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"But they also said the underlying technology may hold potential." That is exactly my position. The underlying technology is very compelling, but Bitcoin's pre

by api 13y ago

"But they also said the underlying technology may hold potential." That is exactly my position. The underlying technology is very compelling, but Bitcoin's present valuation is nutty. It's like the web. Pets.com and Flooz were silly, but the web was not.

a3voices 13y ago
Do you think it's nutty for all the gold in the world to be worth $6 trillion?
- wnevets 13y ago
  yes.
- konceptz 13y ago
  Not if all the gold in the world is pieced into 6 trillion chips. An obvious argument for any currency system based on a physical media limited by scarcity. Which is "artificially" true of bitcoin, another part of the viability of the system. But you already knew this, however I wanted to explore it on a similar high level idea.
- ForHackernews 13y ago
  "Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond."
  - danielahn 13y ago
    For the parent - this is what Warren Buffett said about gold (don't think that is obvious from just the quote being posted)
  - Thiz 13y ago
    And that cube of gold will still represent all the wealth of the world, whatever that is, at any given time. I pick the gold.
    - pavel_lishin 13y ago
      How does a large sample of an element represent all the wealth of the world?
    - dllthomas 13y ago
      Would you say the same of all the tin in the world? If not, what is special about gold? Are you confident that wouldn't change if all the gold were held by one individual?
    - mpyne 13y ago
      "This piece of paper represents $1,000 worth of gold bullion, whatever that is, at any given time. I pick the paper".
  - georgeorge 13y ago
    Excuse me, mr. Buffett, but that is not really compelling. A century form now, US cropland and all the Exxon Mobils in the world could be utterly devoid of value, I really wouldn't like to venture any kind of guess. And the gold? The gold might be equally worthless. A century from now we could well be manufacturing any element at will without giving it a second thought. Conversely, of course, in some unimagined scenario, the future of humanity could depend on a practical application of huge quantities of gold - your cube of gold might outvalue all other planetary resources combined. We just don't know.
  - dualogy 13y ago
    "The 170,000 tons of gold will be unchanged in size and still incapable of producing anything." I find it staggering that the calibre of a Warren Buffet can demonstrate so little capacity for sound thinking about value, wealth and wealth assets. Is the Mona Lisa worthless because it's priceless? What about a Picasso, do you expect it to produce crops or refine oil? When you fondle a French castle, do you expect it to respond? "I ask you, how can currency price gold? Indeed, no price will work!" ~ Another "how can paper currency that represents "the thoughts of a nation blowing in the wind" be used to value real money of ancient world class proportions, gold? It cannot! Any price you can think of will do, as in no price will work!" ~ Another Gold could absorb the worlds derivatives debt tomorrow in value and not a thing would change in the world, except many headaches gone. Gold could be managed at around production costs for many many decades since 71 and not a problem was found with this. Gold's currency price is meaningless, it's utility for "inter-generational" wealth preservation at a "giant scale" is priceless indeed. Because it is so unproductive, representing "great wealth" comes at no cost infringing on the "productive economy". Why hoard rice or industrial-strength silver to represent your wealth across currency regimes, social upheavals and technological fads and whims and political and market ups and down, when there is gold that can represent "much wealth" in very small physical chunks! Come on Warren, you gotta be kidding me. This piece must be intentional disinformation. He must have been walking around much old-world wealth in his life, and here he pretends "gold, I'm not getting it, gimme ExxonMobile shares any day" (or why not Enron if you're so into energy?). Then again, he prefers giving all his excess wealth to charity instead of doing the old-school "intergenerational family wealth" thing, truly American I suppose, so yeah, makes sense he see's no value in gold. Someone like Warren Buffet must truly believe that the American Dream will never expire, its currency never weaken in the eyes of the world, it's stocks always be cutting edge. At his age and with his life experience, can we fault him for that? Guess not.
6thSigma 13y ago
The difference is bitcoins provide value for both merchants and consumers. Pets.com and Flooz on the other hand...
ihsw 13y ago
Definitely: the distinction needs to be made between Bitcoin the currency and Bitcoin the transaction network. The former's value is intrinsically fluid to the point where it's a weakness as well as a strength, however the latter's value is quite distinct. The BTC transaction network is reliably robust, spans the globe irrespective of national boundaries, quite secure, and fast. Some people call BTC the internet's gold, but that couldn't be further from the truth -- gold just sits there gathering dust. Gold has some industrial applications but at the end of a day it's just a store of value, whereas BTC encompasses the transaction network just as much if not more than acting as a store of value.
- OmarIsmail 13y ago
  The rub is that the currency and the network are inextricably linked together. This is the underlying genius of Bitcoin and it's the main thing that most people don't appreciate. Put another way the value of bitcoin is the value of the network. How do you value the network is the big question.
- maxerickson 13y ago
  The value of the transaction network is highly dependent on the exchange value. I'm not sure exactly what you mean when you call it distinct, but miners will certainly respond to changes in the exchange value, which may end up removing much of the vaunted security of the ledger (which removes interest, which makes mining less lucrative, which ...). (I don't necessarily think there is strong case for those scenarios, but it's pretty hard to decide at what exchange rate the thing becomes unstable).

