14 ms·

>> They said they might look at selling when the value of all the Bitcoin in circulation approaches the value of all gold in the world — some $7 trillion or $8

by TheBiv 9y ago

>> They said they might look at selling when the value of all the Bitcoin in circulation approaches the value of all gold in the world — some $7 trillion or $8 trillion compared with the $310 billion value of all Bitcoin on Tuesday — given that they think Bitcoin is set to replace gold as a rare commodity. But then Tyler Winklevoss questioned even that, pointing out the ways that he believes Bitcoin is better than gold. I found this to be the most fascinating part of the article.

dpflan 9y ago
Interesting. What are the economics arguments for Bitcoin replacing gold? Does the “ease of transaction” of Bitcoin provide an implicit value over gold and is that factored into the price of Bitcoin as maybe a fixed value?
- KaoruAoiShiho 9y ago
  Gold is just non-scalable and is bound to die eventually. If you think about it, if you're going to start a new country and a new federal reserve, how much sense does it make to ship tons of gold to Mars for example? Any store of value that makes sense for humanity in the long term has to be both digital and reflect the work/real value creation process that matters in the future. I'm not sure it's going to be bitcoin but it's definitely not gold.
  - meric 9y ago
    Gold is definitely useful for building the spacecraft going to Mars though. They cover the entire spacecraft in the stuff. It might be too useful for Mars to use as reserve! https://www.itmtrading.com/blog/aerospace-gold-the-next-frontier/ https://www.itmtrading.com/blog/aerospace-gold-the-next-fron... https://www.geek.com/news/geek-answers-why-does-nasa-use-so-much-gold-foil-1568610/ https://www.geek.com/news/geek-answers-why-does-nasa-use-so-...
    - dpflan 9y ago
      :) thanks!
- apeace 9y ago
  > Does the “ease of transaction” of Bitcoin provide an implicit value over gold... I know this doesn't answer your question but it's still relevant. Currently Bitcoin is the most expensive, least convenient currency available. According to estimatefee.com it would take about a $25 fee in order to get your transaction through in an hour. My point is that nothing about Bitcoin will ever really be "implicit" like it is with gold. Gold exists as it exists, cryptocurrencies only have the properties that are created by the developers, and/or are run on machines by participants in the network. In Bitcoin's case, the developers and the network have not been able to handle the load of all the transactions. I used to be in the "Bitcoin is the new gold" camp. But after seeing what's happened with Bitcoin, I'm certain it's not that simple.
  - umanwizard 9y ago
    It definitely takes longer than an hour to send gold to someone on the other side of the world.
  - dpflan 9y ago
    Should the slowed clearing rate actually reduce the value? Increased perceived value driving the price up / speculation actually causing a drop in value due to the system underlying Bitcoin?)
felipeko 9y ago
There's a difference about Gold's rarity and Bitcoin's. Gold is rare on its kind and rare on its abundance. It may be hard to mine more gold, but it's way harder to find another gold-like commodity. Bitcoin is only rare in the abundance sense. It is hard to mine more bitcoin, but it's pretty easy to find a (arguably better) substitute for what it does. I can agree with it being better (having more utility) than gold, though. So I'd agree that the sum of all e-coins will surpass gold, but I see no reason for Bitcoin to do it alone.
- WorldMaker 9y ago
  Bitcoin definitely isn't rare in kind as we've already seen how relatively "easy" it is to fork. Could just fork Bitcoin infinitely as one way to deal with its supposed scarcity. Bitcoin isn't even rare in the abundance sense if you consider that how hard it is to mine new coins is merely a function of a mathematical curve that can be adjusted as a software change. Certainly any change to the mining difficulty and/or coin pool ceiling would be hugely controversial, but it's not like it's mathematically impossible merely politically improbable, for now.
  - derekp7 9y ago
    The thing that is rare is the total amount of mining nodes behind bitcoin. That is what you are buying into, is mindshare. Of course the mining nodes are mostly profit driven. If another coin had a higher profit margin, the miners would switch over to that coin.
    - WorldMaker 9y ago
      That rarity too is also software controlled based on the difficulty curve. Bitcoin doesn't have to boil the oceans, it could make mining easy enough again that transactions could be mined in a coffee break on an average person's smart phone's GPU. As I said, the scarcity of Bitcoin is much more a political structure than an inherent nature of Bitcoin. The miners control Bitcoin so much as anyone does and it is their political intent as much as anything else that creates any scarcity in Bitcoin at all.
QAPereo 9y ago
To me it just sounded like talk designed to pump the price now.
epx 9y ago
Good luck trying to make a fountain pen nib with a cryptocoin :)
0wing 9y ago
If you understand the computer science behind Bitcoin, you'll realize how ridiculous the false equivalency to gold is. 1. The claim of "rare" doesn't exactly hold true. Consider the 10,000 BTC pizza - how did this happen? This was the direct result of Satoshi's economic policy, granting vast sums of BTC to mint out very quickly very early for a short duration to the very small pool of people who ran the software. Satoshi's algorithm produced BTC in plentiful quantities enabling the 10,000BTC pizza - thus it wasn't rare if you were Satoshi and the dozen other early whales hording as much as possible, until the algorithm begins cutting off the production and limiting later users from producing coins, starving the economy. Now there's a psychological game being played, where public relations and marketing must convince new users to buy in. Because the exchanges are unregulated, they can manipulate the spot price though wash trading and painting the tape [2] (where trades are falsified and you just sell the same item back and forth to your friend for a higher and higher