Noah Smith makes the case for Bitcoin as gold

Noah Smith makes the case for Bitcoin as a new gold. The problem recently has been that it hasn’t held value well. Perhaps there’s a future where it’s used more in transactions, once fees are decreased, giving it a resurgence in a new manner.

There are essentially three reasons Bitcoin isn’t working out as a currency — twotechnological, and one economic. Technologically, Bitcoin tends to be slow and laborious to use because it verifies transactions in small blocks. That problem isn’t particularly hard to overcome — just use bigger blocks, or use a form of temporary credit to ease the burden on the network. More ominously, Bitcoin relies on people known as miners to verify all transactions, and compensates them by creating new Bitcoins. But soon, this will stop, since the total number of Bitcoins is capped at 21 million — at that point, transaction fees will be needed to pay miners.

It’s very possible that all of these technological problems will be overcome, either by Bitcoin or by rival cryptocurrencies. Lots of smart people are working feverishly on solutions. But there’s also an economic reason why Bitcoin and other cryptocurrencies will never be useful as money. Things that are good financial investments don’t make good currencies, and vice versa.

via Bitcoin Is the New Gold at Bloomberg.com

Can Bitcoin Follow Gold’s Path to become Digital Gold?

Alex Gurevich writes on the origins of gold as a store of value and Bitcoin‘s path toward the same outcome.

Bitcoin is battling to become digital gold, while ether, for example, is elbowing to become digital copper. If the analogy holds, the price of ether will be driven by technology demand, while the price of bitcoin by the need to store liquidity.

He then argues that altcoins are complementary – not competition to bitcoin.

As a corollary, the rise of altcoins geared towards specific purposes is not at all dilutive, but actually supportive of bitcoin. While diminishing its share of trading volume in actual transaction flows, it shields bitcoin from being demand driven and makes it a more attractive store of value.

He then examines bitcoin’s likelihood to become digital gold by answering four questions. His conclusion:

In summary, despite the rise and fall of various alt coins and fork considerations, “time” works FOR bitcoin, not AGAINST it. Every day it doesn’t disappear, it gets one step closer to a permanent status of digital gold.