Bitcoin vs Gold & Silver

Adam Taggart
By Adam Taggart on Sat, May 25, 2013 - 11:29am

[crossposting from the Gold & Silver Group]

Here's a video discussion that was recorded between Chris and Mike Maloney when we were down in Los Angeles last month:

The big deal over Bitcoin is our freedom of choice, because if digital options such as Bitcoin or U.S. dollars were equal in value as money to gold and silver, the owners of the systems wouldn’t need laws to enforce a currency monopoly. Mike has already taken sides in this controversy, saying, “I’m for whatever the free market picks for currency.”

Dr. Martenson agreed, wisely pointing out the ongoing “Cold War race between security professionals and hackers.”

On money, Mike says “I really hope the public learns enough that they refuse a gold standard, and demand gold and silver”—in other words use real gold and silver as mediums of exchange.

Mike continues:

“…instead of a national currency that supposedly represents gold and silver, that they’re keeping safe in the vault for you, and they’re allowing you to trade these claim checks on gold and silver

…which give them the ability to put capital controls in place so they can control, and tax, and monitor shifts of wealth … and basically infringe on our privacy and limit our freedom.”

Here is what Nobelist, Friedrich Hayek, had to say about this in his 1944 classic, The Road to Serfdom (cartoonoriginal):

Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference

Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty. It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape—not merely for the rich but for everybody.

Mike reminds us that it is dangerous to swim near a drowning man, and as these legacy economies drown in debt, they’ll be grabbing anything they can to stay afloat.

The recent shutdown of the U.S. bank account operated by Bitcoin’s most popular exchange, Mt. Gox, shows us that exchanging currency without registering with the U.S. Treasury is simply not an option. 

Mike wonders how converting energy to Bitcoin purchasing power is equivalent to energy embodied in mined and minted precious metals, as it produces nothing tangible. Chris points out that “Bitcoins have value if and only if the Internet is there for you, period.” 

“The system being up and running is your central bank in this case,” Dr. Martenson continues.

“The reason I prefer gold is that it’s the only money I can actually hold which is not simultaneously somebody else’s liability. 

Bitcoin is still somebody’s liability; there is a server farm out there that has to maintain its integrity, has to stay up and running, for your Bitcoins to have any value at all.”


For more introduction to Bitcoin, a beginner video, and our most recent article, can be found here.

Note: If you're reading this and are not yet a member of Peak Prosperity's Bitcoin Interest Group, please consider joining it now. It's where our active community of sound money enthusiasts have follow and debate this emerging form of digital money Simply go here and click the "Join Today" button.

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Nervous Nelly's picture
Nervous Nelly
Status: Silver Member (Offline)
Joined: Nov 23 2011
Posts: 209
No single point of failure

One of the claims above is: "Bitcoin is still somebody’s liability; there is a server farm out there that has to maintain its integrity, has to stay up and running, for your Bitcoins to have any value at all.”"

That is absolutely false.

BTC relies on no single computer or "server farm" anywhere at anytime.  New "miners" can join at any time in the race to mine coins - and at the same time are part of the verification process for transactions.  If one "miner" fails in the middle of a transaction verification IT DOES NOT MATTER.  Other "miners" are not only mining and verifiying but the usually accepted confidence check level is at least 6 mining computers (anywhere in the world) verifying every transaction from milli-cents to thousands of dollars worth.

(Which is why, BTW, that the value of BTC hardly fluctuated when HS raided Dwolla (Mt. Gox's 'transfer agent') in the US.  The rest of the world shrugged.)

So there is no server farm out there that has to maintain anything.  The required information is in every bitcoin and in the blockchain.

The one thing that DOES have to exist is communication to move all the transactions and the blockchain around so everyone can operate on it.  Whether it is the internet or some other net, you do need the comms net.  If you are sufficiently paranoid wrt to the internet's survival then buy gold.