price). The supply was created by running a piece of software. It's not magic. Most of the supply was produced very early on and as much as 30% of all Bitcoins are owned by less than 100 people. Best estimates are that there are about one million holders of Bitcoin; 47 individuals hold about 30 percent, another 900 hold a further 20 percent, the next 10,000 about 25% and another million about 20%, with 5% being lost. So 1/10th of one percent represent about half the holdings of Bitcoin and 1 percent close to 80 percent (http://www.businessinsider.com/927-people-own-half- of-the-bitcoins-2013-12). The concentration of Litecoin ownership is similar (http://litecoin-rich-list.blogspot.com). Most of the big wallets have been in place from early on, so sitting back and watching your capital grow has been a very successful strategy. The distribution of Bitcoin holdings looks much like the distribution of wealth in North Korea and makes the China’s and even the US’ wealth distribution look like that of a workers’ paradise 2. Easy migration to more advanced e-cash services, LTC, XMR, ETH, so on See: https://coinmarketcap.com/currencies/views/all/ https://coinmarketcap.com/currencies/views/all/ 3. Bitcoin network requires ASIC miners, largely centralized in China [3]. Assuming the inveitable surpassing of a more advanced cryptosytem making Bitcoin obsolete, as the market is informed there will be a decline in BTC's spot price and once this falls below the cost of OPEX for miners, the hardware goes offline and the network will cease to function. Maximalists will attempt to offer an emergency fork, in any attempt to save their "investment", just as they have developed the lightening network to create centeralized payment hubs, so "investors" can act as liquidity providors and take fees, instead of miners. 4. Electricty usage is unsustainable, GOTO 3 [1] https://bitcoin.stackexchange.com/questions/86/is-it-possible-to-estimate-the-gini-coefficient-for-bitcoins-and-if-the-trend-is https://bitcoin.stackexchange.com/questions/86/is-it-possibl... http://www.businessinsider.com/bitcoin-inequality-2014-1 http://www.businessinsider.com/bitcoin-inequality-2014-1 [2] https://www.youtube.com/watch?v=6r04gfWfRkE https://www.youtube.com/watch?v=6r04gfWfRkE [3] https://qz.com/1055126/photos-china-has-one-of-worlds-largest-bitcoin-mines/ https://qz.com/1055126/photos-china-has-one-of-worlds-larges...
sytelus 9y ago
That's quite a balony. - Both are in fixed quantity so none is more rare than other. - Gold has practical use in industry which puts lower bound on its value. BTC has no lower bound. - Gold is exchangeable virtually in any country and any culture regardless of how technologically advanced that society is. - Thousands of years of history has proven that humans have almost natural lust for this shiny metal and it gets displayed as jewelry uses. This again further sets the lower bound for gold prices. - Gold is not only rare but is virtually rust proof and can be stowed away without any advanced tech for 100s of years. BTC will be pointless if there was a natural or human made disaster and few people had electricity. - Gold is far more unlikely to be made illegal by governments. - There are no new rare metals popping up every day like whole slew of new cryptocurrencies which might fragment and trump each other. No one knows which cryptocurrency will end up dominating 10 years down the line. - BTC has huge risk of getting stolen and hacked because someone exploiting zero day vulnerabilities in your system even if you did everything you possibly could to keep your system safe. - Governments can start their secret operations to control the crypto market behind the scene, hack in to exchanges, find vulnerabilities or do dirty trades. - Crypto exchanges are wild west without regulations which means clever deep pocketed traders would be exploiting them by techniques like frontrunning, wash trades, willybot, spoofing etc. This enables big investors to profit at the expense of small investors. Above arguments should make it clear that btc has very real upper bound that it can rationally reach and its most definitely less than gold market cap. Of course, big investors can juice up things in the short term but it would be impossible to sustain irrational highs on long term.
- varjag 9y ago
  Should just point out that gold was made illegal in multiple cultures on several occasions.
  - svachalek 9y ago
    Some may be surprised to learn this includes the U.S. from 1933-1974.
    - 9y ago
nathancahill 9y ago
Say the guys with a significant stake in BTC.
- shostack 9y ago
  So rather than just assume ulterior motives here (which I agree should be considered as a possibility whenever a big stakeholder is discussing a major investment of theirs), I wonder if there's a different question to ask. Specifically, how does the game theory play out for his comments? Does it point towards him being genuine? Or does it point to him trying to do something else?
jpm_sd 9y ago
BTC is far more likely to hit zero than to outstrip gold.
- jhall1468 9y ago
  Literally nobody knows what Bitcoin is going to do, so comments like this are not only blatantly false (you have no idea what's more likely), they serve zero purpose.
- Kiro 9y ago
  I claim the opposite. The truth is that neither of us knows so your comment is nonsense.
cohnnton 9y ago
can someone explain why bitcoin is rare? there are COUNTLESS cryptocurrencies out there. The only reason bitcoin is believed to be rare is blind belief, much like believing in santa claus.
- glitch003 9y ago
  There will only ever be 21 million BTC. I mean, it's right there in the code for Bitcoin. Yes you can fork or create new cryptocurrencies, but they don't have the mining power of BTC, and they are inherently NOT BTC. So Bitcoin is rare, cryptocurrencies are not.
tim333 9y ago
Just now Bitcoin is down 11% (to $17k) and Bitcoin Cash up 55% (to $3.4k) as people look to it as an alternative. I'm not convinced Bitcoin will last thousands of years as a major asset the way gold has.
kamaal 9y ago
>>But then Tyler Winklevoss questioned even that, pointing out the ways that he believes Bitcoin is better than gold. :) Well. This could be another Facebook level embarrassment if it turns out false.

