6 ms·

Bitcoin money ≠ the Gold Standard.

84 points by spenvo 15y ago

msy 15y ago
I'd like to see some of the many bitcoin evangalists about the place convert their life savings, serious cash, into BitCoins and keep it that way. Talk is cheap, particularly when it's abstract economic theory. Then I might think it's got something in it rather that looking like a volatile ponzi scheme that geeks are keen because they think they're in early and going to make mint.
- hasenj 15y ago
  That's not a good idea. Being passionate about bitcoin doesn't imply you should convert all your money to bitcoins. In fact I would never advice anyone to invest too heavily in it: treat it like a side project, like an experiment. Maybe accept it as a form of payment for some non-essential products or services that you provide. Maybe try to make some trading with bitcoins. Try to see if you can buy a pizza maybe with bitcoins. But only on the side. Not because it's a ponzi scheme, but because it's still in its early days. > ponzi scheme that geeks are keen because they think they're in early and going to make mint. I just learned about it yesterday, but I'm excited about it because it has the potential to become a "Free" currency (free from the central control of a powerful authority).
  - msy 15y ago
    Why not? If the crypto is bulletproof and the theory is sound shouldn't it be the ultimate place to keep your money?
    - dfox 15y ago
      Because market value of BTC is not at all stable or proven as the market is quite small. It is entirely imaginable that somebody will design similar, but slightly better system (faster transactions, more efficient implementation, whatever) that will cause most bitcoins traders to move there. Essentially, system like this depends entirely on market, while nothing has "inherent value", most physical things can be still exchanged for something (and actually gain value) after market crashes, when this kind of virtual market is abadoned, you are left with completely worthless big chunk of data.
      - msy 15y ago
        So if this is an unstable, unregulated market that shouldn't be used for anything more serious than pizza at what point is that going to change? What magical thing is going effect to change? And if that thing doesn't exist, what is this apart from a more complicated way to waste electricity than Seti@Home?
        hasenj 15y ago
        The assumption/hope is that it will stabilize as it grows, but this will take time. It's not gonna be a magical thing/moment.
    - Tichy 15y ago
      It only has value if people accept it as payment. Cryptography is only part of it.
vrsmn 15y ago
the comments that guy made against bitcoin just smells like good and old FUD. Linden dollars didn't tried to replace US Dollars.
Steko 15y ago
The link ignores most of the arguments made in what it purports to reply to: No response to the Great Depression argument. No response to the governments will declare it illegal argument. No response to the offline argument. No response to the potential hackability of bitcoins. Other then that it's a slam dunk.
sharpneli 15y ago
This current debacle shows that economists and hackers look at bitcoin from completely different perspectives. The rant was based mostly on issues of economy disregarding the technical side completely. This response to the rant however disregards the economical side of the rant almost entirely. It's sad to see two groups of smart individuals talk completely past each other.
- hasenj 15y ago
  I wouldn't put "economists" on the same intelligence level with "hackers". Most economists -- I wouldn't trust. In a similar way that I wouldn't trust most politicians.
- crocowhile 15y ago
  I don't think the guy who ranted about bitcoin using the gold standard is an economist because from reading what he writes it's clear he had no clue of what he was talking about.
hasenj 15y ago
I don't like how people get defensive around capitalism; "our ideas are not at odds with capitalism", ok, so what if they were? If an idea is at odds with capitalism, that doesn't necessarily make it a bad idea. For instance, I think the idea of free software (RMS style) really is at odds with capitalism; but so what? This is not a good reason to agree or disagree with the idea.
- olalonde 15y ago
  Free software isn't at odds with capitalism. In fact, right of property is what makes free software possible (otherwise you couldn't enforce any free software license).
  - hasenj 15y ago
    GPL is a hack; its existence is not an approval of the system in any way, shape or form. That's not the point though. Whether Free Software is at odds (or not) with capitalism shouldn't matter at all in any intelligent discussion.
    - olalonde 15y ago
      You're right in the sense that the free software movement as advocated by Richard Stallman is at odds with capitalism. I really meant "Open source software isn't at odds with capitalism". But I don't think we should exclude the capitalism debate from an intelligent discussion since it has pretty huge implications. If you're advocating a system that is incompatible with capitalism, you have to first make the case for an alternative to capitalism.
      - hasenj 15y ago
        It's not as if we live in a purely capitalistic system. In a pure capitalism, there would be no taxes. Yet here we are living in a system where the government takes money from you, specially if you're really rich. It's not as though any idea that's at odds with capitalism will require "an alternative system". There's not gonna be any change to the system that requires a new theory of economics. Suppose bitcoins are at odds with capitalism because they're just like gold (yes I know this is ridiculous, but just for argument's sake). What now? Should bitcoiners make a case for an "alternative to capitalism"? No. You will still be able to buy and sell and own property and trade and own factories and rent an office space and build a company and hire employees.
