

Bitcoin vs. Gold - oleganza
http://blog.oleganza.com/post/47008650694/bitcoin-vs-gold

======
dgregd
> First of all, money is information.

No, first of all, money is trust that someone will honour it. Information is
on the second place.

------
nugget
I think Bitcoin's greatest strengths (anonymity and decentralization) are also
it's greatest weaknesses.

Anonymity helps certain people but hurts others. For example, you don't want
to be the victim of identity theft or other fraud within a totally anonymous
and decentralized financial system, because then there is little hope for
restitution. There are many stories of Windows malware and viruses stealing
the wallet.dat file from a PC which literally wipes out all of that person's
BTC wealth.

I hear some Bitminers saying "it's just like cash" - yes, but most people do
not hold their entire life savings in physical cash. They trust banks and
credit card companies whose systems allow everyone to transact with a high
level of confidence. If we went back to the days where people physically held
and/or had ultimate responsibility for their entire net worth, I think the
world economy would look very different than it does today.

I think the best comparison for Bitcoins is to people who hold physical gold
in their homes. However, even between these two stores of value there is a
pretty fundamental difference. In order to keep a BTC wallet secure - REALLY
secure (e.g. what the BTC community calls "cold storage") - you have to be
technically adept and constantly security conscious. I would say that even
with some training, less than 10-15% of the population has the intelligence
and skills necessary to safety receive, store, and spend Bitcoins.

Unencrypted wallet.dat file? Oops, a trojan just stole all your Bitcoins.
Keylogger? Oops, all gone. Downloaded a compromised BTC Windows client? Sorry,
better luck next time!

Whereas it's pretty simple for someone to understand how to stash away a few
gold coins or bars.

I think this will be what ultimately keeps BTC in the realm of a hobbyist
currency, full of speculation and very useful for certain online transactions
but not comparable to a real fiat currency.

~~~
wladimir
That is the current state of affairs, but I don't see how any of those issues
is fundamental, or should be extrapolated to 'ultimately'. Sure, BTC has a
different risk profile from a bank account, or gold bars under your mattress,
but if it keeps up the current pace, there will be dead-easy methods for cold
storage and safe, hardware based wallets commonly available soon. People are
working on those already (see for example <http://bitcointrezor.com/>)...

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zobzu
Yeaaaa well when bitcoin crypto gets broken, gold will still hold the same
value. gold has actual physical value, not because its shiny but because its
useful.

In fact, we need gold to generate bitcoins :)

~~~
brazzy
Except the useful value of gold is probably around 1% of its market value, and
when we start mining asteroids ([http://baselinescenario.com/2011/09/23/the-
price-of-gold-in-...](http://baselinescenario.com/2011/09/23/the-price-of-
gold-in-the-year-2160/) ) that market value will plummet.

------
jeffem
I don't think I've seen anyone claim that gold is easier to hide or bury than
bitcoin. Maybe some people do but that's not the issue most people are talking
about when they compare bitcoin to gold. The main distinction that they're
pointing out is that gold has historically held value beyond its use as money
(electronics, jewelry, etc.)

------
george88b
You do not need to melt down gold and take it to an expert to determine
authenticity. There are many ways you can determine if a metal is real gold on
your own (density, hardness, magnetism, nitric acid test).

~~~
gonvaled
I have always wondered about this: are you able, with simple methods and no
melting, to guarantee that a gold bar is a gold bar, with a 99,99% certainty?

By producing a gold-coated bar:

\- density could be faked by putting something else in the inside of the bar

\- nitric acid test would not work, since the surface is gold

\- hardness would not work, if the surface layer is thick enough.

\- no idea about magnetism

\- other tests?

~~~
InclinedPlane
Yes, X-ray fluorescence. Modern handheld devices are fast, accurate, and
relatively inexpensive, see my other post.

~~~
jlgreco
Might be worth noting that the things denser than gold are probably all going
to be more expensive as well, so there isn't really any way to hollow out your
gold and fill it with weights to correct the density. Even DU falls short of
being dense enough todo that.

~~~
gonvaled
And DU would be ...?