-Nervous Nelly's boyfriend (who owns all of 6 BTC's).

tommyguy's picture
Status: Bronze Member (Offline)
Joined: Sep 30 2008
Posts: 32
Bitcoin value

I think Chris' comment "there is a server farm out there that has to maintain its integrity, has to stay up and running, for your Bitcoins to have any value at all”  Is not true. I believe the token residing on your computer contains everything it needs to establish its "value" as a bitcoin and to be used as payment in bitcoin.  That's the whole concept of a true peer-to-peer event.  I think servers are needed only to create new bitcoins or to exchange them for some other currency. And creation of new bit coins is defined (and therefore limited) by the algorithm that is part of each bitcoin's "DNA". It remains to be seen whether the encryption contained within each bitcoin is truly secure, because that's the essense of its value. But if so, hacking some server should not impact the utility or value of bitcoins themselves.

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Bitcoin and the Future.

You indulgence for two declarative statements (Unsupported) if you please.

If the system goes down and technology collapses, Bitcoin is passé.

If the system stays up and goes the usual way that Singularities go, then Bitcoin goes the way of the dinosaur. (What was it that Diana saw?)

So what environment will Bitcoin thrive in? Only if things stay more or less as they are now. Time to brush up on exponential functions again.

woodster1's picture
Status: Member (Offline)
Joined: May 2 2013
Posts: 1
Bitcoins to Dinosaurs

Sometime in the future, perhaps next year, next decade, but certainly sometime in the future, quantum computing will render Bitcoins worthless. The computing power of a quantum computer will be many orders of magnitude greater than even today's most powerful supercomputers, allowing a flood of virtual currency. One can only imagine the Fed (or some "successor agency, USA or other) getting hold of the first quantum computers in order to mine an umlimited Bitcoins and manipulating that market as well, with the intention of undermining it.


Whether paper or "virtual", intangible currencies are subject to an "arms race" facilitated by ne'er do wells with the power of the printing press.



Oliveoilguy's picture
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
Bartering with Bitcoins

In a SHTF scenario I can't even imagine someone trying to barter a bitcoin with me for some food, ammo, soap, or whatnot. However, if that were to come to pass, I would start by politely refusing and suggest that they trade their bitcoins for something of equal value like paper dollars. I would regard silver in a different light.

I guess I'm conservative or traditional, but that's how it is.

LisaR's picture
Status: Member (Offline)
Joined: Jan 8 2013
Posts: 19
Persistent value of gold

I am reading two books right now, "The Crash Course" and "Alain Coumont's Communal Table". I wanted to share this snippet of Alain's recollection of his grandfather's food market business in Belgium, because the serendipity was remarkable to me:

"It happened during World War II, when the German occupiers were printing paper money to pay their soldiers. I have never known how or why my grandfather smelt a rat and realized that once the war was over this paper money would be worth much less. But he asked his customers to pay for their eggs, lettuces, etc. in coins only! As the currency was indeed devalued, paper money was replaced but not coins... I believe it took my grandfather ten years to spend all of the coins he accumulated."

I, too, don't know why metal persists throughout history to hold its value when other currencies fail (still soaking it all in), but this anecdote seems to support Chris' inclination to invest in gold. To me, bitcoin is just another corruptable form of currency subject to, as Chris says, "the most induring of human weaknesses: the deisre to get something for nothing."

What is needed is a simple, transparent rating system for placing a "rated" value on any good or service that is based on the actual resources used to create that good or service, and the current supply and demand for that good or service. This "rated value" would make the real value of anything transparent and clear to consumers.

goldcoinnet's picture
Status: Member (Offline)
Joined: May 21 2013
Posts: 5
I choose a palpable currency

I choose a palpable currency over any bitcoin.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
False Dichotomy

It is not Bitcoin vs Gold (and Silver).  Bitcoin is a new currency... one of the first since the (real) Gold standard was in place to have a scarcity integrity similar to that of a rare, mined metal.  Bitcoin and Gold can and should co-exist.  The best way, IMO, to view this is Bitcoin and Gold against the fiat currencies.  

Regardless of what any one individual thinks.. the market continues to speak, and the value of a Bitcoin has not collapsed back to zero.. even with the latest Gov't interventions in the Mt. Gox tranfser accounts.  Right now, a Bitcoin will cost you $128, if you can find one for sale.

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