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Open Letter to Peter Schiff by Erik Voorhees

Dear Peter,

It was a privilege and an honor to be a guest on your radio show today. I’ve been a fan of yours for more than five years; you were one of the reasons I discovered Austrian economics (and, in turn, Bitcoin), and your eloquent explanation of consumption vs. production in an economy has guided my outlook of the world ever since. So thank you sincerely for what you’ve taught me, and for the opportunity to appear on your show. It was a really special moment for me.

While we had some valuable discussion today, I felt a follow-up was appropriate to better articulate my points. You’re right to be highly skeptical of such a new technology and monetary system, but please take the time to ensure your skepticism doesn’t blind you from what I humbly suggest is one of the most important tools for human freedom ever conceived.

The Fundamentals

First, Bitcoin must always be considered as two things: the payment network (Bitcoin) and the currency units (bitcoins). Condemnations of the latter can often be resolved with an understanding of the former. Satoshi should have named them differently to avoid this initial confusion.

When you suggest that bitcoins have “zero intrinsic value,” you are only considering the currency unit itself and ignoring the payment network. While I prefer the term “utility” over “intrinsic value” (because all value is subjective to the valuer), I may indeed admit that bitcoins, as currency units all by themselves, have no fundamental utility and are completely uninteresting. But – and this absolutely critical – the payment network has vast utility.

In fact, this network is probably one of the most valuable and consequential technologies currently on the planet. Some of us realized this a few years ago. Others are realizing it now. Many more will realize it in the future. The Bitcoin network is, fundamentally, a ledger of title controlled by no man. Ponder that for a moment. The transmission of value and ownership has thus just been severed from the State, not by impotent voting, but by the technological achievement of man.

Now, during the show, you agreed that perhaps this payment network has utility. So, if the network (Bitcoin) has utility, and only one currency is accepted on this network (bitcoins), and those bitcoins are scarce, then should not those units themselves command a market price? Who knows what that price should be, but there should be a price, no?

Any good that is useful and scarce will have a price (consider that air is useful but not scarce, and fish with three eyes are scarce but not useful, thus no price for either of them). Because the Bitcoin network is useful, and because only scarce bitcoin currency units are permitted on this network, the bitcoins themselves have a price. Indeed, they must have a price until the network is no longer useful, or the coins are no longer scarce.

This is not magic. It is not a Ponzi scheme or elaborate fraud. It’s just the market pricing something that it finds useful. As the network grows in usage, its utility subsequently grows, and thus scarce bitcoins appreciate further. Those who grabbed coins in the early days benefit hugely, just as those prospectors grabbing nuggets of gold out of the California foot hills did in the early days of the gold rush. Gold is not a pyramid scheme merely because early acquirers profit from later subsequent adoption and demand.

The Utility of Bitcoin and Competitors

So to adequately claim that bitcoins ought to have no price (which is the implicit assumption from your claim on national television that Bitcoin is a Ponzi scheme), you must demonstrate that the Bitcoin network has no utility. As someone who has transferred $100,000 worth of value to another person instantly in another country (on a Sunday when banks were closed, no less), I am confident that you will not succeed in this demonstration.

I believe that you will understand and agree with my above arguments if you objectively ponder them for a while. Your contention then moves to the following: that if Bitcoin (the network) can be replicated by anyone, it isn’t actually scarce at all and thus even though the network is valuable, the price of individual coins will fall toward zero as the system is replicated over and over by competitors. You would explain that while bitcoins are limited to 21 million units, anyone can create a competing crypto-currency and thus the number of possible crypto-currency units are unlimited, thus not scarce, and thus not fundamentally worth anything.

You made this argument several times on the show today. It is a fair point for you to raise, but please allow me to counter it.

Bitcoin, after all, cannot really be copied. True, the open-source code can be copied and the copier could release CopyCoin (indeed this is happening all the time). But, the copier cannot copy the infrastructure. The protocol layer is easily copied. The infrastructure layer is not. On Day 1 of Bitcoin, it had no infrastructure layer. I can tell you, as an entrepreneur in this space for the past few years, Bitcoin’s infrastructure layer is now substantial. Indeed, I am sitting in my office, and looking at my employees building this very infrastructure as I write this. Their work, and that of many thousands of others around the world, is not so easily replicated.

Let’s use an analogy, which you so often convincingly do when describing the absurdity of Fed policy or the counter-productive nature of various government programs. I believe the following is a very fair analogy.

