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As Bitcoin Soars Over $300, A Question Arises: Could It Become A Global Reserve Currency?

Tyler Durden's picture





 

Having now tripled since August, Bitcoin's break above $300 ($324 highs) raises an important thought experiment - can a digital currency act as a global reserve currency?

 

 

It seems yesterday's CNBC discussion that Bitcoin is nothing but a beanie-baby fad just served to feed the beast... on heavy volume after Draghi's comments...

 

Charles Hugh-Smith, from OfTwoMinds blog, attempts an answer of just that question:

Could a non-state issued digital currency like Bitcoin become a global reserve currency? The idea came up in my recent conversation with Max Keiser on the Keiser Report during our discussion of reserve currencies.

The idea is intriguing on a number of levels. In terms of retaining value though thick and thin, the ultimate reserve currency cannot be printed (and thus devalued) with abandon by a government. Gold and silver have served as the ultimate reserve currency, as precious metals can be traded for commodities and services, provide collateral for debt and serve as reliable stores of value.

While many observers believe gold is still the only reliable reserve currency (or if you prefer, the only reliable backing for government-issued paper money), it's a worthy thought experiment to ask if a digital currency could also act as a reserve currency.

Since there is no real-world commodity backing the digital currency, its value must be based on scarcity and its ubiquity as money. The two ideas are self-reinforcing: there must be demand for the digital money to create scarcity, and the source of demand is the digital currency's acceptance as money that can be used to buy commodities, goods, services and (the ultimate test) gold.

It follows that the first step in a non-state issued digital currency becoming a reserve currency is that it isn't created in quantities that dwarf demand. If the digital currency is issued with abandon, it cannot be scarce enough to gain any value. If I own one quatloo (our hypothetical digital currency) and a trillion new quatloos are issued tomorrow, the value of my one quatloo will decline to near-zero.

The second step is its widespread acceptance globally as money, i.e. a store of value and something which can be traded for goods and services.

There is a bit of a built-in conflict in these two requirements. To be useful in the $60 trillion global economy, the quatloo must be issued in size: there must be enough of it around to grease transactions large and small in all sorts of markets. Using the U.S. dollar as a guide (since the USD is the primary reserve currency), we can estimate that a minimum of $1 trillion in quatloos would be needed to become a practical global currency.

To act as a reserve currency, another trillion or two would be needed, as nations would hold these quatloos as reserves. (Nations hold an estimated $7 trillion in USD reserves, about $3 trillion euros and $1 trillion or so in yen, pounds and other currencies.)

But issuing quatloos in these quantities would remove any scarcity value. Thus the issuer of the quatloo would have to carefully issue more quatloos only when demand justified the need for more monetary "grease" for the global economy.

If on the other hand skyrocketing demand/scarcity drove the value to the stratosphere, holders of the quatloo would rejoice, but this volatility would present its own set of risks for those seeking to use the quatloo as a reserve against currency volatility in the home-country currency. If a digital currency can leap ten-fold in a short time, then might it not drop with equal volatility?

Volatility is the enemy of reserves; the holder of reserves needs a liquid (meaning it can easily be sold or traded in size) currency that predictably retains its value. A volatile currency poses risks, as do currencies that cannot be traded in size without drastically influencing the market value of the currency.

These conditions pose a steep challenge for any digital currency, but they are not insurmountable. Even as a niche currency, non-state issued digital currencies could play a role in the global economy, especially if government-issued fiat currencies destabilize/ devalue due to massive money creation by desperate central banks and state treasuries.

Is scarcity enough to back a non-state issued currency? Bitcoin offers a real-world experiment.

* * *

Meanwhile, in Russia if you pay with Bitcoin, you get a 10% discount:

 


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Thu, 11/07/2013 - 12:42 | Link to Comment achmachat
achmachat's picture

no

Thu, 11/07/2013 - 12:43 | Link to Comment NotApplicable
NotApplicable's picture

Yeah, you can be sure that between the IRS and Homeland Insecurity, this terrorist plot will be dealt with.

Otherwise it will be impossible to stop.

Thu, 11/07/2013 - 12:45 | Link to Comment malikai
malikai's picture

BTC Traders - We've just released QSN Risk Manager for Bitcoin. 

https://bitcointalk.org/index.php?topic=327027.0

Thu, 11/07/2013 - 12:48 | Link to Comment EscapeKey
EscapeKey's picture

Very cool.

I have spoken to a couple of hedge funds who are opening their eyes to BTC, one of which already had an entire trading platform revolving around BTC.

 

Thu, 11/07/2013 - 12:50 | Link to Comment gmrpeabody
gmrpeabody's picture

But..., I thought bitcoin died months ago...

Thu, 11/07/2013 - 13:07 | Link to Comment Bunga Bunga
Bunga Bunga's picture

... and Bitcoin can be easily hacked. And it has a flaw, it will crash. And I can't hold it in my hands. 

Thu, 11/07/2013 - 13:18 | Link to Comment Bindar Dundat
Bindar Dundat's picture

One BTC = one ounce of GOLD

Thu, 11/07/2013 - 13:28 | Link to Comment SMG
SMG's picture

I think the plan is to introduce a global reserve new currency backed by gold and silver after the fiat blowup.  Maybe it will be like Bitcoin but backed by silver and gold. Like a Silver Bitcoin or something like that.  But in it's current version, no.

Maybe something you could load on an implantable chip too.

Sigh.

Thu, 11/07/2013 - 14:19 | Link to Comment CH1
CH1's picture

I love Bitcoin, but there are a lot of steps between here and a global reserve currency. Let's not jump to extremes.

Thu, 11/07/2013 - 14:42 | Link to Comment mmanvil74
mmanvil74's picture

The author attempts to imagine the use of Bitcoin as a world reserve currency by comparing it to the US Dollar.  But, for Bitcoin to be effective, it does not have to act as a reserve currency at all, it merely needs to be effective as the world's trading currency.  

The idea of a reserve currency, which requires trillions upon trillions of units in circulation, has been created to sustain the modern financial system, which is rooted in ridiculous quantities of money flowing around that are not being used to buy or sell anything, but exist only contractually, to make bets and hedges, and hedges and bets against those hedges and bets, up to infinity, if the FED will let them.  

