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Imagine that a thief breaks and enters into a warehouse which is holding physical gold for its customers, and the thief steals all their gold. The warehouse an

by cs702 14y ago

Imagine that a thief breaks and enters into a warehouse which is holding physical gold for its customers, and the thief steals all their gold. The warehouse and/or its customers will suffer losses, but every single ounce of the gold stolen by the thief will continue to be as valuable as any other ounce of gold. In other words, gold will continue to be the same exact commodity. Essentially the same thing has happened here, but in the digital realm. A thief (or thieves) broke into the backend systems of an exchange which was holding bitcoins for its customers, and the thief stole all their bitcoins. The exchange and/or its customers have suffered losses, but every single bitcoin stolen by the thief will continue to be as valuable as any other bitcoin. In other words, Bitcoin will continue to be the same exact commodity -- its integrity has NOT been compromised. The moral of this story: if you own bitcoins, make sure they are stored in a truly secure system. Many Bitcoin exchanges claim to be -- but really aren't -- truly secure!

thomasz 14y ago
> its integrity has NOT been compromised Shesh. A Bitcoin has no inherent value. If such incidents become common enough, nobody will be willing to buy bitcoins for dollars or accept bitcoins as payments for goods,which means that the thieves will sit on a bunch of useless bits.
- a-stjohn 14y ago
  ...which is also no different than paper money, or the money we store digitally in our banks...
  - philwelch 14y ago
    The difference is, you can't pay your taxes in bitcoin.
    - coconutrandom 14y ago
      You can't pay your taxes in gold. Or yuan for that matter. That doesn't invalidate it as a currency.
      - philwelch 14y ago
        Chinese people can pay their taxes in yuan. When there was a gold standard you could pay your taxes in gold, but now there isn't, which is why gold is just a commodity, not a currency.
- chevas 14y ago
  A USD has no inherent value since it is also a FIAT currency. At least BitCoin's algorithm is locked into a growth curve that eventually stops. The US can continue to print money. THe way I see it, BTC is going to increase in value.
- Benferhat 14y ago
  > If such incidents become common enough, nobody will be willing to buy bitcoins No, that would only be true if people were forced to store their bitcoins on vulnerable bitcoin exchanges, which they're not.
- Tichy 14y ago
  Gold does not have that much of inherent value either.
  - rprasad 14y ago
    Gold is inherently useful as a tangible object with exploitable physical properties. Gold, for example, has good conductivity and is used to plate electrical connections. Gold is also useful for its rust-resistance. Thus, on this basis, like all useable physical goods, gold has some inherent value as a commodity.
    - ewillbefull 14y ago
      Bitcoin has inherent value and "physical properties" that far exceed what Gold can offer. 1. Bitcoins can't be counterfeited. If you receive them with even just a few confirmations on the blockchain, it's probably going to be there forever. 2. You can confirm the legitimacy of Bitcoins, en masse, without any cost. 3. You can store bitcoins without any cost. 4. Bitcoins are much easier to transfer to other people. 5. You can form contracts and advanced redemption conditions for transferred coins. If Bitcoin had no "inherent value" then it should be worthless. Maybe Mises Regression Theorem is wrong?
      - tptacek 14y ago
        None of these points have anything to do with an intrinsic value for bitcoin; all of them presuppose that bitcoin is intrinsically valuable. Bitcoin can be worthless and yet hard to counterfeit; I can sign a random number right now and it's worth nothing. I can Tweet that number or create a permanent record in any number of other ways. Your second point is the same as your first; it again presumes that there is some value to bitcoin. I can store a lot of things without meaningful cost. That doesn't make them valuable. My application server with seven gigs of dev logs isn't a treasure trove either, despite the ease with which I managed the data relative to bars of gold. Bitcoins are easier to transfer than gold coins. That is true. But spent facial tissue is also easier to transfer than gold. You can form contracts with all manner of instruments, from cows to gravel to pork bellies. Every commodities trader in Chicago has a story about a friend of a friend who ended up with a garage full of pork when they failed to sell a futures contract in time.
k2enemy 14y ago
> The moral of this story: if you own bitcoins, make sure they are stored in a truly secure system. Many Bitcoin exchanges claim to be -- but really aren't -- truly secure! Then how do you know what storage locations are truly secure? If you have to be a computer security expert to safely use bitcoins, then that will surely decrease the demand for the currency and therefore reduce its value.

