    - vasilipupkin 9y ago
      Well, what I mean is, physical things tend to track inflation. That doesn't make them great investments. I'm not sure it's fair to assume the same properties for bitcoin, but supposing bitcoin is like gold - gold is actually not a great investment.
- wpietri 9y ago
  Non-financial use is the majority of gold demand: https://www.statista.com/statistics/299603/gold-demand-by-sector/ https://www.statista.com/statistics/299603/gold-demand-by-se... Jewelry is definitely not just a fancier way to store gold. How many people do you know that sold their wedding rings when prices spiked? I don't think intrinsic value is a meaningful term. Gold has been valued for millennia because it is very useful for making pretty things. And the price has been high for a long time because the supply of it is low.
IkmoIkmo 9y ago
You've got the causal relationship flipped. Gold isn't valuable because it's used in jewellery. It's used in jewellery because it's considered valuable. There was a time when we hadn't the technology to produce aluminium in significant quantities like we do in today's factories, and it was more expensive than gold. And for that reason, it was used in jewellery, expensive cutlery and even the Washington monument. Gold is mostly valuable for its scarcity and the way our culture has used scarce metals as a store of value, not because of its intrinsic value as a metal. Today we can create artificial scarce tokens digitally, before using a centralised party to manage the ledger, today in a decentralised manner. Who knows whether gold's status will last, or in fact bitcoin's. Perhaps the noble notion of decentralisation won't be valued by markets in the end, perhaps there's no reason to respect one token's value for its scarcity when you can programmatically create a million clones on a single computer. I've been a bitcoin enthusiast for half a decade, but the past few years I've seen a major decline in genuine interest in bitcoin other than as a get rich quick scheme. We used to have lots of cool and fun things going on, now it's bland and boring. People forget bitcoin's only value is its decentralised nature, yet the price increases don't reflect any significant growth in capturing the value of decentralisation, at all.
- vasilipupkin 9y ago
  gold is also used in jewelry because jewelry made out of gold looks good, right? it's not pure scarcity, certain physical properties of it make it attractive, correct?
  - joeschmoecad 9y ago
    You can make something that looks identical with cheaper alternatives or even synthetic materials. Same with diamonds (see cubic zirconia). Thus, it is not the actual properties that make them desirable as jewelry. It is solely the fact that they are valuable that people want them for jewelry.
    - vasilipupkin 9y ago
      hmm, perhaps, but historically you couldn't and so this combination of historical data, etc. as well as physical properties is what gives it value. But, yes, because of the issues you are talking about, going forward we should expect gold to be a bad investment, not a good investment.
cloakandswagger 9y ago
Gold isn't worth $1.2K per ounce because of its "non-financial use", and has been valued throughout human history for its scarcity. I'm fairly certain kings weren't making crowns from the stuff 500 years ago because of its conductive properties.
- lucozade 9y ago
  Mostly they were using gold because it doesn't readily tarnish and it's relatively easy to work. Scarcity was necessary, for sure. But definitely not sufficient.
- kgwgk 9y ago
  But it was, in large part at least, because of its malleability. There were even scarcer materials that have never been used to make crowns.

mxwsn 9y ago

The rub is in "gold just works". It doesn't just work, there are reasons it has retained value for so long and reasons it might not forever. The intrinsic value of USD is it's the only currency you can use to pay taxes to the US government. The intrinsic value of gold is its industrial/commercial uses. The intrinsic value of bitcoin is a nearly incorruptable transaction ledger while also being trust less. None of these things "just work", some or all will fail eventually.

Manglano 9y ago
Gold in industrial applications will probably be used at atomic-scale in integrated manufacturing processes sometime within the next three years. If you look at an ATX motherboard from 2009 with an Intel processor and a MacBook Pro mainboard from 2017, the amount of material consumption to create a similar product has fallen dramatically. You can actually see Moore's Law, it's kinda beautiful.
conanbatt 9y ago
Again with the pay taxes thing. The duty to pay taxes cannot be the value of the usd. Lowering taxes would depreciate the coin!
lallysingh 9y ago
Not just taxes. The dollar says "This note is legal tender for all debts public and private." Useful to have when you're getting sued.
bicubic 9y ago
> and reasons it might not forever Is there historical precedent for something to be as widely accepted as gold, which isn't considered valuable today?
- notdonspaulding 9y ago
  Aluminum was once worth more than gold. https://gizmodo.com/how-aluminum-cost-more-than-gold-1575564897 https://gizmodo.com/how-aluminum-cost-more-than-gold-1575564...

Manglano 9y ago

From an economic standpoint, Bitcoin is backed by generated electricity, computer hardware, and network trust. This is not dissimilar from the American Dollar, currently backed by the global energy economy and network trust. Here, the network is the US Treasury and the American public, depending on your analysis; Bitcoin's network is necessarily smaller but the opening of Futures trading suggests a vested interest in continued network growth by exchange operators. Consider the hedge on continued access to electricity and advanced technologies. What this is worth to the consumer (is currency a product? opinions vary) will vary, but diamonds without industrial use were valued at billions of dollars only 150 years ago. Large diamonds still carry multimillion dollar values, despite that a 32-karat diamond can be grown from carbon ash in a small plasma cell for only hundreds of dollars. Maybe even less if the laboratory is powered with a renewable energy source. The diamond was perhaps my favorite currency to study. It is an object historically backed partially by human fascination with light, partially by industrial demand, but the industrial demand was slowly diminished by the introduction of synthetic grit and stones. Despite the low cost of manufacturing a synthetic diamond for jewelry, they usually depreciate immediately--that may be a comment on the consumer's demand by those who practice valuation, or it may be that a "used" diamond is somehow worth less than a "newly discovered or grown" diamond. Impossible to say. Good talking to you!

notyourday 9y ago
US dollar is backed by : https://en.wikipedia.org/wiki/List_of_aircraft_carriers_of_the_United_States_Navy https://en.wikipedia.org/wiki/List_of_aircraft_carriers_of_t... and other things like that. Which is why even drug dealers that are hunted by the US trust US dollar.
- Manglano 9y ago
  Yes, I know that. I lump the US military under "network trust."
- tome 9y ago
  What does it mean for a currency to be backed by the military?