by TheBiv 9y ago

dpflan 9y ago

Interesting. What are the economics arguments for Bitcoin replacing gold? Does the “ease of transaction” of Bitcoin provide an implicit value over gold and is that factored into the price of Bitcoin as maybe a fixed value?

KaoruAoiShiho 9y ago
Gold is just non-scalable and is bound to die eventually. If you think about it, if you're going to start a new country and a new federal reserve, how much sense does it make to ship tons of gold to Mars for example? Any store of value that makes sense for humanity in the long term has to be both digital and reflect the work/real value creation process that matters in the future. I'm not sure it's going to be bitcoin but it's definitely not gold.
- meric 9y ago
  Gold is definitely useful for building the spacecraft going to Mars though. They cover the entire spacecraft in the stuff. It might be too useful for Mars to use as reserve! https://www.itmtrading.com/blog/aerospace-gold-the-next-frontier/ https://www.itmtrading.com/blog/aerospace-gold-the-next-fron... https://www.geek.com/news/geek-answers-why-does-nasa-use-so-much-gold-foil-1568610/ https://www.geek.com/news/geek-answers-why-does-nasa-use-so-...
  - dpflan 9y ago
    :) thanks!
apeace 9y ago
> Does the “ease of transaction” of Bitcoin provide an implicit value over gold... I know this doesn't answer your question but it's still relevant. Currently Bitcoin is the most expensive, least convenient currency available. According to estimatefee.com it would take about a $25 fee in order to get your transaction through in an hour. My point is that nothing about Bitcoin will ever really be "implicit" like it is with gold. Gold exists as it exists, cryptocurrencies only have the properties that are created by the developers, and/or are run on machines by participants in the network. In Bitcoin's case, the developers and the network have not been able to handle the load of all the transactions. I used to be in the "Bitcoin is the new gold" camp. But after seeing what's happened with Bitcoin, I'm certain it's not that simple.
- umanwizard 9y ago
  It definitely takes longer than an hour to send gold to someone on the other side of the world.
- dpflan 9y ago
  Should the slowed clearing rate actually reduce the value? Increased perceived value driving the price up / speculation actually causing a drop in value due to the system underlying Bitcoin?)