chipsy 15y ago
All economies are built on some combination of trust, fakery, coercion and hard work. The underlying rationale of a currency backed by "real material" is that it can be trusted to last. It can be trusted more than any government. Governments can fall quickly. Bitcoin hasn't proven itself to the degree of gold. It doesn't necessarily have to, though. It just has to look _better_ than alternatives, within some useful timeframe of economic activity(i.e. more than a year or two, but probably less than a century). And, as the original author wrote, it might fall apart suddenly, but then it is basically the same risk as a government-backed currency.
- barrkel 15y ago
  Gold isn't "real material" any more than paper. It's only has its value because of supply and demand, just like fiat money. If someone finds a huge lump of gold underneath the ground, or in some other possibly accessible location, gold's value will dramatically drop. If a new industrial use for gold is found, its value might dramatically rise (assuming the industrial use returns higher value than current prices). I think the chances of a flaw being found in the Bitcoin cipher system are a lot higher than e.g. a sudden disintegration of trust in the US dollar.
  - dpatru 15y ago
    > Gold isn't "real material" any more than paper. It's only has its value because of supply and demand, just like fiat money. If this is so, then why have plundering governments consistently sought to replace gold with paper?
    - barrkel 15y ago
      Why have plundering governments plundered? The answer to your question is an implicit assumption of your question. As to governments replacing gold with paper, that seems to be correlated with economic growth and modernity than anything else. A mercantile approach to gold would be something like that followed by the Spanish with their South American possessions, mining for gold, etc. It didn't serve them very well because they didn't understand that it's not some magical property of the gold that holds value.
olalonde 15y ago
I'm oversimplifying here, but it all boils down to Keynesian economics[1] (steaming rant) vs Austrian economics[2] (this submission) if anyone wants to dig deeper in the subject. tl;dr: http://www.youtube.com/watch?v=GTQnarzmTOc http://www.youtube.com/watch?v=GTQnarzmTOc [1] http://en.wikipedia.org/wiki/Keynesian_economics http://en.wikipedia.org/wiki/Keynesian_economics [2] http://en.wikipedia.org/wiki/Austrian_school http://en.wikipedia.org/wiki/Austrian_school
contactdick 15y ago
Just on a brief look at BitCoin the question I have is generating blocks of bitcoins which requires computational power earns 50 bitcoins. Firstly that seems fairly arbitrary but secondly, what would happen if the currency became commonly used and a large company with a lot of computational power decided to get involved i.e google / facebook / microsoft. Wouldn't they end up monopolising a large portion of the bitcoins?
- corin_ 15y ago
  A good description of why that won't happen comes from a comment made on HN a week ago by Construct. "Meanwhile, hardware enthusiasts all over the internet are rushing to buy GPUs to dedicate to mining. They don't seem to realize that the bitcoin system automatically adjusts to keep the bitcoin generation rate constant at 50 BTC per 10 minutes. As the mining market becomes flooded with new 'miners' the difficulty will climb rapidly, until it becomes unprofitable to run a GPU if you have to pay for electricity." http://news.ycombinator.com/item?id=2501154 http://news.ycombinator.com/item?id=2501154
  - contactdick 15y ago
    Sounds like it's already happening - to quote construct "Some quick research shows a handful of big players in the mining market who have invested heavily in high-end GPUs for dedicated bitcoin mining, some with over 50 GPUs running 24/7 for months now. These guys are bound to have huge quantities of bitcoin they are eager to unload when the price is right. Meanwhile, news coverage is driving exploding popularity, which appears to be pulling the exchange rate sky high. On paper, many of these guys have become overnight millionaires just by running a bunch of computers 24/7."
    - corin_ 15y ago
      I believe the idea is that mining was a solution for launching BitCoin, and that as BitCoin has become more popular, the value of mining has gone down, meaning that at some point (I don't know if it's already happened or not), mining won't be worth the returns.
gritzko 15y ago
Technically, BitCoin is hardly scalable. As every participant needs to be aware of every transaction, that gives O(N^2) computational/storage cost, assuming N is participants and transactions~participants. May be cured by a dedicated central server storing all the transactions, but then it is not P2P anymore.
- tlrobinson 15y ago
  I was wondering about this after reading a little about how BitCoin worked. It sounded like every client needed to know about every transaction ever, which clearly can't scale to a mainstream currency. Perhaps there's a way to partition/shard the historical data?
  - dfox 15y ago
    there really is way to "shard" historical data. But mainly, it is expected, that most users will not use whole transaction history, but trust majority opinion of network without actually verifying it or even use services of established network nodes without actively participating in network. This can be seen even now, when there are disjoint sets of nodes that actually perform "useful" transactions (users) and nodes that timestamp them (miners).
