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Bitcoin Or Gold: Did The Alleged Bitcoin Creator Just Settle Once And For All What Is More Valuable?
Last Wednesday, we brought you the story of Craig Steven Wright who was “outed” by Wired and Gizmodo as Satoshi Nakamoto, the pseudonymous founder of bitcoin.
Hours after two articles pegged Wright as the man behind the myth, Australian authorities moved in, raiding the residence “Cold fish Craig” (as he was known in his neighborhood) rented with his wife and conducting searches and interviews at his businesses.
Apparently, Australian tax authorities had questioned Wright in the past and according to a number of sources (and documents obtained by Wired and Gizmodo), there appears to have been some manner of dispute over how his bitcoin holdings should be taxed. The attention accorded to Wright on the heels of the two articles published late last Tuesday might have prompted the ATO to move in once and for all, although authorities claimed at the time that there was no connection between the new “revelations” about Wright’s identity and the raids.
Now, we get the latest twist in what is already a fairly bizarre story, as The Australian says that in May of 2013, Wright attempted to buy some $85 million in gold and software from Mark Ferrier, who at the time was working on a deal whereby his MJF Mining would obtain 50% of the gold discovered by ASX-listed goldminer Paynes Find Gold.
Apparently, Paynes needed machinery which Ferrier - via MJF - was willing to provide in exchange for a claim on any future discoveries. According to the Australian, “Mr Ferrier is alleged to have told Mr Wright gold was good security in the event the ‘funny money’ of Bitcoin failed.” Here’s what supposedly happened next:
Mr Wright has alleged payments were made in August 2013 of $38.8m — then the equivalent of 245,103 Bitcoin — for Siemens software and gold from Paynes. He then claimed payments were made to Mr Ferrier of $20.3m — or 135,100 Bitcoin — in September 2013 for the “core software” from Al-Baraka. In September that year Mr Ferrier was arrested in Perth and the gold partnership with Paynes was discontinued.
In December 2013 Mr Wright filed actions in the Federal Court and NSW Supreme Court suing for his share of the gold, claiming the sum of $84.42m based on the market value of the alleged Bitcoin payments for the gold.
Paynes' annual financial report for the year ending June 30, 2014 contains the following passage about the partnership:
The company terminated a mining services and profit sharing agreement with MJF on October 1, 2013. Mr. Mark Ferrier has lodged a statement of claim with the District Court of New South Wales, claiming an amount of $279,621 related to the loss of profits from the small scale mining.The company considers the claim to be completely false.
Here's an excerpt from a transcript of an ATO meeting that tells part of the story (this is from a John Chesher, who was Wright's accountant):
Craig Wright was speaking in a conference in Melbourne. He was giving a talk about Bitcoins and mining. He was then approached by a man by the name of Mark Ferrier and that was how they met. This was how the relationship was formed. They started talking. Craig Wright told Mark Ferrier that he wanted to start up a Bitcoin bank. They then started emailing. Mark Ferrier told him that he knew someone who could help him start up the bank. This was all done in early June 2013. Everything was done very quickly- most of it was done in one weekend. Craig Wright, with the help of Mark Ferrier, agreed to purchase banking software from Al Baraka. Mark Ferrier also convinced him to purchase gold ore.
He also offered Ian Ferrier’s services to Mark Ferrier. Ian Ferrier is Mark Ferrier’s father. Before engaging in Mark Ferrier’s services, Craig Wright had conducted lots of checks on him and everything came up clean. So in essence, Craig Wright wanted the banking software and Mark Ferrier wanted Bitcoins. Around mid-July/August,
Craig Wright released funds from an entity located in the UK to MJF Consulting. This was all going through a server located in Central West Africa. Mark Ferrier was then arrested in September 2013. Craig Wright then started to take action to protect his own rights. Your director, Des McMaster has informed us that ASIC documents show that Mark Ferrier was only put on as a director for one day. Craig Wright then contacted Pitcher Partners in Brisbane and asked them for an explanation. We found out that Mark Ferrier was never a director. The address that he had on ASIC was false as well. Craig Wright was able to get hold of the banking software and automation system. He has everything but not the gold ore. He was expected to receive the gold ore in 2015 but now that’s not happening as the gold can’t be delivered.
