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As per gold: I agree with that common objection. If bitcoin is a ponzi, so is gold. > First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour. First, this does not negate the comparison. Bitcoin could also be like that, and therefore not a ponzi. Second, I know a long of gold investors who would disagree with this opinion. Third, the market cap of gold is over 4x bitcoin, indicating that gold has already reached saturation, whereas bitcoin has space to grow. > Second, as a commodity, gold HAS a source of revenue besides the investors; namely, the purchases by consumers like jewelers and industry, This is a point that always gets brought up in discussions of gold. It is wrong and practically dishonest. Gold as jewelry does NOT drive the value of gold, by and large. And even if it DOES, the valuing of gold as jewelry material over any other similar-colored material is itself non-intrinsic/socially constructed. People like to own gold jewelry for the same reason people like to own bitcoin. |
Once we accept that the price is defined by speculators, the industrial and decorative applications of gold set a floor price rather than necessarily redefining the category.
There are a few key differences.
(1) Gold is zero-sum. Once out of the earth, it simply continues to exist. It produces nothing, consumes nothing, reacts with nothing, and doesn't really get lost or destroyed.
(2) On the other hand, if Bitcoin miners are turned off, 100% of the value evaporates instantly.
(3) Bitcoin therefore is negative-sum because miners require a steady influx of new capital in order to purchase coal to burn to 'secure' the network. This new capital is raised in the form of block rewards which are sold, exerting negative price pressure in the amount of ~$60M USD per day. If new capital stops coming in, Bitcoin bleeds value slowly, and then drops to zero all of a sudden.
The difference between a zero-sum vehicle and a negative-sum vehicle is enormous at the limit.
> People like to own gold jewelry for the same reason people like to own bitcoin.
I do disagree with this however, most people buy gold because it's shiny and a status symbol. They want others to see it. People buy bitcoin because number go up.