Post
Topic
Board Bitcoin Discussion
Re: Bitcoin to be pegged to gold
by
franky1
on 25/09/2014, 09:17:30 UTC
I agree that 595 tonnes of gold is difficult to store, but how do you store "cost of living" in a vault?  Grin

you dont, C.o.L is not stored.!!!

its just a common sense measure of true value of things people need in real life, such as bread and milk. it requires no trust, no third parties. and the benefits of pegging it to a C.o.L measure is that even if dollar fiat goes the same way as the Zimbabwe dollar. people know that bitcoin will still give them a fair value for a loaf of bread.

even when dollar start pricing a single loaf of bread at $1000, due to economic crash (massive inflation). bitcoin will ensure that you can buy atleast 1 loaf for 0.005btc.

(edit to do some maths and get more specific.)

c.o.l = ~$300 per week (today)
minimum wage = ~$7.50 today ($300/40hours)
thus making bitcoin 1.5 C.o.L(today: $450)

ok using those numbers
based on c.o.l a loaf of bread is a maximum of 1% which works out as:
based on c.o.l a loaf of bread is a maximum of 0.0066btc ((1/1.5)/100)
based on c.o.l a loaf of bread is a maximum of $3 (300/100)
so right now in both cases you can get 100 loaves of bread for $300 or 150 loaves for 1btc

ok.. hope you got the maths understood..
now imagine dollar crashed and inflation made everything 400x more expensive (loaf of bread now $1000, C.o.L=$120,000)
bitcoin would still be at 1.5c.o.l meaning people can still buy 150 loaves per btc.

all it means that bitcoin converts to $180k a coin. thus bitcoin still keeps up with inflation to ensure bitcoin users dont suffer. whilst those sticking to crappy dollars are spending $1000 just to buy a loaf of bread.


now lets move onto the positives of bitcoins deflation due to supply/demand for bitcoin

PLEASE wipe your mind of pre-valuing bitcoins to FIAT. imagine bitcoins on exchanges had no fiat valuation. just a C.o.L valuation
imaging demand doubled. this will mean that 1btc is now worth 3 weeks C.o.L,

deflation now means 1btc then equivalent to 300 loaves of bread.

so while fiat is giving less and less loaves of bread due to its inflationary nature and possible crashes (research Zimbabwe dollar)
bitcoin is giving people more and more loaves of bread due to its deflationary nature of demand/circulation