We don't need a world reserve currency, apart from Earth's commodities as they currently exist, what we need is an alternative trading currency that is more useful and amenable to Earth's population at large.  Earth's commodities, including Gold, can be measured in Bitcoin.  Therefore, we don't need a currency so vast to sustain the world's current financial system, we only need enough to satisfy the buying and selling of goods and services by the population as a whole.

The requirement for a world's trading currency is much more modest than a world reserve currency, and, with each Bitcoin divisible by up to 8 decimal points, it is conceivable that there will be enough of them to do the job.  If not, competing virtual currencies could, and are being created so the market can decide which virtual currencies it wants to trade with, none of which are printed, governed or controlled by any central bank.  

If central banks want to hold on to the idea of a fiat currency being the world's reserve currency, they may do so, but if that currency is no longer favored by those of us who buy and sell real goods in every day life, that fiat currency will no longer serve any significant purpose.  Central banks might be wiser to accumulate gold as their reserve currency, or other commodities, as er, uh someone (China) we know is already moving strongly in that direction.  Earth is the world's reserve currency, what we need is a more effective, decentralized trading currency.

Thu, 11/07/2013 - 14:56 | Link to Comment wintermute
wintermute's picture

The extreme volatility of Bitcoin/fiat fx rate will only persist during the exponential growth phase. Once "market saturation" is reached, it will plateau and prices in XBT will become very stable.

Gentle deflation should occur in a Bitcoin economy driven only by improving technology and real production efficiency. Just how an economic system should work.

 

Thu, 11/07/2013 - 16:17 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

The NSA is not stopping the DOLLAR because it prints them. The NSA is not stopping the BITCOIN because it generates them. Bend over and grab your bootstraps. max Keiser can go fuck himself too.

Thu, 11/07/2013 - 16:33 | Link to Comment Jack Napier
Jack Napier's picture

BitCoin could only be as effective as a world reserve currency as any other non-metal backed currency. There's no intrinsic value. With fiat we have central banking management, or with BitCoin we would have speculative market management. Both are inferior and rooted in the sand as far as stability is concerned.

Thu, 11/07/2013 - 15:05 | Link to Comment Simplifiedfrisbee
Simplifiedfrisbee's picture

So a worlds trading currency, by default of the current world reserve currency, would not be considered a world reserve currency? Hmm...Ultimately, the people are the reason why currencies and monies hold value, so if the current global reserve currency collapses(which it will), then wouldn't according to the paradigm established today reserve Bitcoin as the reserve currency of choice? Is not that the ideal situation for those who believe in Bitcoin? Another salivating over the amount of prosperity can be obtained by the demise of others.

Thu, 11/07/2013 - 15:58 | Link to Comment fonestar
fonestar's picture

Short of installing high-end ALG's with deep packet inspection at every major ISP and banning encryption (you couldn't anyway) I dont' think Bitcoin can be stopped. 

There is nothing to stop the mighty Bitcoin from gaining critical mass at this point.  It will grow and grow until it causes panic throughout the globe.  The mass of a single Bitcoin will cause a tear in the fiat universe.  Every barrier is only a psychological barrier to be destroyed, utterly destroyed, ravaged, pissed on and left for dead.  I have no sympathy for those left holding fiat.

PM bugs take heart, your gains are only being temporarily masked by the massive crimes at the COMEX. 

 

 

Copper - The money of beggars

Silver - The money of gentlemen

Gold - The money of kings

Paper - The money of con men

Debt - The money of slaves

Bitcoin - The money of hackers

Thu, 11/07/2013 - 15:49 | Link to Comment emersonreturn
emersonreturn's picture

mm74

 

great take, thanks for the insight

Thu, 11/07/2013 - 18:12 | Link to Comment MrPoopypants
MrPoopypants's picture

The CFR is pushing this, anyway. Read Benn Steil on digital gold.

Thu, 11/07/2013 - 13:28 | Link to Comment Bunga Bunga
Bunga Bunga's picture

As of now:

Wealth of the richest 0.1%: 40 trln

Bitcoin in circulation: 12 mln

Thu, 11/07/2013 - 19:45 | Link to Comment TheHound73
TheHound73's picture

A bitcoin is an arbitrary unit that can be divided ad naseum.  A Bitcoin contains 1,000,000 base units, sometimes called Satoshis after the mythical inventor of Bitcoin.   $40 trln/12min BTC = $3.333mln/BTC or $3.33 per Satoshi.

Thu, 11/07/2013 - 13:52 | Link to Comment TheCanadianAustrian
TheCanadianAustrian's picture

Actually, as a fraction of the overall currency supply, one BTC = approximately 310 ounces of gold.

(This is using Bitcoin's maximum supply of 21 million. By today's supply, it would be more than 500 ounces of gold.)

Thu, 11/07/2013 - 14:03 | Link to Comment zaphod
zaphod's picture

And gold is significantly undervalued today compared to fiat because of the fractional games the central bankers can play.

Just two generations ago, gold based financial instruments represted around 30% of the world's wealth and this percentage was stable, this was before massive debt based fractionalization. Today gold represents around 0.1% of the world's wealth.

We were to move back to a sound money system based on gold, gold itself would rise ~300x in value.

If this sound money system were based on bitcoin that value would be your 1 BTC = 310 oz of gold * 300 to bring it to the true value in terms of dollars today

Thu, 11/07/2013 - 16:52 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

As savers, investors or speculators, ALL we need to know is shown on http://www.oanda.com/currency/converter/

Select BTC vs. USD or BTC vs. XAU (gold), and you get the chart plots.  If you go to the Historical Rates tab, you can create custom charts.

The point is, "There's money in them there Bitcoin hills!"  In fact, BTC kicked Gold's ass.  Big Time!!!*  Which is why I'm re-balancing my portfolio to start buying BTC (after next Dip), rather than any more PM. 