EDIT: I think you meant Tungsten, also known as Wolfram (symbol W):
<http://en.wikipedia.org/wiki/Tungsten>

Gold: 19.30 g/cm3 (<http://en.wikipedia.org/wiki/Gold>)

Wolfram: 19.25 g/cm3 (<http://en.wikipedia.org/wiki/Tungsten>)

EDIT2 (I can not reply to your reply): So you meant Depleted Uranium
(<http://en.wikipedia.org/wiki/Depleted_uranium>)

Depleted Uranium: 19.1 g/cm3

So Wolfram is a better substitute for Gold, in terms of density. I do not know
about prices or other physical properties.

~~~
glurgh
Pretty sure they meant Depleted Uranium by DU.
<http://en.wikipedia.org/wiki/Depleted_uranium>

Has a lower density than Tungsten, though so would make a poor counterfeiting
material in both cost and physical properties.

------
adventured
This article starts out on an absurd premise.

Namely: they dislike bitcoin because they don't understand it.

The assumption that people who prefer gold over bitcoin, just don't understand
bitcoin, is arrogant to put it mildly. I understand bitcoin, I like bitcoin, I
prefer gold because it is radically safer as a store of value.

One thing not mentioned in his list, is that bitcoin can be replaced (or
legally usurped) by another protocol or approach in the relatively near
future, one that is perhaps vastly superior. Bitcoin can also easily be made
illegal by the US Government, and that is a real threat. Your typical gold is
not tracked, the government has no idea who owns it, and many states have
passed laws shielding owners against Federal confiscation. It's easy for the
NSA to track all bitcoin related IP traffic however, and then to continuously
press on it forever to check for bitcoin based transactions (all run by
machines, not people that have to search every house and yard in the nation
for gold).

This is particularly an issue given the speed at which technology is
advancing: the things you don't know about tech just 10 or 15 years in the
future, is the problem.

It's guaranteed bitcoin will run up against lots of direct competing digital
monetary systems in the future (they're in the works now, thanks to the
splashy bitcoin headlines). Bitcoin is merely the first to gain a small amount
of traction; it's very early yet. There's no insurance that bitcoin will
retain its position for even the next few years, much less further out. A few
things will happen in just the next 24 to 36 months, first there will be
numerous new competitors to bitcoin, and second laws / regulations will begin
to proliferate to control digital monetary systems (and those will dictate
winners and losers).

The odds we're going to replace gold in the next 20 or 30 years with another
physical store of value? We can hardly fly to the moon at this point (in fact,
nobody is flying to the moon right now, and we've never even attempted space
based mining yet) - well there's no logical place that would derive from any
time soon.

The US was able to lean hard against the Swiss and directly force them to
change their banking laws. Bitcoin would be trivial to destroy by comparison,
simply by leveraging the UN / IMF / global banking system.

The reality today is that bitcoin is tiny and still irrelevant, IE it can be
made to disappear tomorrow morning at a mere list price of $1 or $2 billion, a
paltry sum in the finance game.

Maybe that won't be the case 'tomorrow' - and maybe bitcoin will get far
easier to use for the lay person, leading to wider adoption. Bitcoin is a
speculation that may turn out great, gold is proven.

~~~
nugget
The US wouldn't have to lean on anyone. If the Government wanted to destroy
BTC it should be trivial for the NSA to take over 51%+ of the network which
then allows it to pollute the system with malicious data that would eventually
kill it. (It's not even clear that this would be against any law.) I would bet
all my Bitcoins that the architecture for this has already been mapped out,
and perhaps even implemented.

~~~
wladimir
It's an international currency, so it's interesting how all the "government
will kill Bitcoin" hysteria is coming from the US. Is that a specific US
thing, that people have a special distrust and fear of your government
destroying everything?

~~~
adventured
The global banking system is (currently) controlled by the US Government.
There's no such thing as an international currency outside their reach.

It's how the US is able to attack Iran's currency from the outside so easily
and spike their inflation to the moon.

It's how when the crash occurred, the Fed was able to stabilize the global
banking system by shooting hundreds of billions around the planet to
international banks (from Berlin to Tokyo).

It's how the US was able to pressure the world's second largest - and fastest
growing - economy (China) into floating its currency more freely and
'allowing' its value to climb.

It's how the US was able to dictate terms to the Swiss (of all people, given
their history).

The fact that it's international will just make the Feds more frantic about
either controlling it / replacing it / destroying it. The solvency of the US
Government depends on the FRN standard, and the ability to 'print' at least
$15 trillion dollars over the next 15 years. You don't think they'll attempt
to kill anything that even remotely threatens that?

And to be clear, what's likely isn't that digital monetary systems will
disappear, rather, that bitcoin will be usurped by official standards. The US
will merely get the G30 to agree to some common frameworks and regulations,
that will stuff the dollar / euro / yen / yuan into a new shiny digital box.
The G30 will jump on board with glee, as they all want to control their own
currency systems as much as the US does.

------
drucken
The value of gold is its immense store of value attribute. It is extremely
difficult to form from any other substance, at least in any meaningful
amounts, and it is extremely inert, while still being readily available
compared to alternatives.

Secondly, there is implicit monetary value to gold because most of it is
hoarded and stored by central banks, the institutions who issue your legal
tender and in whom society places its financial trust, i.e. money. Bitcoin has
no such association.