Consider that language itself is a protocol – a set of rules for conveying information. Consider then that one could copy the English language, and change parts of it, and release it as English 2.0. However, why would anyone use it? Even if it had marginal improvements over traditional English, where is the infrastructure? Where are the vast tomes of literature written in English 2.0? Where are the speakers and writers and scholars of this new language? Where are the libraries and Wikipedias full of English 2.0 articles? How many newspapers are written and conveyed in English 2.0? How many Peter Schiff podcasts are disseminated in this new alternative? That infrastructure wouldn’t exist, and neither therefore, would the users. This is merely the natural, spontaneous consequence of network effect, and it applies to English as a protocol for language just as it applies to Bitcoin as a protocol for money.

Now, does the network effect mean English, or Bitcoin, can never be replaced? No. But it does mean it’d be extremely difficult in either case.

But let’s remember something. Even if a superior crypto-currency overcomes Bitcoin in the open market (certainly possible), does that make Bitcoin a failure or Ponzi scheme? Does that negate the utility bestowed by Bitcoin while the market still favors it? Consider that one can benefit from the Bitcoin network with zero or very low exposure to the currency price long term. This means a payment made with Bitcoin last year still accomplished its objective – value moved freely, the users benefited, even if a year later the system falls apart and goes to zero. Thus, there is real utility today even if the system doesn’t work next year. The assumption that Bitcoin will be around for eternity is not a prerequisite for benefiting from its utility in the present.

Mutual Respect for Market-Based Money

I think you will discover, upon reflection, that your concerns about Bitcoin boil down to the thesis that Bitcoin is a volatile, highly speculative, and non-conservative asset class. In this, I wholeheartedly agree. But if your arguments are claiming that the payment network itself is some kind of fraud – a Ponzi scheme undeserved of respect or even consideration – then I must take issue with that. The Bitcoin network is an utterly revolutionary technology. It separates money from the state, in a way that gold, unfortunately, has been unable to do.

When fully understood, Bitcoin should bring tears to the eyes of anyone who fights against the tyranny and ignorance of coercive governments and their monetary witch doctors. This is why thousands of people around the world have dedicated their lives to this campaign. We are carrying out this experiment without anyone’s permission. We’ll either fail, or change the world in a way that was inconceivable before this technology existed.

I wholly support your idea to make a gold-backed digital currency. Please do it. I’d love to be your first customer, because I love gold. But being in this business, seeing how the payments and banking and regulatory world works, I can tell you that your initiative will likely fail, either by self-immolation (GoldMoney severing inter-account payments), or by governmental take down (e-gold).

A monetary/payment system that relies on gold backing is reliant on the backer. It relies on a centralized, trusted party, to warehouse the gold and provide convertibility. This is the counter-party risk eliminated by Bitcoin.

If there is a centralized backer for any payment system, then the system will have to follow all government laws, or be shut down. To follow the laws, personal customer information must be known, meaning privacy is impossible. Transfer limits and strict terms of use will be imposed, meaning financial freedom is impossible. And have fun with the compliance costs. Have you noticed international banks dropping American customers around the world? It is due to this unfortunate dynamic. And then, if the stars align, and the gold-backed currency manages to grow big and become a successful global payments network, it’s not unreasonable to assume that governments will take it down anyway, because it would compete with fiat – from which great swaths of their power originates.

You cannot compete with fiat by having a competitor that is vulnerable to the guns of government. Bitcoin may not be perfectly immune, but it is highly resistant. Censorship of e-gold was easy. Censorship of Bitcoin will be… entertaining.

Regardless, if you’re honestly interested in trying that experiment again, I will help you and support that effort, because I recognize the value of precious metals as commodities and as money. Until such a system actually exists, I am humbly asking you to support our efforts in kind, and am humbly suggesting to you that bitcoins, while non-physical, are indeed real and indeed have real value, because they are the one currency accepted on the most revolutionary payment network known to mankind. This is not theory – it’s actually working for millions of dollars of payments every day. We’ve moved beyond the Mises textbook. We’re running in the open market.

While Bitcoin is still a highly-volatile experiment, it deserves more respect than dismissal as a Ponzi scheme, and regardless of whether you think the current price of a bitcoin unit is justified, you must acknowledge that this technology, broadly speaking, has utility both for both economic exchange and, more importantly, individual freedom.

When my grandparents ask me how to protect their wealth, I don’t tell them to buy bitcoins. I tell them to buy precious metals. When they ask me how to transfer value across distance, I don’t tell them to ship gold. I tell them to use Bitcoin. My hope in writing this letter is simply this – that perhaps you’ll come to see Bitcoin and gold as beautiful compliments and important tools in the advancement of free-market money – one long-standing, conservative, and physical, the other new, technologically and politically disruptive, and digital. One will not replace the other, but I believe both will come to replace fiat, and good riddance to that stuff.