* E.g., Say you bought AU in 10/1/2012 @ $1778.  You could've bought BTC @ $12.60.  YOU do the math, what ROI you got for XAU and for BTC. Let me make it Excel-easy on you:  If you had "invested" $100k in gold (listened to gold-bugs/shills on ZH), you now have ~ $75k.  Congrats, you must be proud of yourself.  If you had invested the same $100k into BTC, you'd be sitting on a cool $2.4 MILLION right now, and be telling your boss to go fuck himself.  Of course, if you sold your BTC now, you'd be buying gold at $1325 -- thus buying a LOT more from the $100k chump-change out of your $2.4M.

No wonder that those who make their living off gold are eating their livers in anger and frustration.  As someone who went through this EXACT scenario (different investment amount) and is sitting on "shitty gold" instead of a shitload of money, I can categorically say to the Gold SHILLS to go FUCK themselves!  Every time an article or blog gets excited about a rise in gold price (or tries to get others excited), I will gleefully remind them (and ZH readers) of the XAU vs. BTC performanceWelcome to Fight Club!

Thu, 11/07/2013 - 19:28 | Link to Comment PaperWillBurn
PaperWillBurn's picture

@$55,000 an ounce.

 

Hold both

Thu, 11/07/2013 - 16:04 | Link to Comment fonestar
fonestar's picture

Bitcoin cannot be hacked.  You people didn't understand Satoshi's brilliance at $3 BTC, you don't understand it at $300 BTC and you still will not understand it at $3,000 BTC.

 

And Satoshi said unto them, "the geek shall inherit the Earth!"

Thu, 11/07/2013 - 17:30 | Link to Comment Being Free
Being Free's picture

http://www.wired.com/wiredenterprise/2013/11/inputs/

Here’s your digital currency lesson of the day, courtesy of a guy who calls himself TradeFortress: “I don’t recommend storing any bitcoins accessible on computers connected to the internet.”

Thu, 11/07/2013 - 13:23 | Link to Comment Non Passaran
Non Passaran's picture

XenoFrog said so.

Where IS Xenofrog, by the way? I miss his insightful views on bitcoin!

Thu, 11/07/2013 - 13:45 | Link to Comment XenoFrog
XenoFrog's picture

When China starts buying Bitcoin instead of Gold, it might have a chance at being a global reserve currency. Until then, I wouldn't get your hopes up reading bitcoin fanfiction.

Thu, 11/07/2013 - 14:02 | Link to Comment unununium
unununium's picture

If China wants to keep up with its citizens, they ought to start diversifying now.

http://www.zerohedge.com/news/2013-10-19/bitcoin-climbs-highest-april-le...

Thu, 11/07/2013 - 17:03 | Link to Comment Brand_New_Investor
Brand_New_Investor's picture

But isn't there a limited number of Bitcoins? What if China buys all the bit coins over time. Won't this ultimately undermine the system? Other governments won't have a way to balance "a la mutually assured financial destruction" if we can't print unlimited bitcoins ? Isn't it about control ?

Thu, 11/07/2013 - 18:32 | Link to Comment shitco.in
shitco.in's picture

China invented Litecoin beacuse they were jealous the US developed Bitcoin.  Litecoin has 4x as many coins (84m) and 1/4 the block times (2.5 mins) and is widely considered the silver to btc being gold.

Thu, 11/07/2013 - 19:53 | Link to Comment TheHound73
TheHound73's picture

China has been leading the charge into Bitcoin recently.  My question is when will India wake up?

Thu, 11/07/2013 - 12:51 | Link to Comment New England Patriot
New England Patriot's picture

Why would central banks want to recognize a world reserve currency that cannot be easily inflated?

Thu, 11/07/2013 - 12:56 | Link to Comment TheGardener
TheGardener's picture

Why not inflate ? Trade it hundreds of times the underlying "physical" and who is to know if those reserves are really
on that hard disk in your vault ? If someone asks for
delivery, claim it is so well encrypted it will take 7 years
to decipher and deliver...

Thu, 11/07/2013 - 13:01 | Link to Comment strannick
strannick's picture

Smells like a G.S. pump and dump, with a side order of gold discreditation. 

Bitcoin is as good as its encryption. Im not buying it.

Thu, 11/07/2013 - 13:32 | Link to Comment bob_stl
bob_stl's picture

Bubblecoin

Thu, 11/07/2013 - 16:21 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

Coinopium.

Thu, 11/07/2013 - 14:25 | Link to Comment aminorex
aminorex's picture

i prefer proofs to opinions

Thu, 11/07/2013 - 13:10 | Link to Comment AgentZeroM
AgentZeroM's picture

It is trivial to securely sign an abitrary message from an offline system to prove ownership over a bitcoin account. Publish the signed message and anyone can trivially verify the signature and view the amount in the account.

Thu, 11/07/2013 - 14:15 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Write a post sometime when you have a vague clue what you're talking about. Til then please shut up.

Thu, 11/07/2013 - 14:34 | Link to Comment TeMpTeK
TeMpTeK's picture

Robert Wagner - " Did u forget your bitcoin password, lose all your retirement savings and are in desperate need of cash ...find out if a reverse mortgage is right for you"

Thu, 11/07/2013 - 15:23 | Link to Comment GoldMeUp
GoldMeUp's picture

Actually he's right and you're wrong.  If you own bitcoins, you can prove your ownership by signing a message using the public key that owns the coins.  This provides a way for banks to *provably* show that they own X bitcoins, in a secure way.

Thu, 11/07/2013 - 14:21 | Link to Comment CH1
CH1's picture

Again, gross ignorance.

THERE IS NO SUCH THING AS A BITCOIN ACCOUNT.

Thu, 11/07/2013 - 20:15 | Link to Comment TheHound73
TheHound73's picture

For all intents and purposes a public/private keypair and associated address can serve as a "Bitcoin Account".  The Blockchain is a public ledger of transactions between accounts. A person or entity can sign a message using their keypair proving they control the account.

Thu, 11/07/2013 - 13:06 | Link to Comment Meat Hammer
Meat Hammer's picture

Why would central banks want to recognize a world reserve currency that cannot be easily inflated?

They wouldn't.  This would be a kill-shot for the banking cartel.

