6 ms·

Any system of checks and balances will have its price. Look at what we do with gold: we dig it from a hole in Africa, we transport it in other countries, we dug

by vladd 15y ago

Any system of checks and balances will have its price. Look at what we do with gold: we dig it from a hole in Africa, we transport it in other countries, we dug holes or build vaults and throw it there. Like Warren Buffett said, it has no utility, if Martians were to look at the process they would scratch their heads. Except for the guarantee of uniqueness. Which is one of the most powerful invariants against corruption and government-sponsored inflation, goals which are worth these effort.

gus_massa 15y ago
Gold also is usefull in the industry and electronics: http://en.wikipedia.org/wiki/Gold#Industry http://en.wikipedia.org/wiki/Gold#Industry http://www.gold.org/technology/uses/ http://www.gold.org/technology/uses/
- joelthelion 15y ago
  Gold's market value is far above what it would be if it wasn't used as a value store.
  - duskwuff 15y ago
    Which ends up being harmful to industries which could make good use of gold... if it just weren't so bloody expensive.
    - joelthelion 15y ago
      In the same way the car industry harms the industries that could use all that oil we burn in our cars... Using gold as a store of value is useful, otherwise we wouldn't do it.
masklinn 15y ago
> Except for the guarantee of uniqueness. There are a few more actually: gold is one of the least putrescible materials out there (it's one of the least reactive elements available and as one of the royal metals very few acids can attack it), it has a distinctive look, and it has a very high density (most denser metals were only discovered in or after the 19th century, and are generally more valuable) which makes it easy to differentiate pure and impure golds (such as fake coinage). It also used to strike a good balance between rarity (which ensures the market won't be flooded) and availability (which actually made it usable as money). Of course, most of this broke down as new, very productive, mines were found (e.g. in South America) and mining techniques improved. And nowadays we have the opposite issue: gold mining output declines, and is unable to follow the value growth of the world itself. This is one of the reasons why most countries moved first to fractional gold standards and then to convertible currency.
- pbreit 15y ago
  The idea that gold has no real value is bizarre.
  - scott_s 15y ago
    They pointed out on the Planet Money podcast that gold may be in a 4,000 year-old bubble.
    - sethg 15y ago
      “This University has invested profitably in real estate for the last thousand years!” “Yes, but the last thousand years may have been atypical.”
  - masklinn 15y ago
    "real value" is not very clear a concept. Gold does not have much intrinsic value (not actually correct anymore, in our modern world gold is used quite a bit in industrial contexts): apart from being shiny, before the 19th century there wasn't much it could be used for. The vast majority of its value was extrinsic and pretty much arbitrary, in its use as part of monetary exchange systems. The same can be said of diamond, by the way.
    - ghshephard 15y ago
      The major difference, of course, is that diamonds are not rare, can be industrially counterfeited, and are easily damaged. Diamonds, in some way, are the "anti-gold." There is a great game-theoretic reason for why something as completely worthless as diamonds make great engagement rings though: They are something expensive to the male (so he can't repeat the process of proposing very often) - but worthless to the female (so she can't be accused of being a gold digger) - and at the same time sparkly and easy to show off.
      - masklinn 15y ago
        > The major difference, of course, is that diamonds are not rare, can be industrially counterfeited, and are easily damaged. Gold is not rare either. Please re-read my comment, it's about intrinsic and extrinsic value, especially across history. Before modern industrial usages, diamond was all but useless (even worse than gold, if anything) and all of its valuation was extrinsic. And much like gold's, diamond's intrinsic value has risen in modern times with industrial uses. > Diamonds, in some way, are the "anti-gold." Most definitely not. If you want anti-gold, you should look at water instead.
m__ 15y ago
Exactly. It is a feature of money if it is costly to produce. The alternative is inflation (and economic instability) as soon as people start generating income by producing money for basically nothing.
api 15y ago
Bitcoin is not quantum-hard. When quantum computing reaches a certain threshold, bitcoin will lose its uniqueness and collapse. There are post-quantum algorithms that are computable on ordinary computers, but they're still under research and they'd make Bitcoin's data set considerably larger.
- DennisP 15y ago
  Bruce Schneier has written that quantum computers only halve the effective number of bits for symmetric encryption algorithms, which seem more closely analogous to hashing than factoring. That would be a giant leap in mining capability, but perhaps not so much as to cause collapse. Switching to 512-bit hashes would bring us back to where we are now.
- bdhe 15y ago
  Bitcoin is not quantum-hard. When quantum computing reaches a certain threshold, bitcoin will lose its uniqueness and collapse. Could you elaborate which aspect of bitcoin has efficient quantum algorithms? The proof-of-work system requires you to invert hashes and quantum algorithms only give you a quadratic speed up (brute force takes time O(\sqrt{size of range}) rather than O(size of range)). Right now there is no quantum attack on SHA-256 (which is what Bitcoin uses). There are post-quantum algorithms that are computable on ordinary computers, ... This sounds interesting, but could you elaborate? What does it mean for a post-quantum algorithm to be computable on ordinary computers?
  - DavidSJ 15y ago
    Could you elaborate which aspect of bitcoin has efficient quantum algorithms? BitCoin uses public key cryptography for its digital signatures. That in turn relies on the difficulty of factoring large numbers, for which there are efficient quantum algorithms.
    - caf 15y ago
      Bitcoin actually uses ECDSA for its digital signatures, which relies on the difficulty of calculating discrete logarithms rather than factoring. However I believe that there are efficient quantum algorithms for that, too.
cynicalkane 15y ago
Scarcity of money is not the most desirable end, because the supply and demand for money threatens to change the value of money. Even if all the money in the world were fixed, you would see inflation and deflation, more inflation than you've ever seen on a properly managed fiat money system. This is not mere economic theory, it's a matter of history.
- jncraton 15y ago
  > more inflation than you've ever seen on a properly managed fiat money system While this may be true, a scarce money system does produce better result than poorly managed fiat money systems. You won't see the kind of hyperinflation that we saw in Zimbabwe with the gold standard.
  - sethg 15y ago
    A poorly managed money system is one symptom of a government that is poorly managed, period, and living under a poorly managed government is always going to suck. If armed thugs loyal to the ruling party come to kick you off your land, steal your valuables, and discourage you from voting for the opposition, you’re not going to be able to pay them off with Bitcoin. (ETA: ...or if you can, the ability to do so is not going to make that country a pleasant place to live.)
  - oelewapperke 15y ago
    But the million dollar question is whether it produces better results than a well-managed fiat money system ? In a fixed-supply system a small number of powerful people will amass all money (as the value of cash tends toward infinite over time, the only correct action is to hoard any and all money you have). Or that's what the theory says, anyway. Is it true ? History would seem to indicate that it is, but there is certainly no consensus on this matter. In a fiat-money system with controlled inflation the value of money tends toward zero, forcing investors to do stuff with their money. All money will therefore be used for running the economy, very little money will be used for hoarding (which is exactly what you see today in America. The wealthy control very little money, and even the portion they do control is mostly invested in loans to profit-seeking companies). Of course, inflation de-facto puts money in government hands. The theory is (but is it true ?) : in a controlled-inflation system nearly all money is used for making people do things (which tends to result in absurd levels of bureaucracy on the negative side), in a scarcity system all money is hoarded, and nobody gets off their ass. I'm thinking I'd prefer a controlled inflation system. Now how do we restrict inflation to a fixed, predictable value ? Because bitcoin is not the answer for this.
daniel-cussen 15y ago
Martians may also use gold as a store of wealth.

