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I never said the energy is lost. I'm saying I, the owner, cannot extract it back out. This is also true for gold-backed currency, but USD, among others, hasn't

I never said the energy is lost. I'm saying I, the owner, cannot extract it back out. This is also true for gold-backed currency, but USD, among others, hasn't been backed by gold for some time now. My understanding is that a currency needs to be backed by something intrinsically (seen as) valuable as it goes through the bootstrapping process. Once it is generally accepted, it can stand on its own (at least for a while). No matter how big Bitcoin is, it can never get off of its "gold standard" -- i.e. the computing power required to mine it. On its own, this would be fine, but the parallels break down very quickly when we are talking about new *coins coming out at a MUCH higher velocity than traditional currencies.

starbugs 8y ago
Well, I think the comparison to gold holds to a high degree. Let's take alts out of the equation for now. Bitcoin requires energy to be mined and transferred. Same is true for gold. I'd say Bitcoin's and gold's intrinsic value hence is energy. The parallels only break down at the point where you could get more gold after you've mined all of it on earth (e.g. by mining an asteroid) while for Bitcoin there's a hard limit which cannot be exceeded by design. Maybe I misunderstand your issue about getting the energy back out. For me it's quite clear that you can get it out, simply by exchanging it for something else that provides you with that energy. Fiat currencies tend to devalue to a point where there's literally nothing left of the energy that it originally represented. E.g. the USD devalued by more than 96% since 1913. In my point of view, this really is the currency which you can't extract the energy back out of — with a government guarantee.
- epicide 8y ago
  When I say "getting the energy back out", I do not mean exchanging it for something equivalent. I mean actually doing something with Bitcoin other than exchanging it for something else. It is intentionally a silly proposition. I think Ethereum is a step in the right direction compared to Bitcoin since it is backed by usable computation, but it is still overpriced.
- nosuchthing 8y ago
  Gold to Bitcoin analogies are false marketing. BTC inflation is currently higher than USD Historically, Bitcoin started off as a hyperinflationary mint in order to produce the supply rapidly before the general public would be able to access the production methods. Aprox 4.11% of Bitcoin users (addresses) control 96.53% of all bitcoins in circulation. Also there's a chance that something will make Bitcoin obsolete in the near future - immediately destroying the trade value of Bitcoin, either a new cryptocurrency, a quantum computer or cryptographic breakthrough that would allow theft of BTC private keys or more predictably a bug like what recently happened in the main Bitcoin core wallet client software which allowed a user to inflate the supply of Bitcoins past 21 million and mint more BTC for free. Here’s an explanation on how the Bitcoin market differs vastly from Gold speculation markets: https://www.youtube.com/watch?v=6r04gfWfRkE https://www.youtube.com/watch?v=6r04gfWfRkE
  - starbugs 8y ago
    I am familiar with the arguments of Jim Rickards, Peter Schiff and other goldbugs regarding cryptos. They are generally saying that crypto is doomed and should be abandoned. They continuously brought up fraud and money laundering until they recently realized that blockchains make it easier to track down transactions — not harder. While I respect these people for their great expertise on the general economy, I don't agree with their take on crypto. They obviously misunderstand its nature and, to be frank, during the crypto boom they sometimes appeared to be a bit threatened by the rise of crypto (one of their core businesses is — you guessed it — gold). With regard to your other points: * Yes, you can create new altcoins out of thin air, but do you really think that will be possible forever? There are strong network effects at play and — as with any other market — there will be winners and losers. So far Bitcoin has oscillated around the 50% dominance mark. I don't see that changing in the near future. Saying that you can indefinitely create new alts is like saying that you can create unlimited Amazon clones. While technically true, this does not work in reality. * Yes, inflation is built into Bitcoin, but in contrast to fiat it will not go on forever. Eventually it's a deflationary currency. * According to the NYT the richest 1% in the US hold more wealth than the "bottom" 90%. This pattern seems to have nothing to do with Bitcoin, although I'd personally wish it would look different. * Yes, there might be fraud and maybe there are also severe bugs. But up to now, Bitcoin has survived all tests in the field and appears to be pretty stable. Probably more stable than most other pieces of software I have ever seen.

starbugs 8y ago

Well, I think the comparison to gold holds to a high degree. Let's take alts out of the equation for now. Bitcoin requires energy to be mined and transferred. Same is true for gold. I'd say Bitcoin's and gold's intrinsic value hence is energy. The parallels only break down at the point where you could get more gold after you've mined all of it on earth (e.g. by mining an asteroid) while for Bitcoin there's a hard limit which cannot be exceeded by design. Maybe I misunderstand your issue about getting the energy back out. For me it's quite clear that you can get it out, simply by exchanging it for something else that provides you with that energy. Fiat currencies tend to devalue to a point where there's literally nothing left of the energy that it originally represented. E.g. the USD devalued by more than 96% since 1913. In my point of view, this really is the currency which you can't extract the energy back out of — with a government guarantee.

epicide 8y ago
When I say "getting the energy back out", I do not mean exchanging it for something equivalent. I mean actually doing something with Bitcoin other than exchanging it for something else. It is intentionally a silly proposition. I think Ethereum is a step in the right direction compared to Bitcoin since it is backed by usable computation, but it is still overpriced.
nosuchthing 8y ago
Gold to Bitcoin analogies are false marketing. BTC inflation is currently higher than USD Historically, Bitcoin started off as a hyperinflationary mint in order to produce the supply rapidly before the general public would be able to access the production methods. Aprox 4.11% of Bitcoin users (addresses) control 96.53% of all bitcoins in circulation. Also there's a chance that something will make Bitcoin obsolete in the near future - immediately destroying the trade value of Bitcoin, either a new cryptocurrency, a quantum computer or cryptographic breakthrough that would allow theft of BTC private keys or more predictably a bug like what recently happened in the main Bitcoin core wallet client software which allowed a user to inflate the supply of Bitcoins past 21 million and mint more BTC for free. Here’s an explanation on how the Bitcoin market differs vastly from Gold speculation markets: https://www.youtube.com/watch?v=6r04gfWfRkE https://www.youtube.com/watch?v=6r04gfWfRkE
- starbugs 8y ago
  I am familiar with the arguments of Jim Rickards, Peter Schiff and other goldbugs regarding cryptos. They are generally saying that crypto is doomed and should be abandoned. They continuously brought up fraud and money laundering until they recently realized that blockchains make it easier to track down transactions — not harder. While I respect these people for their great expertise on the general economy, I don't agree with their take on crypto. They obviously misunderstand its nature and, to be frank, during the crypto boom they sometimes appeared to be a bit threatened by the rise of crypto (one of their core businesses is — you guessed it — gold). With regard to your other points: * Yes, you can create new altcoins out of thin air, but do you really think that will be possible forever? There are strong network effects at play and — as with any other market — there will be winners and losers. So far Bitcoin has oscillated around the 50% dominance mark. I don't see that changing in the near future. Saying that you can indefinitely create new alts is like saying that you can create unlimited Amazon clones. While technically true, this does not work in reality. * Yes, inflation is built into Bitcoin, but in contrast to fiat it will not go on forever. Eventually it's a deflationary currency. * According to the NYT the richest 1% in the US hold more wealth than the "bottom" 90%. This pattern seems to have nothing to do with Bitcoin, although I'd personally wish it would look different. * Yes, there might be fraud and maybe there are also severe bugs. But up to now, Bitcoin has survived all tests in the field and appears to be pretty stable. Probably more stable than most other pieces of software I have ever seen.