Monday, June 15, 2020

Gold vs. Bitcoin: Should We Cheer Bitcoin?

Viresh Amin emails as a follow up to: George Selgin: Bitcoin is Not Money
I understand your thoughts on Bitcoin and how it is not money. Just out of curiosity though, wouldn't you commend the attempt of the free market in good intent? I think the story behind it is amazing, as supposedly Satoshi was fed up with the bailouts in 2008/2009.

The argument that the government can control it or stop it because it's digital is just the same as gold where they confiscated it long ago under FDR and de-linked it with the dollar. Either digital or physical, the reach of the government is far and wide, but as you highly commend black markets (like the haircuts in SF during lockdown) why not commend the attempt and use of Bitcoin?
RW response:

Just because something appears on the free market doesn't mean it should be cheered. There is no need to object to any activity in a free market, in the sense it should be stopped but there is no reason any one of us has to take part in a given activity.

I am not, for example, ever going to practice cow cuddling though it has appeared on the free market.

As far as the difference between gold and Bitcoin.

There is an old Swiss saying, "Gold has no smell."

It means that gold is hard to detect, hard to track and an outsider doesn't know where it came from.

Bitcoin is just the opposite. It is very easy to track. And once the government detects a user, they have the entire transaction chain to find evidence of "wrong-doing."

Using Bitcoin is like getting a black market hair cut inside the police station when Karen is on patrol.

Throughout history, many lives have been saved by those who had some gold coins in their pockets, even when it was illegal to have them. There was no smell.



  1. There IS a good use for bitcoin. That is, to transfer payment for free and fast. Also to and from countries under sanction by good ol' Uncle Sam, for instance, Russia, or Iran.
    Quickly exchange for $$$ and Bob's yer uncle.

  2. Bitcoin is becoming part of the investment scene. It seems unlikely that the government will ban it. And since we're not using it as money, only as a digital asset, tracking is not a concern.

    A newsletter called CryptoCompare on June 10 sent this out:

    Fidelity: One Third of Institutional Investors Have Invested in Digital Assets
    A new survey of 774 institutional investors conducted by Fidelity Digital Assets has found that more than a third have invested in digital asset spot or derivatives markets.

    Globally, the survey found that 36% of respondents own cryptoassets. In the US, this number was only 27%, up from 22% last year, while in Europe the survey found that 45% had some exposure to crypto.

    Interestingly, the survey found that more than 60% of the institutions surveyed had purchased cryptoassets on spot markets, and only 40% had purchased derivatives. Tom Jessop, Fidelity Digital Assets President said:

    “These results confirm a trend we are seeing in the market towards greater interest in and acceptance of digital assets as a new investable asset class.”

    They also sent this:

    Warren Earl Davidson, a congressman from Ohio has labelled Bitcoin "a great store of value."

    Talking to podcaster Laura Shin about a range of crypto-related topics, Davidson explained how his interest in Bitcoin was sparked by his background in manufacturing and the complexities he encountered with international payments. Praising the elegance of Bitcoin, the congressman also recalled the early experiments with DigiCash and how solutions were needed for international money transfer.

    Davidson also criticised the enormous financial stimulus underway in the US:

    "The Modern Monetary Theory people believe that if you have a central bank you can just keep printing [money]. That's not what history shows, and frankly the logic of it is that you can dilute the value of everyone's money and there is no consequence for it, and that's completely irrational.”

  3. Suetonius, _12 Caesars_, "Vespasian":

    When Titus found fault with him for contriving a tax upon public conveniences, he held a piece of money from the first payment to his son's nose, asking whether its odour was offensive to him. When Titus said "No," he replied, "Yet it comes from urine."