felipeko 9y ago

There's a difference about Gold's rarity and Bitcoin's. Gold is rare on its kind and rare on its abundance. It may be hard to mine more gold, but it's way harder to find another gold-like commodity. Bitcoin is only rare in the abundance sense. It is hard to mine more bitcoin, but it's pretty easy to find a (arguably better) substitute for what it does. I can agree with it being better (having more utility) than gold, though. So I'd agree that the sum of all e-coins will surpass gold, but I see no reason for Bitcoin to do it alone.

WorldMaker 9y ago
Bitcoin definitely isn't rare in kind as we've already seen how relatively "easy" it is to fork. Could just fork Bitcoin infinitely as one way to deal with its supposed scarcity. Bitcoin isn't even rare in the abundance sense if you consider that how hard it is to mine new coins is merely a function of a mathematical curve that can be adjusted as a software change. Certainly any change to the mining difficulty and/or coin pool ceiling would be hugely controversial, but it's not like it's mathematically impossible merely politically improbable, for now.
- derekp7 9y ago
  The thing that is rare is the total amount of mining nodes behind bitcoin. That is what you are buying into, is mindshare. Of course the mining nodes are mostly profit driven. If another coin had a higher profit margin, the miners would switch over to that coin.
  - WorldMaker 9y ago
    That rarity too is also software controlled based on the difficulty curve. Bitcoin doesn't have to boil the oceans, it could make mining easy enough again that transactions could be mined in a coffee break on an average person's smart phone's GPU. As I said, the scarcity of Bitcoin is much more a political structure than an inherent nature of Bitcoin. The miners control Bitcoin so much as anyone does and it is their political intent as much as anything else that creates any scarcity in Bitcoin at all.

QAPereo 9y ago

To me it just sounded like talk designed to pump the price now.

epx 9y ago

Good luck trying to make a fountain pen nib with a cryptocoin :)

0wing 9y ago

If you understand the computer science behind Bitcoin, you'll realize how ridiculous the false equivalency to gold is. 1. The claim of "rare" doesn't exactly hold true. Consider the 10,000 BTC pizza - how did this happen? This was the direct result of Satoshi's economic policy, granting vast sums of BTC to mint out very quickly very early for a short duration to the very small pool of people who ran the software. Satoshi's algorithm produced BTC in plentiful quantities enabling the 10,000BTC pizza - thus it wasn't rare if you were Satoshi and the dozen other early whales hording as much as possible, until the algorithm begins cutting off the production and limiting later users from producing coins, starving the economy. Now there's a psychological game being played, where public relations and marketing must convince new users to buy in. Because the exchanges are unregulated, they can manipulate the spot price though wash trading and painting the tape [2] (where trades are falsified and you just sell the same item back and forth to your friend for a higher and higher price). The supply was created by running a piece of software. It's not magic. Most of the supply was produced very early on and as much as 30% of all Bitcoins are owned by less than 100 people. Best estimates are that there are about one million holders of Bitcoin; 47 individuals hold about 30 percent, another 900 hold a further 20 percent, the next 10,000 about 25% and another million about 20%, with 5% being lost. So 1/10th of one percent represent about half the holdings of Bitcoin and 1 percent close to 80 percent (http://www.businessinsider.com/927-people-own-half- of-the-bitcoins-2013-12). The concentration of Litecoin ownership is similar (http://litecoin-rich-list.blogspot.com). Most of the big wallets have been in place from early on, so sitting back and watching your capital grow has been a very successful strategy. The distribution of Bitcoin holdings looks much like the distribution of wealth in North Korea and makes the China’s and even the US’ wealth distribution look like that of a workers’ paradise 2. Easy migration to more advanced e-cash services, LTC, XMR, ETH, so on See: https://coinmarketcap.com/currencies/views/all/ https://coinmarketcap.com/currencies/views/all/ 3. Bitcoin network requires ASIC miners, largely centralized in China [3]. Assuming the inveitable surpassing of a more advanced cryptosytem making Bitcoin obsolete, as the market is informed there will be a decline in BTC's spot price and once this falls below the cost of OPEX for miners, the hardware goes offline and the network will cease to function. Maximalists will attempt to offer an emergency fork, in any attempt to save their "investment", just as they have developed the lightening network to create centeralized payment hubs, so "investors" can act as liquidity providors and take fees, instead of miners. 4. Electricty usage is unsustainable, GOTO 3 [1] https://bitcoin.stackexchange.com/questions/86/is-it-possible-to-estimate-the-gini-coefficient-for-bitcoins-and-if-the-trend-is https://bitcoin.stackexchange.com/questions/86/is-it-possibl... http://www.businessinsider.com/bitcoin-inequality-2014-1 http://www.businessinsider.com/bitcoin-inequality-2014-1 [2] https://www.youtube.com/watch?v=6r04gfWfRkE https://www.youtube.com/watch?v=6r04gfWfRkE [3] https://qz.com/1055126/photos-china-has-one-of-worlds-largest-bitcoin-mines/ https://qz.com/1055126/photos-china-has-one-of-worlds-larges...

