[nodoll]

The idea described in the post makes sense to me. Bitcoin is idealized gold.

Today gold have some advantage over bitcoin in that it has some intrinsic value. But if someone finds a way to covert iron into gold, your reserve will disappear overnight.

But no such risk for bitcoin. The maximum supply is capped at some number.

[throw0101c]

> Today gold have some advantage over bitcoin in that it has some intrinsic value.

For humans, the only things that have 'intrinsic' value are air/oxygen, shelter, water, food. (Notwithstanding things like joy/happiness and being loved by others.)

Anything else is an arbitrary / psychological trick, or sociological agreement, that we do amongst ourselves. Rocks are just part of this latter mechanism, regardless of whether they are shiny or not:

* https://en.wikipedia.org/wiki/Rai_stones

> The maximum supply is capped at some number.

A fixed money supply is a bug, not a feature. The historical record shows this:

* https://archive.is/https://www.theatlantic.com/business/arch...

* https://www.moneyandbanking.com/commentary/2016/12/14/why-a-...

* https://en.wikipedia.org/wiki/Long_Depression

[nodoll]

That article has a chart which shows some price fluctuations and follows that gold standard did not prevent it. But that would require the price fluctuations are only caused by changes in money supply. Which I have a hard time agreeing with.

I get the drawbacks of gold backed money. But I think it dwarfs when compared to a debt based money. Basically I think debt based economies tend to foster rampant exploitation. Yea, I think inflation is really exploitation and thievery. There is no other way to see it. Debt based economies cannot work in a fair way without a way for the community to extract values from the entities that are indebted. It might be a government, or it might be a person. When a bank gives out a loan, it can ask for some collateral. But what collateral does a government provide when it issues a bond?

So in short, a gold backed economy might hinder progress or slow it down, but it won't actually enable thievery and exploitation. But the modern economies does that, and so they are a much bigger evil than a gold backed one.

[throw0101c]

> Yea, I think inflation is really exploitation and thievery. There is no other way to see it.

CPI<0 is deflation, and history has shown how badly things go with that. CPI>>0 has had recent examples and people don't like it. CPI=0 is practically impossible, as you have measurement error and can easily slip into CPI<0 territory.

So we're left with CPI≳0, which is what most monetary policy aims for:

* https://en.wikipedia.org/wiki/Inflation_targeting

> So in short, a gold backed economy might hinder progress or slow it down, but it won't actually enable thievery and exploitation.

The era of the gold standard was the Gilded Age, when wealth inequality was at its highest. The US has reached that peak again by some measures—while other countries have not, which probably says more towards other social policies that are probably more important than currency regime.

Further, the gold standard causes deflation, which is a terrible burden for those that have debt, like most farmers, and anyone who has a mortgage. It can grinds down wages.

There's a reason why many regular folks hated the gold standard back in the day:

* https://en.wikipedia.org/wiki/Cross_of_Gold_speech

[tromp]

If someone finds a way to efficiently compute discrete logs over elliptic curves, bitcoin will disappear overnight.

[nodoll]

I think the community will replace it with a better algorithm and existing coins will be swapped for the new coin. Transactions might be required to be frozen for a while though..

[tromp]

How do you make sure that only the original owner of a P2PK can swap for the new coin, and not one who also found the private key? Isn't that private key the only thing that can be required for authorizing the swap?

[CyberDildonics]

The 'community' hasn't even been able to increase the transaction throughput from being less than a 28.8 modem.

[xigoi]

Who is going to replace it? There is no central authority.

[nodoll]

None required. Once the vulnerability is known, everyone will be incentivized to migrate to the new coin.

[xigoi]

Sure, but you’ll lose all your existing money.

[nodoll]

No, the new coin will be exactly as valuable as Bitcoin, ensured by the community consensus. That is the whole point.

[Gud]

If someone figures out a way to convert iron into gold, we are truly living in a marvellous world because this scarcity economics is finally over. In that case, who gives a shit about bitcoin.

[suraci]

that, is the illusion

[nodoll]

That is not an illusion. Bitcoin supply is capped.

If you actually share what you mean by illusion, I can try to address it.

[munksbeer]

> That is not an illusion. Bitcoin supply is capped.

Bitcoin is just one of an infinite number of cryptos.

[suraci]

the point is to clearly understand where __value__ comes from and how/where it is stored

it's complex so i'll just raise a simple question:

What distinguishes Bitcoin from Titcoin, another kind of cryptocurrency which also is with a 'capped supply'?

other similar questions:

back to the old time - the gold-standard era, gold supply is also capped, why the gold-standard died?

[nodoll]

>What distinguishes Bitcoin from Titcoin, another kind of cryptocurrency which also is with a 'capped supply'?

The presence of a growing community that are willing to accept it for good and services.

> why the gold-standard died..

You don't want the entire economy of a country to be based on capped assets. That would limit the size of your economy. But such assets can work well as a reserve. Gold works because of its intrinsic value, and is not dependent on the presence of a community that accept it. But its intrinsic value can disappear overnight. Bitcoin works as reserve because of the presence of a growing community that accept it, and is dependent on the community. But its value would not disappear and is only decided and ensured by the community.

So it really a matter of reaching community wide consensus. Bitcoin have it right now and there is no fundamental reason why it would lose its value. Sure governments can ban it, and it ll lose its value. But if the government itself is holding reserves in it, then we can be pretty sure that that would not be done.

So to answer your question, gold standard died because it would limit the size of the economy that it can support, because supply of gold is limited.

[nodoll]

> where __value__ comes from and how/where it is stored

Value comes from people and the work they do. A currency, or a system of money, or let us speak plainly, a system of economy tracks the value provided by a person to the community. If you have 100$ with you, that means that you have done 100$s worth of work for the community. Same with bitcoin, if you have 100 bitcoins with you, that is a proof that you have done that much work for the community. And you are entitled to the same amount of work from the community. You redeem it by paying with this currency, the other people of the community for their services.

So in otherwords, paper currency is just a distributed ledger. Instead of a ledger with some values written in a piece of paper against your name, you just hold the corresponding amount of paper currency to prove the work that you have done. When you consider all the currency held by a the people in a community, it is really a ledger that is distributed over the people in that community.

A bitcoin economy can work exactly like this. Fundamentally because in reality, in a real economy, you are not storing the value, you are tracking it.

This makes sense, because an economy really is a system that enables people helping each other, ensuring that no one takes more than they provide, or have to provide more than they take.

[rickydroll]

$100 worth of work is not the same as solving $100 of proof of work puzzles. $100 worth of work produces some value to the local community in that you deliver goods or services that somebody else wants. A proof-of-work puzzle takes a resource (electricity/compute cycles), and destroys it. IMO, Proof of work puzzles are only useful as rate limiters. POW doesn't create value like chemical processes producing pharmaceuticals, or smelting iron ore producing steel.

[nodoll]

When I said "Work" I didn't mean POW puzzle solving.

But solving PoW puzzle to mine bitcoin is also useful work in the sense that it adds one coin to the economy, which is why miners are rewarded for it.