- spenvo 15y ago
  This is a good point and is one of a large number of challenges BTC faces. Right now, a small transaction fee ensures that your transaction will be processed quickly. This distributes the cost of validating the transaction. Eventually, we may see the transaction fee structure become less of an option and more of a necessity. BitcoinJ (the Google 20% time project) uses a very compressed and less comprehensive block chain to make transactions but is not intended to be used to generate coins. In other words, the problem is being mitigated. The level of innovation in the BTC community is jaw dropping.
- njs12345 15y ago
  I don't think that's true. Clients just need the latest block (and a few blocks after) to verify that a transaction has gone through, only nodes (which are meant to be quite computationally powerful) need the whole block chain.
sgornick 15y ago
Incidentally, Bitcoin will be discussed on Tuesday's This Week in Startups @TWiStartups http://thisweekin.com/thisweekin-startups/ http://thisweekin.com/thisweekin-startups/ "Oh yes, we'll talk about poker and #bitcoin on Tuesday's #TWIST. Guest Amir Taaki has experience w/this business model." http://twitter.com/#!/TWistartups/status/66565296550457344 http://twitter.com/#!/TWistartups/status/66565296550457344 I'm assuming the host will be @Jason Calicanis.
Myrth 15y ago
If someone still didn't get it - the whole original post was a hilariously executed troll. The author very clearly states this: "See, a bitcoin rant is almost too over-the-top for me. Asking why I think bitcoin won't work is like asking why the sky isn't red. I mean, wait, you think it is red? You actually took that seriously? Oh boy. Where do I even start?" "For the record, I'm stupid and trolling. That's why it was hard to tell."
- swombat 15y ago
  You need to get that sarcasm detector fixed.
- JunkDNA 15y ago
  I don't think that's true at all. The original post was a cogent, if brief, explanation that about currency and the challenges for bitcoin. The last quote is most certainly meant to be sarcastic. He most certainly is trying to tweak people who are all worked up into a lather about bitcoin as a serious replacement for currencies. Just because he's provocative, doesn't make him a troll. It appears a lot of HN readers like you took his comment too literally and killed the post. It's a shame because he makes some good points worthy of discussion. I'm not certain I agree with all of them, but there's certainly plenty of substance there. In contrast, this "rebuttal" adds little.
nateberkopec 15y ago
A gold standard is a tool used by a central banking authority to promote stable prices. A bitcoin is actually designed not to be controlled by a central monetary authority. So, of COURSE Bitcoins aren't the new gold standard. That's like comparing apples to giraffes.
- dpatru 15y ago
  The aim of both the gold standard and bitcoin are to limit the power of governments and banks to defraud their citizens by forcing them to use fiat money. > gold standard is a tool used by a central banking authority to promote stable prices. This is the wrong way to look at it. The reason for central banks is to allow banks/governments to devalue/print money, i.e., to deviate from a gold standard.
pradocchia 15y ago
I haven't seen this mentioned yet, so I'll mention it here: The production curve for bitcoin, that starts steep and eventually levels off when total supply reaches 21M, is not at all like gold: http://www.goldsheetlinks.com/production2.htm http://www.goldsheetlinks.com/production2.htm At times gold production has exceeded population growth, at times it has lagged behind, but it certainly has not leveled off. Also recall that Friedman called for a fixed 3% growth in the money supply, year on year, commensurate w/ long term rates of economic growth. So why would Bitcoin use a curve that starts steep and levels off? I have heard two claims from Gavin: 1) it represents the pattern of natural resource extraction (easy it first, progressively harder until the marginal cost exceeds the margin gain), and 2) it encourages early adopters. Now, I might wish it weren't so, but we're really good at natural resource extraction, and we get better over time, until demand falls. Plus, the general thinking goes, money supply should ideally grow at a constant rate, in line w/ long term economic averages. Maybe the extended long term view would restate that as a constant rate, relative to population growth. I don't know. The system has to reach equilibrium eventually, but we're not there yet, and for now the closest approximation is a constant percent, year-on-year. So I'm afraid that reason (1), and Bitcoin resembling something fundamental in nature and the economy, is just not true. At best, Bitcoin is an entirely new kind of monetary system, with properties that don't resemble the gold standard or fiat currency, but will be beneficial in some fashion down the road. And at worst, it's just a Ponzi scheme. I haven't seen (1) addressed substantively, so for now I'm tending towards bitcoin-as-ponzi-scheme.
- weavejester 15y ago
  How exactly bitcoin resemble a Ponzi scheme? It kinda sounds like you mean pyramid scheme, rather than Ponzi scheme. (Not that bitcoin is a pyramid scheme either...)
  - pradocchia 15y ago
    In that Bitcoin presents itself as a viable alternative currency, and encourages adoption by people looking for a safe haven from fiat currency. Eventually, though, it could become clear that certain factors, possibly the production function, preclude it from long term viability. The value drops, holding are wiped out, but not before the earliest adopters have already secured their gains.

