I think you misread my comment. I'm aware of the fact that people like Bitcoins because there is no government/central bank that can manipulate them. To me, that's a red herring though, the proverbial 'itch that Bitcoins scratch' for some people. I don't think Bitcoins solve any issues related to wealth preservation, and I don't think they offer any advantages as a store of value compared to other forms of wealth/value or currency that are not (directly) government controlled (at least not in similar ways as fiat money), such as commodities, precious metals, art, production capacity, etc. In fact, I think anyone holding lots of wealth in Bitcoins will someday lose all of it, in an instant.
The point is, that even though there is a limited amount of bitcoins, and even though governments have no influence on the supply of bitcoins or who holds them, they can still affect the value of bitcoins in dramatic ways. For example by legislation that makes any form of bitcoin trade illegal. Or maybe it doesn't even require legislation, maybe just the threat of legislation to curb bitcoin trade will cause people to lose trust in Bitcoins altogether. Just because the government can't inflate Bitcoins, doesn't mean it cannot destroy the trust some people have in it.
I mentioned military power not because I think it's a good thing, or an insurance against the depreciation of wealth expressed in fiat money, but as an example why fiat money is at least backed by something, unsustainable as it is. In times of resource scarcity or world-wide economic collapse, military power will 'buy' you (or at least some) the means to survive, not some virtual currency that nobody has a use for in times of distress.
> Since there is a finite number of bitcoins that can ever be mined, it acts much more like gold than like the dollar.
It acts like gold, but it is not gold. Gold is a tangible asset that has been a proven store of wealth since as long as we know about the history of human civilization. Gold is shiny, you can store it somewhere, make handy pieces out of it and and take it with you, people like holding and looking at gold, almost anybody, anywhere in the world will take gold in exchange for other goods or services. Smart governments are stockpiling gold at an accelerating rate, because they damn well understand that someday in the future dollars, euro's or yens will be worthless. Bitcoins are nothing like that. They are purely virtual, strings of bits, just like Linden dollars, or WoW gold. I think it is extremely unlikely people will ever lose faith in gold as a store of wealth, but I can imagine many scenario's where people will lose faith in Bitcoins. It will happen, trust me.
The money supply and inflation/deflation thing is purely theoretical. Hyperinflation doesn't occur because governements purposefully manipulate the money supply, but because paper rectangles and metal circles are useless if nobody has a use for them. I know the same can be said about gold, but I would bet everything on gold outliving Bitcoins as store of wealth. You don't need a PhD in economics to recognize this.
My advice: don't put your money in bitcoins. If you don't trust fiat money, buy tangible assets, invest in yourself, learn how to generate utility and wealth after the inevitable fiat money crash.
Once somebody mine an asteroid full of gold, the whole Gold as money will come to an end. However, gold will become a more useful commodity in industrial/medical/electronic/etc applications since they are cheap.
Thousand years of history mean nothing when something change the whole playing field. There's nothing remotely implausible about asteroid mining except the necessary development of a space industry. As far as I am concerned, gold is living on borrowed time.
There are individual asteroids that have more easily extractable precious metals than the entire present earth supply, should we have a good method of returning them to earth. The mere existence of these ought to start playing a number on the metals markets once planetary resources starts doing something newsworthy.
Just because some nutters invest their excess money in some sci-fi fantasy doesn't make it real.
Outright bullshit. Gold became money because you could make statues of the Sumerian gods out of it. Silver for almost exactly the same reason.
There is nothing actually valuable about some rotten piece of metal, or at least, their industrial uses can't back up their price.
Good luck when the gold bubble pops.
> There is nothing actually valuable about some rotten piece of metal, or at least, their industrial uses can't back up their price.
Not valuable compared to what? A string of bits identifying some kind of cryptographic hash? Give me a break. If you really think it will be Bitcoins that will provide for your well-being after a complete monetary collapse, sooner than tangible, hard assets such as gold, you should get your head checked.
Forgetting about gold for a moment, go check how many proven, explorable reserves of silver there are right now, and at what rate they are being dug up for industrial use.
> Good luck when the gold bubble pops.
People have been saying this since as long as I can remember. Wait until the bubble pops... It just shows a complete lack of understanding of what actually constitutes a bubble, in economic terms. But feel free to disagree, who am I to tell you how to manage whatever fortune you have managed to gather.
That said, anyone with a brain will make sure they diversify into different asset classes. Apparently you seem to think I'm a goldbug or something, but this couldn't be farther from the truth.