Thu, 11/07/2013 - 13:18 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Ohhh, yes!!  And that is why they, with some of the brightest minds on the planet (whether you all like it or not) will try very hard to destroy Bitcoin.

+ $55,000

 

EDIT:

This seems like a great time to be spending some BTC on Au...

Thu, 11/07/2013 - 13:25 | Link to Comment Meat Hammer
Meat Hammer's picture

Wait a little longer, DoChen.  IMO in a couple weeks you will see Bitcoin higher and gold lower.

Or not.  Yeah, fuck it, good idea.

Thu, 11/07/2013 - 13:36 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

You buy a bearing when it's needed.

You buy gold when you can.

Thu, 11/07/2013 - 21:59 | Link to Comment TheHound73
TheHound73's picture

y, they will recognize it when PMs and Bitcoin are the only credible money instruments left standing.

Thu, 11/07/2013 - 13:10 | Link to Comment Bunga Bunga
Bunga Bunga's picture

Why would a world hegemon favour a reserve currency which he cannot control?

Thu, 11/07/2013 - 22:00 | Link to Comment TheHound73
TheHound73's picture

When he loses control of everything else Bitcoin will be there waiting patiently.

Thu, 11/07/2013 - 13:16 | Link to Comment aminorex
aminorex's picture

they would not want to.  they think they have control.  this is an illusion.

Thu, 11/07/2013 - 15:26 | Link to Comment Gief Gold Plox
Gief Gold Plox's picture

It can be easily inflated. The 21mio limit is arbitrary that can easily be thrashed by a .gov entity.

Get the bitcoin source, main.cpp line 1095, change the 50 to a higher value and build. Install on a shit-load of computers you control. Direct the ISPs that if they don't want to have their connections false-flagged for the rest of eternity to perform DPI on all bitcoin suspect packets and limit SYNC packets to reach only .gov controlled clusters. Give yourself a pat on the back... you control the bitcoin network without the client knowing. You can at the very least tax the shit out of everyone or in fact force the clients to update to a more than 21 million limit protocol and client.

There already is an internationally recognised reserve currency. It's been unchanged for thousands of years.

Gold bitches!

Thu, 11/07/2013 - 15:30 | Link to Comment GoldMeUp
GoldMeUp's picture

Lol nice one, do you really think you came up with a way to kill bitcoin?  Sorry, it's not that simple.

a) Doesn't matter if you're tricked into connecting to dishonest nodes, Bitcoin is *built* around zero trust.  Your bitcoin client checks and validates every block that it receives.  The blocks produced by your modified nodes will be invalid if you are attempting to mint bitcoins beyond the allowed rules.

b) To even get to the point of attempting this futile attack, you'd first need to even mine the blocks.  So, you'd need a huge amount of computational power to do that.  The work would be wasted though - see my first point.

Thu, 11/07/2013 - 15:47 | Link to Comment Gief Gold Plox
Gief Gold Plox's picture

No, I haven't come up with anything. The attack principle is copied from bitcoin wiki, the scenario is naturally hypothetical. That said, the .gov entity controling the most nodes in the network can force clients to install a rased limit protocol if the client ever whises to pay for anything again using bitcoin.

Thu, 11/07/2013 - 15:55 | Link to Comment GoldMeUp
GoldMeUp's picture

Your attack simply reduces to blocking the flow of information between peers.  Modifying the source and adding sybil nodes doesn't achieve anything.  There are 2 fundamental security assumptions that bitcoin relies on:

1) The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.

2) The nature of information being easy to spread but hard to stifle.

If you can isolate a peer from communicating with all other peers, then you stop them from using bitcoin.  However, this is equivilent to shutting down the entire internet.  Remember that we have VPNs, TOR, etc.  Bitcoin transactions and blocks can be transported through any means, it does not have to necessarily be via the p2p protocol on standard ports.

Also note that any such attack would only last as long as the attacker can keep up the censorship.  They cannot steal anyone's money.  Once the internet is "back up" then bitcoin resumes as per normal.

Thu, 11/07/2013 - 17:03 | Link to Comment Gief Gold Plox
Gief Gold Plox's picture

Your point 1) is exactly what I see as possibly the biggest problem to be and the whole point of the method of the attack. While I do own and mine bitcoins, I do not believe it's grown up enough to be a viable replacement for tangible assets as a store of value. VNP and TOR are as you point out very good ways to protect yourself, but speaking from past experience in dealing with average computer users, I just don't see it catching on en mass.

Because of our exchange, I've started going over the things I thought I knew about possible repercussion of controlling a 51% of the available network and it's quite an interesting read, so I just wanted to thank you for making me go learn new stuff. Cheers.

Thu, 11/07/2013 - 12:51 | Link to Comment malikai
malikai's picture

It's really not too difficult to do, provided the available protocols. I just wish other exchanges would start doing sockets. It would make everything better for everyone.

Thu, 11/07/2013 - 12:55 | Link to Comment zaphod
zaphod's picture

The question on if BTC could become a reserve currency was most relevant in its begining (2009-2012).

What is very interesting today is the use of Bitcoin as a platform on which the tech industry can build on top of. Bitcoin is a protocol just as TCP/IP is a protocol. And just as a million impactful ideas were built on top of TCP/IP, a million impactful ideas can be built on top of Bitcoin.

This concept of Bitcoin as a platform is going to be the power of the system and something most do not see yet.

Oh, and each new idea built on top of bitcoin will further expand its usage and further deflate the currency.

Thu, 11/07/2013 - 13:20 | Link to Comment Meat Hammer
Meat Hammer's picture

+ a shitload!  I love my brethren here on ZH, but many suffer from analysis-paralysis.  It's a common affliction for incredibly smart people.

We may not be taking down the banking cartel next week, but the genie is out of the lamp, TPTB are scared shitless, and more & more people are understanding the definition of fiat currency.  

So, it's not about the virtues of Bitcoin; it's about finally having a HUGE awakening to what fractional-reserve banking is all about.

Nothing but good can come from Bitcoin.

Thu, 11/07/2013 - 13:30 | Link to Comment GreatUncle
GreatUncle's picture

Disagree on all good.