84 points by spenvo 15y ago

msy 15y ago

I'd like to see some of the many bitcoin evangalists about the place convert their life savings, serious cash, into BitCoins and keep it that way. Talk is cheap, particularly when it's abstract economic theory. Then I might think it's got something in it rather that looking like a volatile ponzi scheme that geeks are keen because they think they're in early and going to make mint.

hasenj 15y ago
That's not a good idea. Being passionate about bitcoin doesn't imply you should convert all your money to bitcoins. In fact I would never advice anyone to invest too heavily in it: treat it like a side project, like an experiment. Maybe accept it as a form of payment for some non-essential products or services that you provide. Maybe try to make some trading with bitcoins. Try to see if you can buy a pizza maybe with bitcoins. But only on the side. Not because it's a ponzi scheme, but because it's still in its early days. > ponzi scheme that geeks are keen because they think they're in early and going to make mint. I just learned about it yesterday, but I'm excited about it because it has the potential to become a "Free" currency (free from the central control of a powerful authority).
- msy 15y ago
  Why not? If the crypto is bulletproof and the theory is sound shouldn't it be the ultimate place to keep your money?
  - dfox 15y ago
    Because market value of BTC is not at all stable or proven as the market is quite small. It is entirely imaginable that somebody will design similar, but slightly better system (faster transactions, more efficient implementation, whatever) that will cause most bitcoins traders to move there. Essentially, system like this depends entirely on market, while nothing has "inherent value", most physical things can be still exchanged for something (and actually gain value) after market crashes, when this kind of virtual market is abadoned, you are left with completely worthless big chunk of data.
    - msy 15y ago
      So if this is an unstable, unregulated market that shouldn't be used for anything more serious than pizza at what point is that going to change? What magical thing is going effect to change? And if that thing doesn't exist, what is this apart from a more complicated way to waste electricity than Seti@Home?
      - hasenj 15y ago
        The assumption/hope is that it will stabilize as it grows, but this will take time. It's not gonna be a magical thing/moment.
  - Tichy 15y ago
    It only has value if people accept it as payment. Cryptography is only part of it.

vrsmn 15y ago

the comments that guy made against bitcoin just smells like good and old FUD. Linden dollars didn't tried to replace US Dollars.