Craig Wright has also contacted Ian Ferrier. Ian Ferrier advised us that he has not spoken to Mark Ferrier for 2 years and wants nothing to do with him. We have a case against MJF Consulting with the Supreme Court of NSW and also the Federal Court. The case with the Federal Court is for deceptive conduct against Mark Ferrier personally as an individual.
Due diligence was conducted on Mark Ferrier before we engaged him. We have done all we could to protect ourselves. If you look at the transactions made, you will see that every transaction was pegged against the currency exchange rate at the time. Craig Wright has already advised you that the accounting method for this personal enterprise should be changed from cash to accruals. The accounts should be on accruals from the start of the 2013 income year. Craig Wright has previously informed the ATO of this. We have previously been dealing with ATO officers from different sites at first, e.g. some initial work was being conducted from the Hurstville office, Brisbane office etc. But then Des McMaster made a decision for all the audits to be done from Parramatta. The audits were then being conducted by Celso. I am uncomfortable with the fact that Des McMaster is looking after these audits. We have had past dealings with him in the previous audits.
For those interested in attempting to get to the bottom of this, you can read more here (just use a word search for "Ferrier), and we're sure they'll be much, much more revealed as time goes on, unless of course the Craig Wright story goes the way of all other Satoshi Nakamoto discovery claims (see Newsweek).
What's immediately interesting however is that while Ferrier might not have "actually wanted any Bitcoin," (to quote Wright), it does seem clear that Wright did and still does, want gold.
The takeaway: if you believe Wright is Satoshi, then the founder of bitcoin is skeptical enough of his creation's intrinsic value compared to hard assets that he was at one time willing to trade a sizeable portion of his cryptocurrency wealth for physical gold.
Trade - or "mine", as it were - accordingly.
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Soemthing to be aware of is that increasing mining resources for bitcoin does not create additional bitcoins. The amount of bitcoins generated is unrelated to mining power. An entity that ammassed huge mining power could mine the majority of the remaining bitcoin to be mined, but that's all they can do. Most have already been mined and that will never change.
Bitcoin is up over 40% year to date. I don't know what the future holds, but right now it's killing those gold coins in my safe deposit box.And my stocks. And my bonds.
Wright is Satoshi most assuredly.
Wright is not Satoshi. Talk is cheap.
Sign a message with the private key of any of the first blocks that says "My name is xyz and I am Satoshi" or go public and sign any message with that private key. Then, I will believe.
Is anyone actually using bitcoin as an exchange medium or is it only about holding it as an investment?
The only ones using it as a medium of exchange always wind up trading it for fiat cash, done in nervous transactions at cafes with eastern europeans buyers, and defeats the whole point of taking the banks and their money out of the loop.
I use it for day trading on an exchange (BTCE). Great fun.
If an author uses a picture of a golden bitcoin in a "I told you bitcoin wasn't very good" article, you know he (the author) is a clueless moron.
Bitcoin and gold bitchez.
Cheers!
If you don't hold bitcoin in your own safe, you don't own bitcoin.
If someone asks me: Gold or Bitcoin?
I alwas say: yes!
Both have their strengths and weaknesses, so why bet on one horse?
If you don't HOLD it, you don't HAVE it. In a world of liars, thieving pols and banksters how clever does one need to be? Imagine JP Morgue saying "Bitcoin is money, everything else is credit." Nah didn't think so.
EMP attack. Either solar flare that gets lucky (actually unlucky for us on earth) in the release from the sun or a nuclear strike by China, Russia, ISIS or other enemy. Bank of Bitcoin will be closed until further notice.
Satoshi is a GOLD BUG!!!! FUCK YOU SHIT COIN SUPPORTERS YOUR OWN FOUNDER IS A TRUE GOLD BUG! WOOO HOOO! Great endorsement! SHIT COIN IDIOTS!
He shoulda bought guns & ammo.
I'll take the physical over anything ethereal. That is why 95% of my wealth is under the mattress.