The good, yes it i showing the true nature and state of a FIAT currency. Only ever deflationary it cannot hold debt either as the debt once taken starts growing.

The bad - INTERNET SHUT DOWN and restricted communication to control it.

 

 

Thu, 11/07/2013 - 13:38 | Link to Comment SgtShaftoe
SgtShaftoe's picture

If the Internet is shut down, business would shut down. Commerce would disappear.  The Internet is not going anywhere, and for the next few years, neither is Bitcoin likely to. 

Taleb makes an interesting assertion as to the longevity of ideas.  Things that are old have the expected lifetime of their current age.  Gold as a form of money - Age: 5000 years, Expected lifetime: another 5,000 years.  The Internet - 20 years old, expected lifetime: 20 more years.  Like an indefatigable fine wine, ideas that survive tend to survive a long long time and get better with age. 

Thu, 11/07/2013 - 13:39 | Link to Comment Meat Hammer
Meat Hammer's picture

I respectfully disagree with you.  An internet shut down would expose their evil ways and wake EVERYBODY up in an instant.  The Free Shit Army would burn down the joint and people who couldn't post pictures of their lunch on Facebook would flip out.

Their only hope is to keep arresting people like Dread Pirate Roberts, but for every roach they step on 5 more are hatched.

Thu, 11/07/2013 - 13:48 | Link to Comment zaphod
zaphod's picture

"The bad - INTERNET SHUT DOWN and restricted communication to control it."

Not happening for this simple reason.

Government control away from the people has to be done behind the visibility of most people.

A perfect example is the US government having unelected agencies create law through regulation. This is not constitutional but most people don't see it because they were never a part of the legal process of how a bill becomes a law in the first place.

The problem for governements is the only workable solutions to attack bitcoin such as shutting down the internet are too obvious, so they can not use these techniques.

Thu, 11/07/2013 - 14:15 | Link to Comment Thisson
Thisson's picture

Delegation of power is indeed constitutional.  Or at least that's what they taught us in law school.

Thu, 11/07/2013 - 14:14 | Link to Comment unununium
unununium's picture

Soon, the cabal will madly buy up BTC, AU and AG with their fiat currency while said fiat currency still has any value at all.

Their game is just to delay that day as long as possible.

Fri, 11/08/2013 - 15:54 | Link to Comment layman_please
layman_please's picture

internet would not be shut down until government controls more people by it than resist them. unfortunately it's incredible efficient propaganda platform.

Thu, 11/07/2013 - 14:30 | Link to Comment Hulk
Hulk's picture

WHAT analysis-paralysis, HULK SMASH !!!

 

Thu, 11/07/2013 - 14:58 | Link to Comment Josey Whales
Josey Whales's picture

Okay bitcoin, I'm sorry I didn't trust you. Yes, I boasted to all how magificent you were, how wonderful a decentralized currency is--but never trusted you enough to replace my fiat money with. Now, I am shamefully humble. If you could just please come down now babe, to you know like 130...I promise I won't mistrust you BTC...I promise...let's talk down here...

Thu, 11/07/2013 - 15:21 | Link to Comment Martel
Martel's picture

LOL.. I had ample chance to buy at $4 or $5, but didn't. Luckily I got in at $125, 140, 194.... Not selling anytime soon.

Thu, 11/07/2013 - 14:13 | Link to Comment Martel
Martel's picture

I agree. While there are uses for bitcoin in e.g. international remittances, egaming etc., currently it lacks a clear, distinct killer application. Furthermore, to gain widespread acceptance, the technology should be faded into background. Bitcoin servces are still far away from any user friendliness. They will eventually get there, enabling wider participance.

Things built on the protocol could change the picture completely. BIG things, WILD things. Things that trash the current heavy and inflexible technology that is based on 1960s & 70s innovations. The idea of a p2p blockchain is revolutionary, plain and simple. For starters, the owner of a bitcoin account does not have to be a human. It could be your car or house, or an automated power plant with some artificial intelligence built into it.

Thu, 11/07/2013 - 14:16 | Link to Comment unununium
unununium's picture

Really?  Can you be so blind?

Every merchant worldwide is a potential "killer application."

This week's advance - a €100M Dutch food delivery site

http://www.usnews.com/news/world/articles/2013/11/05/main-dutch-food-delivery-website-takes-bitcoin

Thu, 11/07/2013 - 15:09 | Link to Comment Martel
Martel's picture

Look, I read about that Dutch thing yesterday on Reddit. That is NOT a killer app. While the site itself is very popular, that 100M is their turnover in euros. Bitcoin will have hard time achieving 1% of their annual sales. They themselves acknowledged that, saying they're in it for the long run. These and other similar news are good (and expected), but repeatedly blown out of proportion. Just like the Baidu thing. Yes - Baidu's one service is accepting bitcoin, but thus far they've made about 500 USD. Hardly a thing to write home about. You can check it yourself: https://blockchain.info/address/1NtbQKVFxAPc8mmBoWwRzhg7o3EMCBsxNg

A killer app for bitcoin is something that does not exist for any other currency, or is very difficult to execute with fiat money. Therefore, it brings a lot of new people to bitcoin. Thus far, no such thing exist for bitcoin. Hopefully this will change in the future, and I expect services built on the blockchain to be one potential source of success for bitcoin.

Thu, 11/07/2013 - 15:46 | Link to Comment aminorex
aminorex's picture

I think the market cap proves that it has already found its killer app.  It certainly hasn't yet destroyed clownbux, but it may yet do so.

Thu, 11/07/2013 - 12:54 | Link to Comment davinci7_gis
davinci7_gis's picture

Turn off all computers and what happens to bitcoins?  I think not!

Thu, 11/07/2013 - 12:58 | Link to Comment EscapeKey
EscapeKey's picture

turn off all computers and what happens to your electricity, water supply, petrol deliveries, super market reshelving, and your ability to use your credit card in said supermarket?

Thu, 11/07/2013 - 13:14 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

Alas!

If we could only get major commodities producers to endorse it and "back it"?

