Quote from: julz on July 14, 2011, 08:33:36 PM

Quote from: realnowhereman on July 14, 2011, 08:08:21 PM

I was mainly using all that to make a point that gold is no better than bitcoins.

Which you failed to do.

There is a striking difference between BGC and BTC.

The BGC has a minimum lower value of whatever size chunk of gold a coin represents whereas a BTC has a minimum lower value of zero.

Quote from: realnowhereman on July 15, 2011, 03:01:30 PM

Why exactly can't gold be worth zero?

Because it isn't trading at zero, and isn't about to be... not because it *couldn't* be. Right now - it's vastly more likely for bitcoin value to go near zero than gold.

Quote from: realnowhereman on July 15, 2011, 03:01:30 PM

"Because it was always so", right? There is no non-zero minimum value for anything.

We're viewing a hypothetical system based on gold - which currently, and barring crazy scenarios such as a monstrous solid gold asteroid landing peacefully somewhere near manhattan - will have a non-zero value it's traded at.
It is non-zero in almost any circumstance imaginable. The same can't be said of bitcoin (yet). No point throwing some extra spanner into the hypothetical situation such that suddenly the world doesn't want to buy gold.

Quote from: realnowhereman on July 15, 2011, 03:01:30 PM

Besides, that wasn't what I said anyway. In my thought experiment I said "the gold vanishes". It mades no difference though, because nobody would know it'd vanished. So: people didn't want the physical gold, they wanted the promise that the issuer couldn't magic more gold from thin air, they wanted something that could be used for trade. Bitcoin can supply those properties, so what do we need gold for?

I get what you're trying to do - and I'm explaining why it doesn't make sense.
People in your scenario *do* want the physical gold to be there. If they wanted 'the promise that the issuer couldn't magic more gold from thin air' then they sure as hell wanted the promise that the gold couldn't disappear into thin air.

That it still works when that promise is secretly violated doesn't mean the gold was irrelevant. Gold has real value in that people know they can get X USD for Y ounces. This means an instrument based on that gold has a minimum that matches this.

The 'promise' is that worst comes to worst - the gold *could* be retrieved and traded at whatever gold trades at.
That 'nobody ever actually goes and claims their gold' is only a function of people's belief in the promise.
The promise gives your BGC a lower bound on value. (Which cannot be zero unless gold goes to zero!)

Bitcoin has no promise of an underlying commodity to redeem... so it doesn't have *that* lower bound.
It's lower bound is the lowest of what people think bitcoins should be worth due to their use in trade.
(close to zero if people worry that government/hacker/corporate/crypto-scientist actions could wreck the system)

Quote from: realnowhereman on July 15, 2011, 03:01:30 PM

I'm trying to show that if gold were easily tradeable via trusted certificates (or a bitgold chain), nobody would ever want to redeem their certificate for physical gold. Therefore they didn't want gold; they wanted some of the properties of gold.

The critical desired property being - that gold has a value in exchange.

Most of the frozen pork belly traders in Chicago never wanted to redeem their slabs of dead pig either.. they too just 'wanted something that could be used for trade'. Their only interest in trading pork belly futures was to make a profit.. so their only interest in the underlying pork belly was that *somebody* (the meat industry) valued it.
Now that there is reduced demand for frozen pork bellies - the CME has just this month delisted frozen pork bellies futures and options.
That pork belly contracts were convenient for speculators to trade amongst each other is a property of the financial instrument that isn't true of slabs of meat.
Obviously there are significant differences between frozen meat and gold - but the value relationship to the underlying commodity remains.

It's similar to the concept of biasing in electronics where a particular circuit operates at a certain voltage and the signal dances around that level.
The bitcoin value dances above zero - the BGC value would dance above whatever value gold trades at.

Quote from: realnowhereman on July 15, 2011, 03:01:30 PM

I was mainly using all that to make a point that gold is no better than bitcoins.

After all my long-winded argument about why the gold-backed BGC you dreamt up would *currently* be better than bitcoin (from a value perspective - not in all aspects!), if you want to make the argument that gold is *in principal* no better than bitcoins, or *in future* may be no better - then I'd tend to agree.

If bitcoin were massively entrenched in the economies of the world and widely held valuable - then yes - I think bitcoin would be superior to gold in terms of practical use in trade and value storage.

Gold would remain superior as an emergency value store in the minds of those who think the internet could collapse, technology regress, world war could break out or other semi-apocalyptic visions could come to pass.

It's that simple physicality which gold bugs will always value, so I don't see your argument persuading them that bitcoin is *now* better than gold, and even in some future where bitcoin dominates - people would probably want some of their portfolio in gold.