Lol remember when the silk road shitcoin got confiscated and the herd lauded and laughed because the security was impenetrable and the government would never be able to access them......Until they did. The pumpers crawled under thier rock pretty quickly after that little mishap. Now we have the ponzi king himself getting burned on his own scam. This shit is priceless! The positive spin the pumpers try to splash over this should be worth a few more laughs.
Smart people don't love or hate a stock or currency they love money and go where the moves are. Trading run ups in Bitcoin then cashing out to gold is a good strategy right now. Gold has put in multiple 15 and 30 year bottoms and currently trades for not much more than it takes to pull it out of the ground. Can't go much lower unless they give it away. If gold starts popping along with Bitcoin then you have a decision to make. A good one might be to split it down the middle. Do I recommend anyone put all of their funds in Bitcoin? No, but I don't recommend anyone put all of their funds in gold, USD, or anything else for that matter. Diversification is your friend. Don't fall in love with anything including Bitcoin or gold. If something else offers greater volatility go there.
Fundamentals: Gold is money (a good). Bitcoin is fiat pseudo-currency (a nothing). Always exchange real goods for real goods.
And do so in one transaction wherever possible:
#1: you lay your goods on the table.
#2: they lay their goods on the table.
#3: you both examine goods to verify what they are.
#4: you both nod, then take the goods you trade for.
#5: transaction complete (no externals, no delays, done).
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Once someone involves fiat, fake, fraud, fiction, fantasy pieces of paper or computer bits in a transaction, they subject themselves to endless arbitrary abuse by the other individual involved... plus unknown dozens, hundreds, thousands of human predators who call themselves "bank", "central bank", "government" or other bogus name.
Or to simply, always adopt the KISS principle when possible. And if not possible, think long and seriously before you decide to get involved in what will probably become a disaster. No longer is a handsake, a verbal agreement or a written agreement worth beans.
When you say "Bitcoin is fiat" I feel I have to show you that you are wrong. And naturally I have to bring up the meaning of the word because it is clear that you had the meaning wrong (knowing that you don't misunderstand what bitcoin is). I do this because I think it shows that perhaps your ontological understanding (fiat money vs. the broader category of things that have no physical substance, intangibles) is not quite as good as you would want to have (seeing that you write and post about this topic). And I too care about that, not least because with a good understanding there can be a good discussion.
I believe I have thought long and seriously before getting involved with Bitcoin. I've though long and seriously about precious metals, too, and they too can run afoul of the KISS principle in some circumstances. Think about the security necessary in order for one to just hold PMs, perhaps move a little around a world that has too much physical obstacles, (borders) while keeping the PMs available. That security just isn't affordable for many people. Think about the security needed to complete certain kinds of transactions (particularly ones that make certain people angry). In some cases bitcoin KISSes gold goodnight (and vice versa).
The bitcoin (blockchain) technology can be applied to many situations, including cheap and fairly secure transfer of ownership (of anything, potentially).
That and other applications of the technology seems potentially reasonable to me, once someone creates all the reliable infrastructure required for each application.
However, look at the name bitcoin. The term "coin" is a unit of currency. Therefore, the very name of that entity declares bitcoin to be currency. Well, when something without intrinsic value is declared to be currency, that's precisely the meaning of fiat as far as I understand (the fact someone declares or decrees). So I don't see how bitcoin isn't fiat.
Someone could attempt the same with plain old binary numbers (no encryption involved). Just decree that the least significant 128-bits of every 256-bit number that starts with 0xFEDCBA9876543210FEDCBA9876543210 is a unit of currency. The self-declared fictional "authority" could even attempt to pin the exchange rate to something specific in reality, like 1 microgram of gold. The fact that authority, whether JoeSchmoe or FederalReserve or IMF simply decrees this bit pattern is to be "currency" makes it "fiat". The same would be true of the predators-DBA-federalreserve or predators-DBA-government decree coffee beans to be currency [each equivalent to 0.001 or 0.000001 grams of gold].