sytelus 9y ago

That's quite a balony. - Both are in fixed quantity so none is more rare than other. - Gold has practical use in industry which puts lower bound on its value. BTC has no lower bound. - Gold is exchangeable virtually in any country and any culture regardless of how technologically advanced that society is. - Thousands of years of history has proven that humans have almost natural lust for this shiny metal and it gets displayed as jewelry uses. This again further sets the lower bound for gold prices. - Gold is not only rare but is virtually rust proof and can be stowed away without any advanced tech for 100s of years. BTC will be pointless if there was a natural or human made disaster and few people had electricity. - Gold is far more unlikely to be made illegal by governments. - There are no new rare metals popping up every day like whole slew of new cryptocurrencies which might fragment and trump each other. No one knows which cryptocurrency will end up dominating 10 years down the line. - BTC has huge risk of getting stolen and hacked because someone exploiting zero day vulnerabilities in your system even if you did everything you possibly could to keep your system safe. - Governments can start their secret operations to control the crypto market behind the scene, hack in to exchanges, find vulnerabilities or do dirty trades. - Crypto exchanges are wild west without regulations which means clever deep pocketed traders would be exploiting them by techniques like frontrunning, wash trades, willybot, spoofing etc. This enables big investors to profit at the expense of small investors. Above arguments should make it clear that btc has very real upper bound that it can rationally reach and its most definitely less than gold market cap. Of course, big investors can juice up things in the short term but it would be impossible to sustain irrational highs on long term.

varjag 9y ago
Should just point out that gold was made illegal in multiple cultures on several occasions.
- svachalek 9y ago
  Some may be surprised to learn this includes the U.S. from 1933-1974.
  - 9y ago

nathancahill 9y ago

Say the guys with a significant stake in BTC.

shostack 9y ago
So rather than just assume ulterior motives here (which I agree should be considered as a possibility whenever a big stakeholder is discussing a major investment of theirs), I wonder if there's a different question to ask. Specifically, how does the game theory play out for his comments? Does it point towards him being genuine? Or does it point to him trying to do something else?

jpm_sd 9y ago

BTC is far more likely to hit zero than to outstrip gold.

jhall1468 9y ago
Literally nobody knows what Bitcoin is going to do, so comments like this are not only blatantly false (you have no idea what's more likely), they serve zero purpose.
Kiro 9y ago
I claim the opposite. The truth is that neither of us knows so your comment is nonsense.

cohnnton 9y ago

can someone explain why bitcoin is rare? there are COUNTLESS cryptocurrencies out there. The only reason bitcoin is believed to be rare is blind belief, much like believing in santa claus.

glitch003 9y ago
There will only ever be 21 million BTC. I mean, it's right there in the code for Bitcoin. Yes you can fork or create new cryptocurrencies, but they don't have the mining power of BTC, and they are inherently NOT BTC. So Bitcoin is rare, cryptocurrencies are not.

tim333 9y ago

Just now Bitcoin is down 11% (to $17k) and Bitcoin Cash up 55% (to $3.4k) as people look to it as an alternative. I'm not convinced Bitcoin will last thousands of years as a major asset the way gold has.

kamaal 9y ago

>>But then Tyler Winklevoss questioned even that, pointing out the ways that he believes Bitcoin is better than gold. :) Well. This could be another Facebook level embarrassment if it turns out false.