by cs702 14y ago

thomasz 14y ago

> its integrity has NOT been compromised Shesh. A Bitcoin has no inherent value. If such incidents become common enough, nobody will be willing to buy bitcoins for dollars or accept bitcoins as payments for goods,which means that the thieves will sit on a bunch of useless bits.

a-stjohn 14y ago
...which is also no different than paper money, or the money we store digitally in our banks...
- philwelch 14y ago
  The difference is, you can't pay your taxes in bitcoin.
  - coconutrandom 14y ago
    You can't pay your taxes in gold. Or yuan for that matter. That doesn't invalidate it as a currency.
    - philwelch 14y ago
      Chinese people can pay their taxes in yuan. When there was a gold standard you could pay your taxes in gold, but now there isn't, which is why gold is just a commodity, not a currency.
chevas 14y ago
A USD has no inherent value since it is also a FIAT currency. At least BitCoin's algorithm is locked into a growth curve that eventually stops. The US can continue to print money. THe way I see it, BTC is going to increase in value.
Benferhat 14y ago
> If such incidents become common enough, nobody will be willing to buy bitcoins No, that would only be true if people were forced to store their bitcoins on vulnerable bitcoin exchanges, which they're not.
Tichy 14y ago
Gold does not have that much of inherent value either.
- rprasad 14y ago
  Gold is inherently useful as a tangible object with exploitable physical properties. Gold, for example, has good conductivity and is used to plate electrical connections. Gold is also useful for its rust-resistance. Thus, on this basis, like all useable physical goods, gold has some inherent value as a commodity.
  - ewillbefull 14y ago
    Bitcoin has inherent value and "physical properties" that far exceed what Gold can offer. 1. Bitcoins can't be counterfeited. If you receive them with even just a few confirmations on the blockchain, it's probably going to be there forever. 2. You can confirm the legitimacy of Bitcoins, en masse, without any cost. 3. You can store bitcoins without any cost. 4. Bitcoins are much easier to transfer to other people. 5. You can form contracts and advanced redemption conditions for transferred coins. If Bitcoin had no "inherent value" then it should be worthless. Maybe Mises Regression Theorem is wrong?
    - tptacek 14y ago
      None of these points have anything to do with an intrinsic value for bitcoin; all of them presuppose that bitcoin is intrinsically valuable. Bitcoin can be worthless and yet hard to counterfeit; I can sign a random number right now and it's worth nothing. I can Tweet that number or create a permanent record in any number of other ways. Your second point is the same as your first; it again presumes that there is some value to bitcoin. I can store a lot of things without meaningful cost. That doesn't make them valuable. My application server with seven gigs of dev logs isn't a treasure trove either, despite the ease with which I managed the data relative to bars of gold. Bitcoins are easier to transfer than gold coins. That is true. But spent facial tissue is also easier to transfer than gold. You can form contracts with all manner of instruments, from cows to gravel to pork bellies. Every commodities trader in Chicago has a story about a friend of a friend who ended up with a garage full of pork when they failed to sell a futures contract in time.

k2enemy 14y ago

> The moral of this story: if you own bitcoins, make sure they are stored in a truly secure system. Many Bitcoin exchanges claim to be -- but really aren't -- truly secure! Then how do you know what storage locations are truly secure? If you have to be a computer security expert to safely use bitcoins, then that will surely decrease the demand for the currency and therefore reduce its value.