Thu, 11/07/2013 - 13:24 | Link to Comment TDoS
TDoS's picture

Can we?  Pretty please?  Now excuse me while I go kill and prepare two ducks. 

Thu, 11/07/2013 - 13:32 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

laughing...

Thu, 11/07/2013 - 16:54 | Link to Comment Gief Gold Plox
Gief Gold Plox's picture

I agree! People screem against fiat currencies and cry freedom, but god forbid you mention taking down the Web. No that would crumble the system. Holly shit credit cards might stop working. We're doomed.

Last I checked an axe gives a fuck about electricity as much as a cow needs a tweeter account to lactate. Man the fuck up and shoot some geese. :P

Thu, 11/07/2013 - 13:40 | Link to Comment SgtShaftoe
SgtShaftoe's picture

Exactly, the 2nd and 3rd order effects of a loss of all computers, power etc, is a mass extinction event from nuclear fallout (spent fuel pools worldwide).  The lights will stay on, or we all die. 

Thu, 11/07/2013 - 15:38 | Link to Comment Gief Gold Plox
Gief Gold Plox's picture

No... we will all die regardless of supplied illumination. It's a biological certainty.

"On a long enough timeline the survival rate for everyone drops to zero."

Thu, 11/07/2013 - 14:21 | Link to Comment XenoFrog
XenoFrog's picture

It'll be a requirement to cut the power in the coming grab for total control as things start to fall apart. We can't have people seeing what is going on and organizing to stop it.

Thu, 11/07/2013 - 19:29 | Link to Comment Exponere Mendaces
Exponere Mendaces's picture

Well, if all the computers get "turned off", at least we won't have to read your inane rantings.

What is this, the Mad Max school of "the juice"? Do you fuckers ever think of a scenario that doesn't end up with people in patched-together vehicles killing each other for a fucking gallon of gas?

 

Thu, 11/07/2013 - 13:00 | Link to Comment Meat Hammer
Meat Hammer's picture

A digital currency?!?!  That would NEVER work!

Oh, wait...

Ben Bernanke

Thu, 11/07/2013 - 12:45 | Link to Comment NIHILIST CIPHER
NIHILIST CIPHER's picture

NOT NO BUT HELL NO !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Thu, 11/07/2013 - 12:48 | Link to Comment Peter Pan
Peter Pan's picture

Can abstract art replace photography?

I thought not?

Thu, 11/07/2013 - 12:59 | Link to Comment Running On Bing...
Running On Bingo Fuel's picture

Let's make a pact. Because of the "other side of the house", "The Pillow Fight Clubers", the red team as it is. Let's not do any I told ya so's when the wheels come off this wagon.

Their sensitivities could cause them to seek end of life counseling.

Over.

Thu, 11/07/2013 - 12:49 | Link to Comment BLOTTO
BLOTTO's picture

Im trying to find the word(s) 'bitcoin' in some of these ancient documents and/or texts.

.

The Quran, Torah, Book of Enoch, Book of Ezekiel, Dead Sea Scrolls, the Bible, ancient Stelea stones, etc...so far - nothing.

.

Ill stick to the stuff that has ruled this planet and was mentioned +1,000s of years ago...

Thu, 11/07/2013 - 13:18 | Link to Comment aminorex
aminorex's picture

good luck with the hunting and gathering.  three words:  nasty, brutish, and short.

Thu, 11/07/2013 - 13:25 | Link to Comment TDoS
TDoS's picture

"Nasty, brutish, short."  A lie in three words, made up by overlords of the civilized, to keep people from defecting into a life of autonomy, community, and balance.

Thu, 11/07/2013 - 14:07 | Link to Comment TORNasunder
TORNasunder's picture

I guess it was a good thing that the Europeans showed up in the New World to help save all those starving, lawless savages from themselves.

Thu, 11/07/2013 - 15:47 | Link to Comment aminorex
aminorex's picture

certainly the native americans didn't need any help.  they were already killing each other off quite nicely.

Thu, 11/07/2013 - 19:30 | Link to Comment Exponere Mendaces
Exponere Mendaces's picture

@BLOTTO

Hey man, you insipired me - I looked up "Fool" and "idiot" - and godamned those words are old as hell. You must be so proud being described as such!

 

Thu, 11/07/2013 - 22:06 | Link to Comment TheHound73
TheHound73's picture

The Amish are using computers these days??

Thu, 11/07/2013 - 22:44 | Link to Comment BitStorm
BitStorm's picture

"The Quran, Torah, Book of Enoch, Book of Ezekiel, Dead Sea Scrolls, the Bible, ancient Stelea stones, etc...so far - nothing."

They also believed the world was flat and that the sun revolved around it. You're really basing your financial planning around that? Bwahhh!

Thu, 11/07/2013 - 12:49 | Link to Comment seek
seek's picture

Yeah, that's not happening. It could be a global currency -- an exchange medium -- but not a store of value.

Plus we know that a huge number of governments would never allow it, even if it meant killing their internet nationally.

I'm a big bitcoin proponent, but some of the assertions I've seen are just uninhibitied daydreaming.

I do think bitcoin will be the next global VISA/MC equivalent, however.

Thu, 11/07/2013 - 12:59 | Link to Comment TeamDepends
TeamDepends's picture

Now that makes a lot of sense. 

Thu, 11/07/2013 - 13:09 | Link to Comment Future Jim
Future Jim's picture

What is stopping one million entrepreneurs from making a product exactly like bitcoin that competes directly with bitcoin? How would that affect the value of bitcoins?

Thu, 11/07/2013 - 13:28 | Link to Comment Meat Hammer
Meat Hammer's picture

Or a better question - How would that affect the central banking criminal cartel?  They might hang themselves for us and save us money on rope.

Thu, 11/07/2013 - 14:12 | Link to Comment Simplifiedfrisbee
Simplifiedfrisbee's picture

The dollar is nearing the completion as a world reserve currency. When the intrinsic value of the dollar comes to fruition, the trust of the people will revert to what they have naturally trusted for centuries: Gold and Silver. After all, what is Bitcoin pegged to? The internet, Currency and digital numbers/code!? Bitcoin can not be a store of value so it is not money. All of you on here rave about the ability to buy currencies with bitcoins when traveling abroad. For that, it is ideal. Bitcoin has a place today and in the future, but if it becomes a world reserve currency, the world is going to be a sick place with the rich owning the bitcoins and the rest working for a digital number to trade it in for some food. It very well could be a smooth transition.

