After the bitcoin boom: hard lessons for cryptocurrency investors

[davidoh]

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.

Lehman was approved by MAS with blessing. After the devastation, MAS appear to "humour" various investors and acted like Pontius Pilate.

Blatant truth is any man-made system is NEVER bullet (hack) proof. Even with physical security eg safe box (anybody remembered how a bank (DBS) can let a renovation carried with dumping of safe boxes from an existing bank. 

Personally as there is no perfect systems that will last forever, I believe systems like blockchain are precursors as to what is to come in the future. It is all about work in progress. What is best today is inadequate tomorrow?

[Wildreamz]

Big picture: there are so many vectors, angles and potential regarding crypto and blockchain: increased security, increased asset liquidity, increased efficiency, unlock new business models, dethrone monopolies etc. etc.

At the moment many rich and smart people are experimenting; some will stick, some will not.

But eventually, a revolution like the internet will come, just let it play out.

[specuvestor]

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.

Lehman was approved by MAS with blessing. After the devastation, MAS appear to "humour" various investors and acted like Pontius Pilate.

Blatant truth is any man-made system is NEVER bullet (hack) proof. Even with physical security eg safe box (anybody remembered how a bank (DBS) can let a renovation carried with dumping of safe boxes from an existing bank. 

Personally as there is no perfect systems that will last forever, I believe systems like blockchain are precursors as to what is to come in the future. It is all about work in progress. What is best today is inadequate tomorrow?

I think the idea of a decentralised blockchain with a presumably centralised collateral backing is a bit of oxymoron. VBs here know that I differentiate between Cryptocurrencies as a concept and Blockchain as a technology. To understand the merit of decentralised system is to understand the merit of a centralised system and then it's flaw. Then you will realise what flaw decentralisation is trying to address and with it, its own flaws.

Nothing is perfect but key is to optimise and make better mousetraps. And usually it depends on different solutions to different circumstances. But as a concept Cryptocurrency doesn't work

[soros]

The FCA ( UK regulator ) has issued warnings to UK Consumers of scammers offering cryptocurrency investment. The fraudsters must be looking for Valuebuddies in Singapore to scam.

https://www.fca.org.uk/scamsmart/cryptoc...ment-scams

[Luke]

@Bluekelah, incredibly we agree on something, Sg gov cannot suka suka declare gold value is x.
But Sg gov (and central bank) can take such measures so that the value of the sg currency increase or decrease.
Right!

We disagree on the rest, but that was predictable

Gold is not only a commodity, it is also money. It has not only a commodity-value but also a monetary value.
it is not by chance that the sg central bank has gold and not diamonds, platin or cobalt in its vaults.

"i prefer my ownership of gold to be registered with a gov regulated bank or in a safe deposit box"
Go tell it to the clients of those banks in Cyprus a couple of years ago
Go tell it to those argentinians during the "bank holiday" during the financial crisis
Would you be so sure if you lived in some other country?
Who told you that your gov will respect your property forever?
Who told you that your gov will have forever the ability to enforce propriety rights?

On another subjekt, why do you need to be always that aggressive. We are all adults here, calm down.
Every time I see a post from you I get scared  

[Luke]

@specuvestor,
"I think the idea of a decentralised blockchain with a presumably centralised collateral backing is a bit of oxymoron."
After having looked for what an oxymoron is...     I think you are right.
That said, a centralised collateral backing supported by a decentralised blockchain is in my opinion still better that a centralised collateral backing without blockchain.

"But as a concept Cryptocurrency doesn't work."
You are right here too, as long as Cryptocurrency's value is not anchored to something with intrinsic value.
That's why, in case of a gold backed coin, I'd talk about blockchain-currency instead of cryptocurrency, to avoid misunderstandings.

In order for a cryptocurrency to work you need 1) to anchor its value to an asset with intrinsic value and 2) to put in place the infrastructure which allows you to convert in real time and at low costs any quantity of your gold in the currency you need at the moment to buy your cappuccino

[specuvestor]

Hi Luke

Just to give you some flavor that we started to discuss bitcoin and my skepticism since 2013. So you have a context of the depth of what we are talking about

https://www.valuebuddies.com/thread-3136...l#pid47257
Quote: "Bitcoin is interesting to me because like gold it is based on scarcity but like fiat it is based on faith"

As to the logic of intrinsic value, it can be either physical or implied. Physical gold has it's supply limitation ie (intrinsically deflationary and positively skewed to those gold producing countries) and Bretton Wood shows it is not the best way forward for a global currency. Fiat is base on faith in the issuer which is sovereign and able to tax and print own money. Currency Board like HKD is a blend of two with the collateral being USD.

Which is cryptocurrency? I would think it's closer to currency board but HKD currency board has a sovereign HKMA as the custodian. I'm keen to know who's going to be the independent non-corruptible custodian for a supposedly anonymous decentralised system. Reminds me of Batman Episode 2 when the joker said the independent custodian of all the mob money is not trustable. I think the similarlity in more than one aspect is uncanny.

[Life is a game]

Actually everything can have its day of value and vice versa. Its always about demand and supply isn't it. No demand no value. High demand then depend on supply to set value.

Sent from my CLT-L29 using Tapatalk

[Luke]

Hi specuvestor,
thanks for the flavor

"Which is cryptocurrency?"
A gold-backed cryptocurrency is the same of physical gold.
An unbacked cryptocurrency is like you say.


"I'm keen to know who's going to be the independent non-corruptible custodian for a supposedly anonymous decentralised system."
Since only God is absolutely non-corruptible, we can only choose between better and worse, more probable and less probable corruptible.
Or maybe we should just diversify and choose more than one system?

[specuvestor]

Hi Luke

Cryptocurrency dont have to be backed by gold. I mean it can be backed by USD for example.

Problem is who is the incorruptible custodian to admninister the backing. I hope you are not taking the "incorruptible" at face value but the context is whether under a democratic institution like HKMA vs some anonymous close group organisation which history has shown will be susceptible to adverse human behaviors like greed and self-serving / self-preservation instincts.

In general my experience is most people can come with good idea but cannot think thorough the implication and the operational aspect. In this sense the bitcoin and blockchain inventor is a genius.