After the bitcoin boom: hard lessons for cryptocurrency investors

[wee]

The difference, with Blockchain, when implemented properly, is that no one government or entity can shut it down, or take it away from you by force or other illegal means. And trade will not be bounded by borders or regulation. You can send gold (or other asset) to your friend anywhere in the world as easy as email, in theory.

Not necessary so. The weakest link is still the human.
All transactions can be proper but yet, it is still illegally transferred due to frauds.

And the most depressing of all is that, till date, there is no way to get it back once you lost it.

You are exactly right. This is the point of it, transactions are set in stone. Although depending of the protocol, it may still be possible to trace where the money went or even reverse it (but that would be missing the point).

This is one of the biggest barrier to mass adoption (cyber-security, including low tech fraud and scams). Today Bitcoin whales (those that owns lots of bitcoins) go to extreme means to secure their digital assets.

Probably another 10-20 years until humans figure out how to scale this up sensibly.

I'm just thinking - we may want records to be set in stone, but I'm not sure if its good that transactions are set in stone.

[Wildreamz]

I'm just thinking - we may want records to be set in stone, but I'm not sure if its good that transactions are set in stone.

You may be on to something there.

[Luke]

The point is not if blockchain based currencies are the optimum, if they are flawless.
Of course blockchain technology isn't perfect.

The point is if blockchain based currencies offer some advantages vs. traditional paper or electronic currencies, as far as technology, privacy etc. is concerned,
or vs. central banks currencies, as far as their value is concerned.

After we have established that they do, we differentiate between better and worse blockchain based currencies.
Between a gold backed blockchain based currency and a nothing backed blockchain based currency I prefer the first one

[Luke]

If a crytocurrency is to be backed by precious metals, its just going back to the old days of government issue a bank note and backed by gold in the vault.

Exactly
Bank notes backed by gold in the vault
A currency whose value doesn't depend on Central Banks and Governments decisions but on gold's value.
I thought value-investors would like such a currency

[Luke]

And if its just a title of ownership, there are already companies that can buy gold for you and keep it in their vaults for a fee and register u on their client list and how much you own.

Yes but in this case you can't use your precious metals in your everyday life isn't it.
You can't use your certificates of ownership to buy your coffee.
Even if this company would give you a certificate for every gram of gold you own, the coffee vendor wouldn't accept it.
This gold of yours wouldn't be viable money.

Putting your precious metals on the blockchain offers you the chance, once the appropriate infrastructure is in place, to be able to use your precious metals to buy your coffee.
Putting your PM on the blockchain, once the due infrastructure is in place, offers gold (and silver) the chance to be money again

[weijian]

If a crytocurrency is to be backed by precious metals, its just going back to the old days of government issue a bank note and backed by gold in the vault.

Exactly
Bank notes backed by gold in the vault
A currency whose value doesn't depend on Central Banks and Governments decisions but on gold's value.
I thought value-investors would like such a currency

Strictly speaking, gold has no intrinsic value as an asset class. It could be used for diversification purposes and is a put against the idiocy of governments but i am not sure why there is a need to add a layer of complexity on top of holding gold. The holding costs of gold still hold whether i hold it directly with a certificate or with a cryptocurrency.

A crypto backed by Gold? We are probably going full circle back to the Bretton Woods system.

https://en.wikipedia.org/wiki/Bretton_Woods_system

[BlueKelah]

The difference, with Blockchain, when implemented properly, is that no one government or entity can shut it down, or take it away from you by force or other illegal means. And trade will not be bounded by borders or regulation. You can send gold (or other asset) to your friend anywhere in the world as easy as email, in theory.

Not necessary so. The weakest link is still the human.
All transactions can be proper but yet, it is still illegally transferred due to frauds.

And the most depressing of all is that, till date, there is no way to get it back once you lost it.

You are exactly right. This is the point of it, transactions are set in stone. Although depending of the protocol, it may still be possible to trace where the money went or even reverse it (but that would be missing the point).

This is one of the biggest barrier to mass adoption (cyber-security, including low tech fraud and scams). Today Bitcoin whales (those that owns lots of bitcoins) go to extreme means to secure their digital assets.

Probably another 10-20 years until humans figure out how to scale this up sensibly.

If u are doing everything by law and by the book why would u need a system (blockchain or otherwise) that government cannot shut down. Obviously it is only the minority of people doing illegal transactions or tax evasion who need this technology to hide.


Always remember, in hacker world there is a saying, Software is only as secure as the hardware its running on

On this topic IMO Nouriel Roubini is spot on regarding crypto as nothing more than a high tech pyramid scheme..

[Wildreamz]

Yes, it is meant for circumventing "official" and "legal" channels. But just because it is "illegal" by the jurisdiction of a country, doesn't automatically makes it immoral, or illegal in every country. For example to protect your wealth in times of political instability, currency hyperinflation caused by runaway monetary policies, offending an authoritarian regime, in times of war etc. The very same reason why some people buy physical gold, stock food, to hedge against war (when banks go down), dictators from freezing your bank account etc.. 