by vladd 15y ago

gus_massa 15y ago

Gold also is usefull in the industry and electronics: http://en.wikipedia.org/wiki/Gold#Industry http://en.wikipedia.org/wiki/Gold#Industry http://www.gold.org/technology/uses/ http://www.gold.org/technology/uses/

joelthelion 15y ago
Gold's market value is far above what it would be if it wasn't used as a value store.
- duskwuff 15y ago
  Which ends up being harmful to industries which could make good use of gold... if it just weren't so bloody expensive.
  - joelthelion 15y ago
    In the same way the car industry harms the industries that could use all that oil we burn in our cars... Using gold as a store of value is useful, otherwise we wouldn't do it.

masklinn 15y ago

> Except for the guarantee of uniqueness. There are a few more actually: gold is one of the least putrescible materials out there (it's one of the least reactive elements available and as one of the royal metals very few acids can attack it), it has a distinctive look, and it has a very high density (most denser metals were only discovered in or after the 19th century, and are generally more valuable) which makes it easy to differentiate pure and impure golds (such as fake coinage). It also used to strike a good balance between rarity (which ensures the market won't be flooded) and availability (which actually made it usable as money). Of course, most of this broke down as new, very productive, mines were found (e.g. in South America) and mining techniques improved. And nowadays we have the opposite issue: gold mining output declines, and is unable to follow the value growth of the world itself. This is one of the reasons why most countries moved first to fractional gold standards and then to convertible currency.

