Topic: Gold collapsing. Bitcoin UP. - page 638. (Read 2032266 times)

We may be in agreement here. I would argue that there is a chance block rewards will need to be reworked, though not in a way that will affect current holders much, or at least not for a very long time.

A better way of making the point I want to make is that the bar for scrapping the entire ledger is extraordinarily high. If reworking the coin issuance schedule is necessary, it makes sense to do just that rather than have a completely different competing ledger.

Turning to an argument based on magnitudes, if we assume the "backup ledger" is worth 10% what Bitcoin is, the Bitcoin ledger would have to be something like 90% screwed up before it would make sense to change over. Coin issuance changes wouldn't be that level of change, at least not for maybe several hundred years(?).

You're confused. When a gold miner pulls gold out of the ground (or out of the ocean, or off an asteroid), everyone else's percentage of the total declines. That doesn't happen with bitcoin. My one bitcoin is 1/21m of the total, forever. The two are not the same.

There has never been a fixed supply money, or ledger, or whatever you want to call it, because fixed supplies don't exist except as a mathematical construction.

This use of a mathematical construction as a monetary base is an unprecedented experiment. Whatever you think will happen or should happen is unproven speculation.

The very mention of "fixed supply monetary standard" shows a misunderstanding of what money is in the first place. Here I mean money the system, not the actual units. Money is a ledger tracking who owns what percentage of the total claims on goods and services in an economy. This ledger has historically been maintained using pieces of scarce metal, paper promises by a central issuer, and now in the most natural and direct way: as an actual ledger (Bitcoin).

If you keep thinking about "currency" and "money supply" you will never understand money. Thinking in terms of percentages, it is clear that "money supply" cannot be expanded - only the ratios of who owns what can be changed. When a miner gets a mining reward, no "new money" is created, even though such phrasing is familiar in everyday talk. All that happens is the percentage of the total ledger all current holders own decreases slightly, while the miner's percentage increases. The very same thing happens when a gold miner finds a nugget or the Fed prints a billion dollars. Only the ratios change.

This is why, again, the whole implication that "something untoward might happen if we do this unprecedented thing where we have a fixed money supply" or "won't something bad happen if money supply doesn't grow with the economy" is based on a pure misconception. To quote a recent reddit post, "It's like saying you need to continually increase the number of inches in a foot as your child grows in order to measure his height."

Yes I already acknowledged that some aspects can be changed but neither can arbitrary changes be made, as you point out.

Other changes one might imagine are include the sorts of variable demand-sensitive block rewards as described in Vitalik's post. With fixed block rewards Bitcoin is inherently subject to enormous price volatility in the presence of any demand volatility, and that may over time turn out to be non-viable.

It is foolish and short sighted not to realize that bitcoin is an experiment in progress, and may have gotten one or more fundamental things seriously wrong.

Before you assume I'm trashing bitcoin here and respond accordingly, note the emphasized use of "may" in both of the above paragraphs. Serious risk factors exist.

Also note that bitcoin is priced for at most a 0.1% chance to succeed in a big way on the scale of fiat. If you think the probability is actually 1% then you should bet big on bitcoin, but it can simultaneously be rational to bet on alternatives that might succeed on that scale instead of bitcoin.

I agree with this, but I think a better term for the value proposition is "neutral money", instead of "store of value".  Bitcoin eliminates trusted authorities.  If the system has trusted authorities, it does not compete with bitcoin.

I wrote a short article about this here: https://gist.github.com/weissjeffm/ab8e157e7d7943b07310

You're not reading.

The Bitcoin protocol specifies the parameters of the ledger (including coin issuance schedule) and how it is updated, but that doesn't mean you can't have a different protocol that maintains the same ledger and issuance schedule but that accomplishes this task differently under the hood. This has nothing to do with the "separate the currency from the blockchain" meme that is floating around.

Mining fees do introduce some ambiguity if they are set extremely high by the protocol and somehow cannot be user adjusted, because the effect would be similar to changing the coin issuance schedule. But that seems a moot point because users would find a way around the default setting if fees were so high as to make a difference.

The very first thing to understand about Bitcoin is that its store of value function is at least an order of magnitude more important than its payment or remittance functions. Very roughly speaking, something like 90% of the value of Bitcoin is in something the government cannot possibly replicate without relinquishing control of the money supply. They could create digital money, but that wouldn't touch the lion's share of Bitcoin's value proposition.

Bitcoin is an auto-immune virus that diseases the incentive structure of the state. Gold couldn't do this, because it is too difficult to hold and transport gold without people finding out you have it. Once higher-ups figure out how to covertly hold bitcoins, the incentive structure disintegrates from the inside out.

They could strengthen the ruble by selling some government property, buy rubles for the proceeds and destroy them, or, these days of debt, repay some debt or stop rolling it over. They could probably cut all taxes and run the government on selling land for a decade or so, while using the timeout to fire all government officials. It will be done if it is in the interest of the current powers, which it isn't.

Yep you're right. Though, I have to say that reading his blog posts is always stimulating (lately he was quite prolific, 4 posts on ethereum blog in Nov alone).
E.g. after having read his "The Search for a Stable Cryptocurrency" I was
eventually barely able to understand what "seignorage shares" is

Yes.  Pegs are completely discredited in economics simply by their history of abuse.  It seems a poor choice of term to recycle for use to describe the Side Chain exchange process, but then... they didn't ask our opinion. 

Uh huh, sounds very user friendly.  Speaking of which, I really hate it when I have to calculate capital gains whenever I use my Visa.

Essentially Russia was previously backing it with oil (and nukes and taxation-or more broadly external and internal force and threat, just like any nation state).
So this is more akin to acknowledgment of adding gold to the basket.

and the good news is that SHA-2 seems to be holding up pretty well with no successor clearly in sight even tho SHA-1 has been proven to be insecure.  it also seems that these advancements come from the academic circles thru NIST competitions IIRC.  we should have plenty of warning that some breakthrough is on the horizon with a need for SHA-3.

Probably not the best example.
This would be a pretty big change to the currency.  At minimum a lot of it could change hands against the will of the owners.
This would be an emergency hard fork that would not be a simple change.
It would destroy every current mining operation and force a complete restart there from CPU-GPU-FPGA-ASIC progression.

I know some notable speakers use this example as one of the "there are no problems we can't solve" message, but this would in fact truly wreck havok on Bitcoin.

Fundamentally though I'd agree with the broader point that not every protocol change is necessarily a change to the currency.  Many would be entirely seamless to users.  This just isn't one of those.

Isn't the problem that at some point there will have to be some centralization for smart contracts to link up with physical objects IRL?

It's not for me, but I feel https://bitreserve.org/ has a very solid business model.

Their new "Gold" card is quite interesting for gold bugs, I would think. https://bitreserve.org/en/our-vision/gold To me this all seem pointless but I can see some people liking the idea.

The transparency model is impressive and I believe, and hope, that this practice will be made a standard in the industry.

I don't understand how a gold-standard could be considered credible. Whether it's the Switzerland, Russia, China, or anywhere, how is it not obvious that after implementing a gold-exchange standard at some fixed peg, they'll eventually just move or eliminate the peg?

Not only is it obvious in theory, but there's historical precedent.

Pegs don't work. Clinging to the idea that a peg somehow conveys credibility is ludicrous.

Chances of that happening are about 0.5%. This is worthless hype.

Interesting discussion and analysis on the possibly of Russia backing the rubble with gold and reinstituting a gold standard.

http://www.goldmoney.com/research/analysis/russia-s-monetary-solution