by api 13y ago

a3voices 13y ago

Do you think it's nutty for all the gold in the world to be worth $6 trillion?

wnevets 13y ago
yes.
konceptz 13y ago
Not if all the gold in the world is pieced into 6 trillion chips. An obvious argument for any currency system based on a physical media limited by scarcity. Which is "artificially" true of bitcoin, another part of the viability of the system. But you already knew this, however I wanted to explore it on a similar high level idea.
ForHackernews 13y ago
"Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond."
- danielahn 13y ago
  For the parent - this is what Warren Buffett said about gold (don't think that is obvious from just the quote being posted)
- Thiz 13y ago
  And that cube of gold will still represent all the wealth of the world, whatever that is, at any given time. I pick the gold.
  - pavel_lishin 13y ago
    How does a large sample of an element represent all the wealth of the world?
  - dllthomas 13y ago
    Would you say the same of all the tin in the world? If not, what is special about gold? Are you confident that wouldn't change if all the gold were held by one individual?
  - mpyne 13y ago
    "This piece of paper represents $1,000 worth of gold bullion, whatever that is, at any given time. I pick the paper".
- georgeorge 13y ago
  Excuse me, mr. Buffett, but that is not really compelling. A century form now, US cropland and all the Exxon Mobils in the world could be utterly devoid of value, I really wouldn't like to venture any kind of guess. And the gold? The gold might be equally worthless. A century from now we could well be manufacturing any element at will without giving it a second thought. Conversely, of course, in some unimagined scenario, the future of humanity could depend on a practical application of huge quantities of gold - your cube of gold might outvalue all other planetary resources combined. We just don't know.
- dualogy 13y ago
  "The 170,000 tons of gold will be unchanged in size and still incapable of producing anything." I find it staggering that the calibre of a Warren Buffet can demonstrate so little capacity for sound thinking about value, wealth and wealth assets. Is the Mona Lisa worthless because it's priceless? What about a Picasso, do you expect it to produce crops or refine oil? When you fondle a French castle, do you expect it to respond? "I ask you, how can currency price gold? Indeed, no price will work!" ~ Another "how can paper currency that represents "the thoughts of a nation blowing in the wind" be used to value real money of ancient world class proportions, gold? It cannot! Any price you can think of will do, as in no price will work!" ~ Another Gold could absorb the worlds derivatives debt tomorrow in value and not a thing would change in the world, except many headaches gone. Gold could be managed at around production costs for many many decades since 71 and not a problem was found with this. Gold's currency price is meaningless, it's utility for "inter-generational" wealth preservation at a "giant scale" is priceless indeed. Because it is so unproductive, representing "great wealth" comes at no cost infringing on the "productive economy". Why hoard rice or industrial-strength silver to represent your wealth across currency regimes, social upheavals and technological fads and whims and political and market ups and down, when there is gold that can represent "much wealth" in very small physical chunks! Come on Warren, you gotta be kidding me. This piece must be intentional disinformation. He must have been walking around much old-world wealth in his life, and here he pretends "gold, I'm not getting it, gimme ExxonMobile shares any day" (or why not Enron if you're so into energy?). Then again, he prefers giving all his excess wealth to charity instead of doing the old-school "intergenerational family wealth" thing, truly American I suppose, so yeah, makes sense he see's no value in gold. Someone like Warren Buffet must truly believe that the American Dream will never expire, its currency never weaken in the eyes of the world, it's stocks always be cutting edge. At his age and with his life experience, can we fault him for that? Guess not.

6thSigma 13y ago

The difference is bitcoins provide value for both merchants and consumers. Pets.com and Flooz on the other hand...

ihsw 13y ago

Definitely: the distinction needs to be made between Bitcoin the currency and Bitcoin the transaction network. The former's value is intrinsically fluid to the point where it's a weakness as well as a strength, however the latter's value is quite distinct. The BTC transaction network is reliably robust, spans the globe irrespective of national boundaries, quite secure, and fast. Some people call BTC the internet's gold, but that couldn't be further from the truth -- gold just sits there gathering dust. Gold has some industrial applications but at the end of a day it's just a store of value, whereas BTC encompasses the transaction network just as much if not more than acting as a store of value.

OmarIsmail 13y ago
The rub is that the currency and the network are inextricably linked together. This is the underlying genius of Bitcoin and it's the main thing that most people don't appreciate. Put another way the value of bitcoin is the value of the network. How do you value the network is the big question.
maxerickson 13y ago
The value of the transaction network is highly dependent on the exchange value. I'm not sure exactly what you mean when you call it distinct, but miners will certainly respond to changes in the exchange value, which may end up removing much of the vaunted security of the ledger (which removes interest, which makes mining less lucrative, which ...). (I don't necessarily think there is strong case for those scenarios, but it's pretty hard to decide at what exchange rate the thing becomes unstable).