Thu, 11/07/2013 - 22:09 | Link to Comment TheHound73
TheHound73's picture

I am using Bitcoin as a store of value just fine, thankyou.

Fri, 11/08/2013 - 16:29 | Link to Comment layman_please
layman_please's picture

i wouldn't be so sure about gold and silver for only one reason. there is no historic knowledge anymore. the extent people have been brainwashed nowadays is unprecedented. i have been looked at as a complete idiot even by people more than twice my age when i have mentioned PM as investment or insurance. this $280 trillion of liquid assets(according to mike maloney) will try to find a safe haven when things go south and wherever most of it ends up will just reinforce itself. the sheeple will just follow the money to the market that will grant them instant gratification. lets hope sheeple won't have much left to have a say here.

 

i do hope i'm wrong on this, otherwise next recession will just shift the bubble to a new market.

Thu, 11/07/2013 - 14:18 | Link to Comment unununium
unununium's picture

Nothing is stopping them.  Just as nothing is stopping them from creating another Internet.

All you have to do is NOT hook up your new Internet2 to the regular Internet. 

Until you realize, hooking it up is EXACTLY what you WANT to do.

Thu, 11/07/2013 - 13:13 | Link to Comment AgentZeroM
AgentZeroM's picture

Literally every government on the planet, besides the US with their petrodollar world reserve status, has an incentive to unseat the US from that position and use a "fair" and zero counter party trust system like Bitcoin.

Thu, 11/07/2013 - 13:25 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

AgentZeroM

I respectfully disagree.  

No other government cares about "fair" or "zero counterparty trust".  They only care about themselves and what they can game from their system.  

Whichever system each may have.

Thu, 11/07/2013 - 13:34 | Link to Comment Meat Hammer
Meat Hammer's picture

He used "fair" and "government" in the same sentence.

Silly AgentZeroM

Thu, 11/07/2013 - 13:21 | Link to Comment Non Passaran
Non Passaran's picture

I'm skeptical about that last sentence... How are they going to tax it? And inflate it?  

It's not "ideal" for the government and CBs.

Thu, 11/07/2013 - 12:52 | Link to Comment holgerdanske
holgerdanske's picture

Easy. If they can fake it, they will.

If they can fake it, then certainly no.

 

Question. What, has ever been put on a computer, that cannot be faked?

 

Bitcoin??

Thu, 11/07/2013 - 19:32 | Link to Comment Exponere Mendaces
Exponere Mendaces's picture

@holgersnakeplissken

When you manage to "fake" a bitcoin, let us know, will you? That is, if you can actually do it before the heat death of the universe, using a computer made out of something other than matter residing in another dimension.

You know, exactly where your lack of logic resides.

 

Thu, 11/07/2013 - 23:06 | Link to Comment TheHound73
TheHound73's picture

There is currently $3.5b riding on the fact that yes, Bitcoin cannot be faked.

Thu, 11/07/2013 - 12:55 | Link to Comment midtowng
midtowng's picture

Obviously not. Bitcoin is for speculators.

Thu, 11/07/2013 - 15:48 | Link to Comment aminorex
aminorex's picture

it is very dangerous to speculate in bitcoin, because bitcoin is like a honey badger: it does not care.

it is very very wise to save in bitcoin, because bitcoin is like a crazy nastyass honey badger:  it does not care. 

Thu, 11/07/2013 - 12:56 | Link to Comment slaughterer
slaughterer's picture

ZH redneck doomer mistake: oops, Bitcoin will replace gold.  Guess I will have another boating accident.  

Thu, 11/07/2013 - 13:01 | Link to Comment gmrpeabody
gmrpeabody's picture

You need to keep your bitcoins separate from your gold coins, I think.

Thu, 11/07/2013 - 13:26 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

You didn't make those wallets!  You didn't build that boat!  You didn't lose your password!

Thu, 11/07/2013 - 13:11 | Link to Comment TheGardener
TheGardener's picture

Booting accident, all files and coins deleted.

Thu, 11/07/2013 - 13:34 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

soup spitter!  +1000

Thu, 11/07/2013 - 12:59 | Link to Comment stant
stant's picture

dosent have a bond market or aircraft carriers so no

Thu, 11/07/2013 - 14:07 | Link to Comment New American Re...
New American Revolution's picture

I concur, No is the correct answer if for no other reason than it fluctuates far too much.   A little is alright, but that is not even good.  But there are a host of other problems, one of which it is just another fiat waiting to be exploited if not already.   Myths die hard.   electanewcongress.com

Thu, 11/07/2013 - 14:21 | Link to Comment unununium
unununium's picture

Stability is just not possible yet.

BTCUSD simply has to go much higher before it can stabilize.

Sorry.  Time to make lemondade.

Thu, 11/07/2013 - 19:35 | Link to Comment Exponere Mendaces
Exponere Mendaces's picture

You know, every fucking time I hear the "its too volatile" I have to do a double-take.

This is fucking ZeroHedge, is it not? Are all you bastards happy with trading super-deep markets that fluctuate a few ticks each day (I'm looking at you, Eurodollar Futures), or do you actually trade markets that MOVE?

I know its crazy, asking if people on a FINANCIAL BLOG actually TRADE something that MOVES regularly, but what the hell, I'm feeling like asking anyway, since all the whiners keep chipping in about the fucking volatility.

 

Thu, 11/07/2013 - 23:26 | Link to Comment Common_Cents22
Common_Cents22's picture

Look to history, and expect any currency to be compromised and manipulated.     The way to get rich off bitcoin is treat it like a modern day gold rush.   Sell tools to the miners and prospectors.   Couldn't think of a bitcoin hooker reference.

Thu, 11/07/2013 - 12:43 | Link to Comment lasvegaspersona
lasvegaspersona's picture

Answer

NO

The world needs a store of value that ain't paper, digits or electrons.