Sometimes, it can be for very benign reason, such as to purchase a real estate in another country, would be much more complicated by doing it the "old way"; would be much easier if anybody can just securitize their asset via tokens.  

Points about it also being used for both immoral and illegal purposes (money laundering etc.) are still valid.

[Luke]

Strictly speaking, gold has no intrinsic value as an asset class.

I admit, I don't know what striktly speaking "intrinsic value" means, but history has shown that gold get accepted as a means of payment even without the blessing of Governments or Central Banks, and that's enough intrinsic value for me

but i am not sure why there is a need to add a layer of complexity on top of holding gold.

With layer of complexity you mean probably blockchain.
Firstly, as was already said in this thread somewhere, titles of ownership on the blockchain are more difficult to be falsified than on paper or on traditional electronic form.
So, security.

Secondly, you need this extra layer of complexity in order to be able to use 0,05 grams of your gold for buying a cappuccino.
Currently you'll probably sell 1 ounce of gold (selling fees), keep 1200 $ in your bank account and spend 2 $ for the cappuccino, after a selling procedure which can become laborious.
That's why nobody uses gold (or silver) to buy a cappuccino. It's too laborious and expensive.

In order to be able to buy a cappuccino with your precious metals you need them on the blockchain plus some kind of device which is able to convert in real time your precious metals account on the blockchain in the currency accepted by the vendor.

A crypto backed by Gold? We are probably going full circle back to the Bretton Woods system.

Not necessarily.
Bretton Woods was just one way of establishing a gold based monetary system.
I think the conditions that allowed the Bretton Woods system to work are no more there, but I must admit, I know this system only through your Wiki-link

I'd put it this way: with a gold backed crypto we would return to a monetary system in which our currency's value is the value given to gold and silver within our society and not the one established by Governments and Banks

[BlueKelah]

Strictly speaking, gold has no intrinsic value as an asset class.

I admit, I don't know what striktly speaking "intrinsic value" means, but history has shown that gold get accepted as a means of payment even without the blessing of Governments or Central Banks, and that's enough intrinsic value for me

but i am not sure why there is a need to add a layer of complexity on top of holding gold.

With layer of complexity you mean probably blockchain.
Firstly, as was already said in this thread somewhere, titles of ownership on the blockchain are more difficult to be falsified than on paper or on traditional electronic form.
So, security.

Secondly, you need this extra layer of complexity in order to be able to use 0,05 grams of your gold for buying a cappuccino.
Currently you'll probably sell 1 ounce of gold (selling fees), keep 1200 $ in your bank account and spend 2 $ for the cappuccino, after a selling procedure which can become laborious.
That's why nobody uses gold (or silver) to buy a cappuccino. It's too laborious and expensive.

In order to be able to buy a cappuccino with your precious metals you need them on the blockchain plus some kind of device which is able to convert in real time your precious metals account on the blockchain in the currency accepted by the vendor.

A crypto backed by Gold? We are probably going full circle back to the Bretton Woods system.

Not necessarily.
Bretton Woods was just one way of establishing a gold based monetary system.
I think the conditions that allowed the Bretton Woods system to work are no more there, but I must admit, I know this system only through your Wiki-link

I'd put it this way: with a gold backed crypto we would return to a monetary system in which our currency's value is the value given to gold and silver within our society and not the one established by Governments and Banks

First of all security hype for blockchain is just hype. When will the next bitcoin exchange be hacked? This year already hacked 2 times liao rite? Millions lost!! 

Will my gold backed crypto get hacked? How will i prove the gold is mine? Paper certificate? But wait, its all anonymous so how?? If my ownership got transferred overseas, sure theres a trail, but how am i gonna get it back? Oh wait, there is no international gov to help, since its designed to have no gov control!

There is already value in gold dictated by its value and available in different currencies. No gov has control over this value, its a traded commodity governed by demand and supply. No government can dictate value of a commonly and internationally traded commodity like gold. If u go buy a piece of physical gold from uob, u pay the price in sgd. Sg gov cannot suka suka declare gold value is double in sg the next day, there is international market price for it, international society bro.

Thank u very much, but i prefer my ownership of gold to be registered with a gov regulated bank or in a safe deposit box or under my pillow. And if i need to spend my gold, i have this thing called SGD. Better yet, my SGD can be stored in my online account and i can spend it with my card. If u try to steal my gold or Money in my wallet or money in my bank, rest assured the police will come after u. If the bank wants to adopt blockchain tech to store any gold i register with them, i dont mind, so long is regulated by them and gov. But why would they want to do that? They already have secure server networks processing gold transactions fine with redundancy backups and very possibly paper records.


Go and read up on how the blockchain is implemented and read up on how a traditional non distributed database is implemented, then u will realise its mostly all hype.