pbreit 15y ago
The idea that gold has no real value is bizarre.
- scott_s 15y ago
  They pointed out on the Planet Money podcast that gold may be in a 4,000 year-old bubble.
  - sethg 15y ago
    “This University has invested profitably in real estate for the last thousand years!” “Yes, but the last thousand years may have been atypical.”
- masklinn 15y ago
  "real value" is not very clear a concept. Gold does not have much intrinsic value (not actually correct anymore, in our modern world gold is used quite a bit in industrial contexts): apart from being shiny, before the 19th century there wasn't much it could be used for. The vast majority of its value was extrinsic and pretty much arbitrary, in its use as part of monetary exchange systems. The same can be said of diamond, by the way.
  - ghshephard 15y ago
    The major difference, of course, is that diamonds are not rare, can be industrially counterfeited, and are easily damaged. Diamonds, in some way, are the "anti-gold." There is a great game-theoretic reason for why something as completely worthless as diamonds make great engagement rings though: They are something expensive to the male (so he can't repeat the process of proposing very often) - but worthless to the female (so she can't be accused of being a gold digger) - and at the same time sparkly and easy to show off.
    - masklinn 15y ago
      > The major difference, of course, is that diamonds are not rare, can be industrially counterfeited, and are easily damaged. Gold is not rare either. Please re-read my comment, it's about intrinsic and extrinsic value, especially across history. Before modern industrial usages, diamond was all but useless (even worse than gold, if anything) and all of its valuation was extrinsic. And much like gold's, diamond's intrinsic value has risen in modern times with industrial uses. > Diamonds, in some way, are the "anti-gold." Most definitely not. If you want anti-gold, you should look at water instead.

m__ 15y ago

Exactly. It is a feature of money if it is costly to produce. The alternative is inflation (and economic instability) as soon as people start generating income by producing money for basically nothing.

api 15y ago

Bitcoin is not quantum-hard. When quantum computing reaches a certain threshold, bitcoin will lose its uniqueness and collapse. There are post-quantum algorithms that are computable on ordinary computers, but they're still under research and they'd make Bitcoin's data set considerably larger.

DennisP 15y ago
Bruce Schneier has written that quantum computers only halve the effective number of bits for symmetric encryption algorithms, which seem more closely analogous to hashing than factoring. That would be a giant leap in mining capability, but perhaps not so much as to cause collapse. Switching to 512-bit hashes would bring us back to where we are now.
bdhe 15y ago
Bitcoin is not quantum-hard. When quantum computing reaches a certain threshold, bitcoin will lose its uniqueness and collapse. Could you elaborate which aspect of bitcoin has efficient quantum algorithms? The proof-of-work system requires you to invert hashes and quantum algorithms only give you a quadratic speed up (brute force takes time O(\sqrt{size of range}) rather than O(size of range)). Right now there is no quantum attack on SHA-256 (which is what Bitcoin uses). There are post-quantum algorithms that are computable on ordinary computers, ... This sounds interesting, but could you elaborate? What does it mean for a post-quantum algorithm to be computable on ordinary computers?
- DavidSJ 15y ago
  Could you elaborate which aspect of bitcoin has efficient quantum algorithms? BitCoin uses public key cryptography for its digital signatures. That in turn relies on the difficulty of factoring large numbers, for which there are efficient quantum algorithms.
  - caf 15y ago
    Bitcoin actually uses ECDSA for its digital signatures, which relies on the difficulty of calculating discrete logarithms rather than factoring. However I believe that there are efficient quantum algorithms for that, too.

cynicalkane 15y ago

Scarcity of money is not the most desirable end, because the supply and demand for money threatens to change the value of money. Even if all the money in the world were fixed, you would see inflation and deflation, more inflation than you've ever seen on a properly managed fiat money system. This is not mere economic theory, it's a matter of history.

jncraton 15y ago
> more inflation than you've ever seen on a properly managed fiat money system While this may be true, a scarce money system does produce better result than poorly managed fiat money systems. You won't see the kind of hyperinflation that we saw in Zimbabwe with the gold standard.
- sethg 15y ago
  A poorly managed money system is one symptom of a government that is poorly managed, period, and living under a poorly managed government is always going to suck. If armed thugs loyal to the ruling party come to kick you off your land, steal your valuables, and discourage you from voting for the opposition, you’re not going to be able to pay them off with Bitcoin. (ETA: ...or if you can, the ability to do so is not going to make that country a pleasant place to live.)
- oelewapperke 15y ago
  But the million dollar question is whether it produces better results than a well-managed fiat money system ? In a fixed-supply system a small number of powerful people will amass all money (as the value of cash tends toward infinite over time, the only correct action is to hoard any and all money you have). Or that's what the theory says, anyway. Is it true ? History would seem to indicate that it is, but there is certainly no consensus on this matter. In a fiat-money system with controlled inflation the value of money tends toward zero, forcing investors to do stuff with their money. All money will therefore be used for running the economy, very little money will be used for hoarding (which is exactly what you see today in America. The wealthy control very little money, and even the portion they do control is mostly invested in loans to profit-seeking companies). Of course, inflation de-facto puts money in government hands. The theory is (but is it true ?) : in a controlled-inflation system nearly all money is used for making people do things (which tends to result in absurd levels of bureaucracy on the negative side), in a scarcity system all money is hoarded, and nobody gets off their ass. I'm thinking I'd prefer a controlled inflation system. Now how do we restrict inflation to a fixed, predictable value ? Because bitcoin is not the answer for this.

daniel-cussen 15y ago

Martians may also use gold as a store of wealth.