At least that's how I understand fiat. The fact is, a gram-of-gold is a gram-of-gold, nothing else. Nobody decreed a gram-of-gold to be valuable or to be acceptable in trade. Nobody decreed that eggs be valuable or acceptable in trade either, but they are, as is everything else that humans value. And nobody has to either, because humans DO value gold and eggs (and golden eggs), with or without decree. That's the difference as far as I know. At least that's what I mean by fiat.
Yes, every real, physical good can be stolen. So can fiat, as so many have learned, and as so many hundreds of millions (if not billions) will learn in the coming bail-ins. To keep fiat bits/currency or gold in banks is the opposite of safe and secure.
OK - you are using the word fiat in the context of currency in a way that is very different from the way it has traditionally been. I'm pretty sure that it originally referred to government decree, and I'd strongly avoid redefining words. I believe it's just a bit disrespectful towards the prior users of the word and it introduces confusion, but enough about this. I get what you mean.
A nobody declaring and referring to this new thing as coins, cash, money, etc. long before there was any market demand for bitcoins, had no purpose other than to suggest what this new creation could be used for in the future. This is very different from a currency which is controlled in some way by a specific person or entity. From the moment the whitepaper proposing Bitcoin reached the public domain on there was no grounds to complain about control. There were a few months of opportunity for anyone to analyze it, implement it and launch it. Then it was launched by the same nobody and there was a year or two in which it wasn't really a currency or cash or money. And then the creator disappeared. So everything in Bitcoin - from its inception to the way the new units are produced is "deliver first and let any rewards come later". There was no element of asking unreasonable things of bitcoin users. I think you should see how fundamentally different this is from any currency which refers to anyone in specific (trusted parties, control entities) or to anything in the present or future (promises).
In the end, the declaration that Bitcoin can be used for a currency and an asset didn't matter - it would have been adopted as such anyway. It could have been announced as a timestamping protocol and it could still develop into what it is today and into what it will be. The creation of Bitcoin is more akin to declaring that: a certain new chemical element makes for a great currency, and imagine if we started using it as such, okay. The latter part would only be accepted and realized if the former is first examined and agreed to, which is the hard part.
There is an agreement with gold, too. It's an implicit, unwritten agreement to prefer it over platinum, for example (which arguably has slightly better properties for a currency, but would first need to achieve the same network effect as that which gold already has). This is what causes gold to be worth what it is today, rather than what it would be worth if it was only used in industry (see this reply to one of your posts from several months ago). So in one ounce of gold's worth there is perhaps 1/10 of "if all else fails, it could be used in industry" value and 9/10 of "so many others declare that they would accept it" value. And you should care what others would accept, because that determines the market price and liquidity. So you could say that there's a huge component of "declaration" in gold too, but it's OK. You don't have a reason to doubt such declarations or to care who exactly the people doing them are.
But cost of production has some influence on practical value too. For example, if rhodium had little value for anything practical (which isn't true), but cost $7,000 per ounce to mine and purify into rounds (coins), then likely the price of rhodium would likely be somewhere near $7,000 ~ $10,000.
Though the above statement is true, it is also too simple. What if the demand for rhodium exploded by 100x... for example, if magically everyone on the planet decided to adopt "gram-of-rhodium" as their standard unit of "money" or "currency"?
Obviously it would take time to mine enough additional rhodium to fill the demand for "money units". So we'd experience a medium-term shortage in rhodium, which would boost the short-term price dramatically but temporarily. Unless, of course, miners simply couldn't find enough rhodium.
One of the great things about gold is, quite a large quantity exists. That's because most applications for gold do not consume the gold. For example, gold that finds its way into jewelry is still gold and easily capable of recovery. Ditto for gold in watches. The consequence of the large and fairly static (slowly growing) quantity of gold in the world is... quantity stability, which tends to lead to value stability.
To be sure, if a massive new purpose for gold happened to occur (like the entire world switching to gold coins as "pocket money" AKA "spending money"), then the value would increase in very short order --- and then become stable again.
That's a good understanding. And thinking of bitcoin in the same terms makes me feel comfortable (in a few months time the quantity growth will go down to about 4.2% for the year from then on, not far away from gold's figure; bitcoin has been in the stage of discovering and developing its massive new purposes and still is).
GOLD BITCHEZ!