Steko 15y ago

The link ignores most of the arguments made in what it purports to reply to: No response to the Great Depression argument. No response to the governments will declare it illegal argument. No response to the offline argument. No response to the potential hackability of bitcoins. Other then that it's a slam dunk.

sharpneli 15y ago

This current debacle shows that economists and hackers look at bitcoin from completely different perspectives. The rant was based mostly on issues of economy disregarding the technical side completely. This response to the rant however disregards the economical side of the rant almost entirely. It's sad to see two groups of smart individuals talk completely past each other.

hasenj 15y ago
I wouldn't put "economists" on the same intelligence level with "hackers". Most economists -- I wouldn't trust. In a similar way that I wouldn't trust most politicians.
crocowhile 15y ago
I don't think the guy who ranted about bitcoin using the gold standard is an economist because from reading what he writes it's clear he had no clue of what he was talking about.

hasenj 15y ago

I don't like how people get defensive around capitalism; "our ideas are not at odds with capitalism", ok, so what if they were? If an idea is at odds with capitalism, that doesn't necessarily make it a bad idea. For instance, I think the idea of free software (RMS style) really is at odds with capitalism; but so what? This is not a good reason to agree or disagree with the idea.

olalonde 15y ago
Free software isn't at odds with capitalism. In fact, right of property is what makes free software possible (otherwise you couldn't enforce any free software license).
- hasenj 15y ago
  GPL is a hack; its existence is not an approval of the system in any way, shape or form. That's not the point though. Whether Free Software is at odds (or not) with capitalism shouldn't matter at all in any intelligent discussion.
  - olalonde 15y ago
    You're right in the sense that the free software movement as advocated by Richard Stallman is at odds with capitalism. I really meant "Open source software isn't at odds with capitalism". But I don't think we should exclude the capitalism debate from an intelligent discussion since it has pretty huge implications. If you're advocating a system that is incompatible with capitalism, you have to first make the case for an alternative to capitalism.
    - hasenj 15y ago
      It's not as if we live in a purely capitalistic system. In a pure capitalism, there would be no taxes. Yet here we are living in a system where the government takes money from you, specially if you're really rich. It's not as though any idea that's at odds with capitalism will require "an alternative system". There's not gonna be any change to the system that requires a new theory of economics. Suppose bitcoins are at odds with capitalism because they're just like gold (yes I know this is ridiculous, but just for argument's sake). What now? Should bitcoiners make a case for an "alternative to capitalism"? No. You will still be able to buy and sell and own property and trade and own factories and rent an office space and build a company and hire employees.

chipsy 15y ago

All economies are built on some combination of trust, fakery, coercion and hard work. The underlying rationale of a currency backed by "real material" is that it can be trusted to last. It can be trusted more than any government. Governments can fall quickly. Bitcoin hasn't proven itself to the degree of gold. It doesn't necessarily have to, though. It just has to look _better_ than alternatives, within some useful timeframe of economic activity(i.e. more than a year or two, but probably less than a century). And, as the original author wrote, it might fall apart suddenly, but then it is basically the same risk as a government-backed currency.

barrkel 15y ago
Gold isn't "real material" any more than paper. It's only has its value because of supply and demand, just like fiat money. If someone finds a huge lump of gold underneath the ground, or in some other possibly accessible location, gold's value will dramatically drop. If a new industrial use for gold is found, its value might dramatically rise (assuming the industrial use returns higher value than current prices). I think the chances of a flaw being found in the Bitcoin cipher system are a lot higher than e.g. a sudden disintegration of trust in the US dollar.
- dpatru 15y ago
  > Gold isn't "real material" any more than paper. It's only has its value because of supply and demand, just like fiat money. If this is so, then why have plundering governments consistently sought to replace gold with paper?
  - barrkel 15y ago
    Why have plundering governments plundered? The answer to your question is an implicit assumption of your question. As to governments replacing gold with paper, that seems to be correlated with economic growth and modernity than anything else. A mercantile approach to gold would be something like that followed by the Spanish with their South American possessions, mining for gold, etc. It didn't serve them very well because they didn't understand that it's not some magical property of the gold that holds value.