Compared to tally sticks, say, or bushels of wheat, or time-banked labor hours.
With that said, I'd recommend you to lookup some history of monetary systems, and see what systems survived for how long, and how they came to collapse. Just because bitcoins are digital, a product of technology, doesn't make them any different from tally sticks. It's just a way to exchange stuff without having to barter. Maybe bitcoins are much harder to counterfeit then tally sticks, but then again, it is probably also much easier to sabotage the systems required to trade them. In the end, the currency that sticks around the longest when all the other systems fail, will be the most reliable one to preserve wealth. It's a self-reinforcing process even.
Now go try and see how many bushels of wheat you can get your hands on with just exchanging tally sticks. Then try to buy some using gold.
No farmers near me take payment in anything except United States Dollars.
If deflation outstrips investment returns, then yes - that would cause capital to stay in one place, as people wouldn't want to spend money that would be worth more tomorrow. Investment would stop, businesses couldn't get financing, and everything would grind to a halt.
That's not a sustainable situation though; there will never be a time when all units of currency are held, nothing changes hands, and value is infinite. Instead, as value increases there will be profit-taking, which will hold down the value to some point. With the current relative lack of liquidity, you get a boom/bust cycle (the price will shoot up as more people try to get in on the value incrase, then confidence falters and the price crashes back to near baseline).
This has already happened once for Bitcoin, and it's important to note that the value over time has been somewhat linear when you account for the impact of the boom/bust.
As the liquidity of the market increases due to wider adoption, then you'll start to see the cycles increase in duration, as the market seeks balance. There will always be fluctuations, though, so the ultimate goal is ubiquitous use of Bitcoin in the general economy, and years- or decades- long variance in value.
I believe we're entering a new phase of growth, which will be sustained. I predict we'll see a good-sized correction relatively soon, and lots of smaller ones on the way up, but otherwise the value of Bitcoin in USD will steadily rise for the foreseeable future.
This doesn't look like another boom to me. This looks like people moving wealth to Bitcoin, and actually using it to buy things other than banknotes.
Gold may have started being used as money because it was already demanded for, say, jewellery. Bitcoin may have started for "fun" or belief in future growth and even bigger demand. The truth is in both cases the initial value was purely subjective.
The dollar isn't necessarily Bitcoin's competitor. So maybe the dollar is good because it has such a power behind it. But what about all the other currencies of the world? Can you say they are all better than Bitcoin also? Try thinking about it in a less US-centric way.
Which will work just as well as stopping global piracy, i.e. not at all.
I don't think there is any kind of currency that survived for more than a few hundred years, there have probably been hundreds if not thousands. Stamps, sticks with carvings on them, silver coins when fiat coins where still actually made of gold (can you believe it?), seashhells, etc. The ones that survived the longest have been government-controlled fiat currencies.
Once again, just to make myself clear, I'm not saying this is a good thing, just making the observation.
On the other hand a 51% attack on the blockchain by _anyone_ would have a near 100% chance of destroying Bitcoin.
Miners who have been on the network for longer would have greater authority than new miners, regardless of computational ability. If a 51% attack occurs, it would in effect fork the blockchain, because the WoT-enabled miners would not accept their signed blocks.
You can fork the blockchain now if you want - it's just a matter of getting enough people to agree with you for those coins to have value.
I'm not saying it would be _good_ for Bitcoin - but this is not an insurmountable problem from a tech standpoint.
I'm not so sure if this is 'inevitable' since bitcoins in itself have no value at all. I know the same can be said about fiat money, but at least that's what everyone agrees is legal tender, as opposed to just a bunch of idealists or people who need a way to pay for shady stuff. But bitcoins are not like commodities, or labour, or whatever else has limited supply and non-zero utility.
Personally I'm not even touching bitcoins with a 10-foot pole. The day some government decides bitcoins are becoming a real alternative or even a threat to government-controlled money, they will shut the whole gig down and all your bitcoins will be worth nothing.
One thing I never understood about bitcoins, is what other problem they solve besides scratching some ideological itch some people have with money controlled by central bankers and governments (which I can imagine are valid concerns for some people). Effectively bitcoins are just like fiat money; worthless tokens that have no intrinsic value besides the trust that some people have in them to hold their value. Trust that is not actually based on anything either. At least the dollar has a government with a big military behind it that can assert their influence on areas where real wealth is concentrated. I'm not saying this is a good thing, just making the observation.