In Liberty, Erik Voorhees


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Let them have their cake

We have been trying to tell people about Bitcoin for the past few years.

Many said it would fail by now, they have stubbornly dismissed it instead of doing objective unbiased research.

It has been to their own detriment.

They have missed out on explosive growth and will continue too.

I say if they still don't want to look in to it... Good.

People deserve what they get, For people who want to be free from banking oppression, they deserve what Bitcoin has given them, a way out.

I'm sure I'll be getting bitcoin before I know it

I imagine it's going to be offered to me for free for all kinds of things soon! 100 bitcoin for early subscribers to whatever.. bitcoin reward points.. I see it coming and I see a currancy that's going to flex wide and far.. before the UN establishes it as global trade.


it gets old doing battle with btc haters day in and day out.

trace mayer said it best

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

understanding Schiff

Schiff has TWO perspectives. It is difficult to keep track of his two corners as he seems to lose track himself occasionally by overlapping his corners. As an investment he sees bitcoins as a ponsi scheme. As money and currency he sees some merit. To understand Schiff's perspective on bitcoins as money and currency, one only has to understand Schiff's rosie perspective on James Turk's GoldMoney [developed in 2001] and digital gold, then compare bitcoins with GoldMoney. Schiff fully recognizes the value of digital distribution systems and the merits of how well bitcoins engage efficient delivery. Digital gold and bitcoins are quite similar overall but inversely bear some assets and liabilities. Schiff is also aware of the reality that due to pressures from fascist global banking/money regulation, James Turk has [temporarily?] taken his digital gold service offline. Whether bitcoins will endure such pressures is yet to be seen.

who is Voorhees?


Erik Voorhees

is a well known person in the Bitcoin community. He was involved with Bitcoin early on and wrote Bitcoin - The Libertarian Introduction which was originally published in Freedom's Phoenix Magazine.

He also created Satoshi Dice, the first super successful gambling site in the Bitcoin community, which he later sold for about 12 million dollars - all payable in Bitcoin.

He now works out of Panama on Bitcoin related companies, like Coinapult.


This is why Google exists.

This is why Google exists.

you're such an a$$hole

upvoted! :)

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016


You still use that?

His name is Edward Snowden

What is Capitalism?

This is also why


and upvoted

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

Good Points All Around

But he has not addressed the issue of intrinsic value at all, in fact he actually re-inforced it. The Bitcoin itself has no value outside of the network. That is the issue.

Actually he has. While

Actually he has. While bitcoin (the currency) has no intrinsic value, Bitcoin (the payment network) DOES have immense utility (which is more accurate than intrinsic value). But bitcoin (the currency) is the only currency that is allowed on that network. It's for this reason that bitcoin (the currency) has value that is unlikely to go away for the foreseeable future, because it's backed by the network. If there's anything that can be called intrinsic value, it's the network aspect that provides bitcoin its intrinsic value.

This is basically what Voorhees argues.

I would argue however, that the scarcity aspect of bitcoin the currency has intrinsic value (if such exists) as well, because this scarcity has been programmed into the code and decentrally backed in order to make a code change exceptionally more difficult (no single point of failure).

Voorhees hasn't stressed above point, because he wants to demonstrate that Bitcoin has intrinsic value, even in the case the currency collapses. And as long as intrinsic value exists, it will retain a market price. So it can never go completely to 0. Just like gold.

Can bitcoin still fail and go to 0? Yes. Something would need to happen that attacks the fundamentals, which is 1. the payment network and 2. the scarcity.

Both 1. and 2. are affected if the internet goes down (though if it's not prolonged, damage will be limited) or if the encryption is hacked (much more serious, but can possibly be solved through an update). Bitcoin might still survive above scenarios, but there are many variables to that.

What network are you talking about?

But bitcoin (the currency) is the only currency that is allowed on that network

Do you mean the p2p network that is used for bitcoin transactions? How hard do you think it is to bring up a new p2p network? If you don't mind, below here on this page I wrote a comment about what the various parts of the bitcoin infrastructure actually are, and why they don't pose a significant barrier to entry for other digital currencies -- really the opposite, they make it almost trivial for other digital currencies to piggyback on bitcoin's success. If I'm wrong, I'd like to see where.

Note: the thing that makes bitcoin's network valuable is the size. A p2p network grows as it gains users. But if all people mean when they talk about the advantage bitcoin's infrastructure gives it is that it is currently the most popular and therefore it's p2p network is larger than, say, litecoins p2p network, then it's just another way of saying that bitcoin has marketshare, which sounds a lot less impressive than talking about "infrastructure."