olalonde 15y ago

I'm oversimplifying here, but it all boils down to Keynesian economics[1] (steaming rant) vs Austrian economics[2] (this submission) if anyone wants to dig deeper in the subject. tl;dr: http://www.youtube.com/watch?v=GTQnarzmTOc http://www.youtube.com/watch?v=GTQnarzmTOc [1] http://en.wikipedia.org/wiki/Keynesian_economics http://en.wikipedia.org/wiki/Keynesian_economics [2] http://en.wikipedia.org/wiki/Austrian_school http://en.wikipedia.org/wiki/Austrian_school

contactdick 15y ago

Just on a brief look at BitCoin the question I have is generating blocks of bitcoins which requires computational power earns 50 bitcoins. Firstly that seems fairly arbitrary but secondly, what would happen if the currency became commonly used and a large company with a lot of computational power decided to get involved i.e google / facebook / microsoft. Wouldn't they end up monopolising a large portion of the bitcoins?

corin_ 15y ago
A good description of why that won't happen comes from a comment made on HN a week ago by Construct. "Meanwhile, hardware enthusiasts all over the internet are rushing to buy GPUs to dedicate to mining. They don't seem to realize that the bitcoin system automatically adjusts to keep the bitcoin generation rate constant at 50 BTC per 10 minutes. As the mining market becomes flooded with new 'miners' the difficulty will climb rapidly, until it becomes unprofitable to run a GPU if you have to pay for electricity." http://news.ycombinator.com/item?id=2501154 http://news.ycombinator.com/item?id=2501154
- contactdick 15y ago
  Sounds like it's already happening - to quote construct "Some quick research shows a handful of big players in the mining market who have invested heavily in high-end GPUs for dedicated bitcoin mining, some with over 50 GPUs running 24/7 for months now. These guys are bound to have huge quantities of bitcoin they are eager to unload when the price is right. Meanwhile, news coverage is driving exploding popularity, which appears to be pulling the exchange rate sky high. On paper, many of these guys have become overnight millionaires just by running a bunch of computers 24/7."
  - corin_ 15y ago
    I believe the idea is that mining was a solution for launching BitCoin, and that as BitCoin has become more popular, the value of mining has gone down, meaning that at some point (I don't know if it's already happened or not), mining won't be worth the returns.

gritzko 15y ago

Technically, BitCoin is hardly scalable. As every participant needs to be aware of every transaction, that gives O(N^2) computational/storage cost, assuming N is participants and transactions~participants. May be cured by a dedicated central server storing all the transactions, but then it is not P2P anymore.

tlrobinson 15y ago
I was wondering about this after reading a little about how BitCoin worked. It sounded like every client needed to know about every transaction ever, which clearly can't scale to a mainstream currency. Perhaps there's a way to partition/shard the historical data?
- dfox 15y ago
  there really is way to "shard" historical data. But mainly, it is expected, that most users will not use whole transaction history, but trust majority opinion of network without actually verifying it or even use services of established network nodes without actively participating in network. This can be seen even now, when there are disjoint sets of nodes that actually perform "useful" transactions (users) and nodes that timestamp them (miners).
spenvo 15y ago
This is a good point and is one of a large number of challenges BTC faces. Right now, a small transaction fee ensures that your transaction will be processed quickly. This distributes the cost of validating the transaction. Eventually, we may see the transaction fee structure become less of an option and more of a necessity. BitcoinJ (the Google 20% time project) uses a very compressed and less comprehensive block chain to make transactions but is not intended to be used to generate coins. In other words, the problem is being mitigated. The level of innovation in the BTC community is jaw dropping.
njs12345 15y ago
I don't think that's true. Clients just need the latest block (and a few blocks after) to verify that a transaction has gone through, only nodes (which are meant to be quite computationally powerful) need the whole block chain.

sgornick 15y ago

Incidentally, Bitcoin will be discussed on Tuesday's This Week in Startups @TWiStartups http://thisweekin.com/thisweekin-startups/ http://thisweekin.com/thisweekin-startups/ "Oh yes, we'll talk about poker and #bitcoin on Tuesday's #TWIST. Guest Amir Taaki has experience w/this business model." http://twitter.com/#!/TWistartups/status/66565296550457344 http://twitter.com/#!/TWistartups/status/66565296550457344 I'm assuming the host will be @Jason Calicanis.