It hardly needs another medium of exchange.

It is a handy thing but a reserve...just no.

Thu, 11/07/2013 - 13:09 | Link to Comment Meat Hammer
Meat Hammer's picture

Very true, but ya gotta admit it's fun to watch the banksters and .gov shart in their undies over it.

Thu, 11/07/2013 - 13:12 | Link to Comment Bunga Bunga
Bunga Bunga's picture

So what material is a store of value?

Thu, 11/07/2013 - 13:28 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Hard assets!  Particularly metals like Au and Pb....

Thu, 11/07/2013 - 13:33 | Link to Comment F-Tipp
F-Tipp's picture

Here's a hint: they have been money for thousands of years.

Thu, 11/07/2013 - 15:50 | Link to Comment aminorex
aminorex's picture

"Reserve" refers to a store of value.  And it defiitely needs an almost perfectly liquid, transmittable, infinitely divisible, non-inflatable store of value. 

Thu, 11/07/2013 - 22:18 | Link to Comment TheHound73
TheHound73's picture

The world doesn't need a store of value. The world IS value.  YOU might need a store of value that isn't digital but don't claim to speak for me or rest of the world.

Thu, 11/07/2013 - 12:43 | Link to Comment Shizzmoney
Shizzmoney's picture
RE
As Bitcoin Soars Over $300, A Question Arises: Could It Become A Global Reserve Currency?

No

But it can be a useful global reserve money laundering vehicle for black markets and those looking to move cash without the statist banks taking their cut.

Thu, 11/07/2013 - 13:26 | Link to Comment aminorex
aminorex's picture

you contradict yourself

Thu, 11/07/2013 - 12:46 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Another question would be;  "Do TPTB really want it to?"  Bankers have computers too...

Re-establish the rule of law first dumbasses (although we are looking into selling some of our homemade distilled spirits via bitcoin, those of you with actual useful information to this end feel free to contact me).

Thu, 11/07/2013 - 12:45 | Link to Comment Gohn Galt
Gohn Galt's picture

I wish we had an alternative crypto currency that wasn't so volatile. 

Thu, 11/07/2013 - 12:48 | Link to Comment Saro
Saro's picture

I think you make the mistake of assuming volatility has something to do with the attributes of a crypto currency itself, rather than market size.

These are just growing pains.

Thu, 11/07/2013 - 12:58 | Link to Comment gmrpeabody
gmrpeabody's picture

Dude..., you really ought to have that eye looked at...

Thu, 11/07/2013 - 13:26 | Link to Comment aminorex
aminorex's picture

as the value climbs, the volatility declines.  

Thu, 11/07/2013 - 13:32 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Wait for the next BTFD event in BTC.  The speculators are using Pump+Dump tactics.

It's clearly due for a correction to the $200 level, wherer it's more stable.

Thu, 11/07/2013 - 19:39 | Link to Comment Exponere Mendaces
Exponere Mendaces's picture

@Kirk

I love you man, but I have to respectfully disagree. I think we're on the curve of a meta-trend that won't see resolution for quite some time. This is just the third wave (No, not Elliott Wave) of the upswing. We've been pronounced "dead" at 31, and "dead" at 266 and everything in between.

In my experience, bubbles stay popped. This isn't silver where the Hunt brothers are soaking up contracts and the exchange changes the rules on them to bust their corner, we're talking about global involvement on a scale that hasn't been seen before.

So honestly, I think we're going to see $1,000 before we see sub-$250.

 

Thu, 11/07/2013 - 12:45 | Link to Comment Tinky
Tinky's picture

Color me skeptical.

Thu, 11/07/2013 - 12:45 | Link to Comment lasvegaspersona
lasvegaspersona's picture

If you are looking for a 'non state issued' currency, consider the Euro. No single nation state controls it. This makes it harder to inflate.

Thu, 11/07/2013 - 12:50 | Link to Comment seek
seek's picture

You forgot the /sarc tag, dude.

Thu, 11/07/2013 - 13:32 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

The Euro was designed by humans.  TPTB over there will find a way to corrupt it, even if the design of the Euro looks good.  On paper.

Draghi, PIIGS and what not cannot easily make more gold.

Thu, 11/07/2013 - 12:54 | Link to Comment holgerdanske
holgerdanske's picture

Ha ha. They are succeeding nevertheless. Just watch Draghi.

Thu, 11/07/2013 - 12:45 | Link to Comment Fukushima Sam
Fukushima Sam's picture

Gold is still good when the power goes out.

Thu, 11/07/2013 - 13:11 | Link to Comment malikai
malikai's picture

Indeed.

Too bad about the air, water, food, etc when al those nukes melt down in succession as their gennies all die out.

Thu, 11/07/2013 - 13:30 | Link to Comment TDoS
TDoS's picture

It depends on where the fuel is at the time.  The nuke plants don't need the grid, and if the fuel is in full pools, it could theoretically cool, as the cycle of the water in the pools is driven by the heat of the fuel.  Wouldn't want an earthquake or anything to come along and rattle it all about, though.  A couple of years and it should all be much less volitile.  Of course, I'd still stay a few hundred miles away if possible.

Thu, 11/07/2013 - 13:48 | Link to Comment XenoFrog
XenoFrog's picture

The new Thorium reactors default to full shutdown if there's any problem. Too bad the greenies won't let us replace the old nuclear plants with the new ones.

Thu, 11/07/2013 - 14:11 | Link to Comment Urban Redneck
Urban Redneck's picture

I don't see the green weenies standing in the way of the thorium mox tests in Scandinavia which are actually far more significant than any new plants, as new plants don't address the issue of existing fuel stocks.

You only need new plants where there is actual economic growth or energy supply falling faster than demand.

Thu, 11/07/2013 - 13:16 | Link to Comment AgentZeroM
AgentZeroM's picture

Does your power go out often?

Thu, 11/07/2013 - 13:32 | Link to Comment Fukushima Sam
Fukushima Sam's picture

Not yet.

Do NOT follow this link or you will be banned from the site!