Thirdly, gold can and does generate liquidity from creditors as collateral -
just ask any bank and exchange during the 2008 financial crisis. Bitcoin has
no such function.

Finally, the value of Bitcoin can disappear just as fast as it appeared. It
can be useful as a medium of exchange or an investment, but as a store of
value it does not compare to gold.

------
lucaspiller
One of the issues I've found with Bitcoin is that it is bloody difficult to
get hold of. I was looking a few weeks ago when it was €40, but I couldn't
find an easy way to buy it.

The solution I found (which I didn't bother with in the end) involved:

\- Creating an account at an exchange

\- Creating an account at one of their payment providers

\- Sending in personal information to get my account verified

\- Making a bank transfer for the payment provider

\- Waiting for them to confirm it and tell the exchange

If I want to buy gold I'm pretty sure I can find somewhere online and buy it
within 5 minutes - it's a lot easier. Please, someone make an easy way for
people to get BTC and I'm sure that'll increase adoption...

~~~
guard-of-terra
In fact it's very easy. You just launch a wallet and have somebody send you
money. It's the easiest kind of wallet ever!

------
jd007
"The harder it is to duplicate and easier to verify, the more liquid it is."

What? A 5-year bond is hard to duplicate and very easy to verify, but it's not
liquid at all. I'm not sure that this guy knows much about how currencies and
assets work...

~~~
polarix
Isn't it? Just because you can't cash it in with the issuer doesn't mean it
can't be traded for currency.

------
hkmurakami
I look at both Bitcoin and Gold as investments (and in many ways, all
currency, alternate or otherwise, are investments/speculation), and in that
light bitcoin doesn't have the price stability or the liquidity needed for me
to seriously consider it.

By liquidity I don't mean "how easy is it to sell", but rather "how easy is it
to sell relatively large amounts of this thing without me moving the market
itself and thus making it very hard to exit positions efficiently".

------
jpswade
>If you need to buy something with Bitcoin, you can do it right away. With a
brick of gold — not so much.

In the UK, my local high street jewelers will trade my gold same day. At the
moment I can't even buy bitcoins, let alone sell them.

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chris123
In 100 years, gold will exist? Bitcoin, maybe, but if not, probably something
different and possibly "better," whoever that's defined (security, efficiency,
capacity, speed, etc.).

~~~
InclinedPlane
In 100 years the Gold market will be flooded with asteroid mined precious
metals. Besides which, the economy will be so different that who knows what
the value of anything relative to anything else will be.

~~~
oleganza
Why would anybody mine gold on asteroids if you would use Bitcoins instead?
For technological purposes existing amount of gold is more than enough and it
will mostly shift in that area.

If (when) Bitcoin proves to be the world money, who would need to pay for gold
storage/verification/transport? In such case gold price will go down and it
will be much more used in production processes than today.

~~~
InclinedPlane
I don't know what point you're trying to make here. People will mine Gold on
asteroids as a _byproduct_ of mining for everything else. And they will mine
Gold because it has value (as jewelry, in industry, etc.) And over time so
much Gold will be mined in such a way as to vastly change the value of Gold
and transform it as a medium of stored value.

~~~
oleganza
I meant that we already have a lot of gold sitting in the vaults because it's
more valuable this way. As a ledger, that is. Only a tiny portion is used for
technology and jewelry. In case Bitcoin makes gold too expensive to use as
money _before_ mining asteroids gets profitable, you would have plenty of gold
for tech purposes already mined and available. If Bitcoin will be as good as
some people think, no one will mine gold at all because there is enough of it
in the vaults for many decades of use in production.

------
matznerd
What would you rather have if there were uncertainty in the world?

~~~
davidw
If you want to get really tinfoil hat about things, arable land and guns would
be better than either gold or bitcoins (quick, to the Compound in Montana!).
And if you don't want to get tinfoil hat about things, there are far, far
better _investments_ than either one - including, once again, land.

~~~
rms
Don't forget antibiotics, antivirals, and narcotic painkillers for your zombie
survival kit...

~~~
caf
Steroids too.

------
furyg3
Fungibility?

~~~
icebraining
Bitcoins are fungible. In fact, there's no such thing as "a" bitcoin, they're
just amounts recorded on the blockchain ledger, so they're actually perfectly
fungible, even more than gold.

~~~
tlrobinson
There is "a" satoshi though, the smallest divisible unit of bitcoin. 1 BTC =
100,000,000 Satoshi

~~~
icebraining
Not in the way I meant it; like Bitcoins, Satochis don't have anything that
identifies them. They're just a number in the ledger.