Myrth 15y ago

If someone still didn't get it - the whole original post was a hilariously executed troll. The author very clearly states this: "See, a bitcoin rant is almost too over-the-top for me. Asking why I think bitcoin won't work is like asking why the sky isn't red. I mean, wait, you think it is red? You actually took that seriously? Oh boy. Where do I even start?" "For the record, I'm stupid and trolling. That's why it was hard to tell."

swombat 15y ago
You need to get that sarcasm detector fixed.
JunkDNA 15y ago
I don't think that's true at all. The original post was a cogent, if brief, explanation that about currency and the challenges for bitcoin. The last quote is most certainly meant to be sarcastic. He most certainly is trying to tweak people who are all worked up into a lather about bitcoin as a serious replacement for currencies. Just because he's provocative, doesn't make him a troll. It appears a lot of HN readers like you took his comment too literally and killed the post. It's a shame because he makes some good points worthy of discussion. I'm not certain I agree with all of them, but there's certainly plenty of substance there. In contrast, this "rebuttal" adds little.

nateberkopec 15y ago

A gold standard is a tool used by a central banking authority to promote stable prices. A bitcoin is actually designed not to be controlled by a central monetary authority. So, of COURSE Bitcoins aren't the new gold standard. That's like comparing apples to giraffes.

dpatru 15y ago
The aim of both the gold standard and bitcoin are to limit the power of governments and banks to defraud their citizens by forcing them to use fiat money. > gold standard is a tool used by a central banking authority to promote stable prices. This is the wrong way to look at it. The reason for central banks is to allow banks/governments to devalue/print money, i.e., to deviate from a gold standard.

pradocchia 15y ago

I haven't seen this mentioned yet, so I'll mention it here: The production curve for bitcoin, that starts steep and eventually levels off when total supply reaches 21M, is not at all like gold: http://www.goldsheetlinks.com/production2.htm http://www.goldsheetlinks.com/production2.htm At times gold production has exceeded population growth, at times it has lagged behind, but it certainly has not leveled off. Also recall that Friedman called for a fixed 3% growth in the money supply, year on year, commensurate w/ long term rates of economic growth. So why would Bitcoin use a curve that starts steep and levels off? I have heard two claims from Gavin: 1) it represents the pattern of natural resource extraction (easy it first, progressively harder until the marginal cost exceeds the margin gain), and 2) it encourages early adopters. Now, I might wish it weren't so, but we're really good at natural resource extraction, and we get better over time, until demand falls. Plus, the general thinking goes, money supply should ideally grow at a constant rate, in line w/ long term economic averages. Maybe the extended long term view would restate that as a constant rate, relative to population growth. I don't know. The system has to reach equilibrium eventually, but we're not there yet, and for now the closest approximation is a constant percent, year-on-year. So I'm afraid that reason (1), and Bitcoin resembling something fundamental in nature and the economy, is just not true. At best, Bitcoin is an entirely new kind of monetary system, with properties that don't resemble the gold standard or fiat currency, but will be beneficial in some fashion down the road. And at worst, it's just a Ponzi scheme. I haven't seen (1) addressed substantively, so for now I'm tending towards bitcoin-as-ponzi-scheme.

weavejester 15y ago
How exactly bitcoin resemble a Ponzi scheme? It kinda sounds like you mean pyramid scheme, rather than Ponzi scheme. (Not that bitcoin is a pyramid scheme either...)
- pradocchia 15y ago
  In that Bitcoin presents itself as a viable alternative currency, and encourages adoption by people looking for a safe haven from fiat currency. Eventually, though, it could become clear that certain factors, possibly the production function, preclude it from long term viability. The value drops, holding are wiped out, but not before the earliest adopters have already secured their gains.