I don't really disagree that

I don't really disagree that Bitcoin will eventually be overcome, but what I disagree on is the timeframe and ease of an altcoin taking over. Your looking too much at the technical aspects of an altcoin copying the infrastructure, while I look more at the psychological and marketing aspects, which are bigger barriers than you might think (technical minded people always underestimate the psychologcial aspects).

Will altcoins eventually rise up? I find this inevitable. But they will only start to rise up when Bitcoin has already been (semi) established. There's a finite amount of resources available and people can only direct these resources at one cryptocoin at a time (well, for the majority anyways). The opportunity cost for choosing Bitcoin is simply more favourable at the moment than choosing an altcoin. Realize that Bitcoin is still in the experimental phase and if they need to direct resources to such a risky project, they will direct those resources to the cryptocoin that has the best chances of success (and thus has the best chance of generating income and not losing the investment).

When that network has been semi established and the idea of crypto coins has been entrenched in the minds of the people, we'll start seeing more serious consideration for cryptocoins. There's big money with new coins and this reason alone is why they will frantically start trying to eat marketshare. With such high competition, we might see some real contenders coming up faster than we might think. As a matter of fact, the altcoins have already been soaring, but it's foremost speculation. The altcoins need some serious investors like Voorhees that are willing to believe in the coin longterm. That day is still off by a few years, but it's probably sooner than we think.

Then that's not an infrastructure argument at all

It's a marketshare argument, which is a very different thing.

I also think you're wrong about that argument. Look at any other new digital technology in the internet era, and the way marketshare shaped up after the first mover demonstrated the potential. Not at all like what you're describing.

Umm, from most examples I

Umm, from most examples I know, first movers usually fail, because of mistakes they made. If they don't trip up, they usually retain the lead by a wide margin, unless the competitor that comes up has actual innovative worth.

You'll need to cite some examples for me to examine.

Edit: Oh, and my argument was a dual argument, both marketshare and infrastructure oriented. Both are relevant.


Umm, from most examples I know, first movers usually fail, because of mistakes they made. If they don't trip up, they usually retain the lead by a wide margin, unless the competitor that comes up has actual innovative worth.

Give me an example of one that retained the lead?

For ones that didn't ... web browsers (NCSA Mosaic), social networking sites (Geocities), how many examples do you need? Or from another angle, if first movers usually fail because of mistakes they made, are you thinking that Satoshi didn't make any mistakes? You can already see competitors popping up that try to address some of the flaws, not just competitors that are merely clones like Litecoin.

Edit: Oh, and my argument was a dual argument, both marketshare and infrastructure oriented. Both are relevant.

I read it again, and don't seen an argument about infrastructure. You're just assuming that people who see value in the sector will put their investments into bitcoin, but that's not how venture capital works, or competition in a new sector. For that matter, it's not even true that a new alt coin needs venture capital and that is precisely because the infrastructure is so little a hurdle. Litecoin was done by one guy working in his spare time.



While the title of above link seems to agree with you, actually the entire link speaks about how Yahoo made some tremendous mistakes sabotaging its own network effect. May I remind you that there is no company behind BTC and thus no single point of failure, like with Yahoo and geocities? If BTC has flaws, they have the entire world as resource to improve upon the design. And I do acknowledge that if BTC reaches a certain size, it will be much harder to implement controversial updates to it, but that initself means that BTC has already reached critical mass.

Another reason first movers usually fail, is because like the link stated, they were too far ahead of their time. The technology and ease of use in order to fully utilize the idea wasn't present yet. I don't see most of these problems pop up with BTC, for one, because people have learned much from those times and now realize how important ease of use is to the people. People like Steve Jobs have taught the industry how important it is to have a polished product. The giants from the past on which shoulders we stand right now have enabled us to innovate faster and faster, with less mistakes on the way. Does this mean that BTC will not have unforeseen hurdles that it needs to overcome? No, such situations may indeed arise, but remember, bitcoin is updateable. If there ever arises a situation where it cannot easily update to solve the problem, it already means that it has reached critical mass.

As for infrastructure, you have a very limited view of what infrastructure actually entails or what it requires. My impression is that your view of infrastructure is purely technical and seen from a software standpoint. When most people use the term infrastructure, they actually mean it in the marketing way, which is the usual interpretation of the word and is vastly broader than its pure software interpretation. Mind you, this is just my impression, I might be wrong, so please tell me if I'm wrong.

Might I enquire what you actually understand under infrastructure?

Flaws and infrastructure

I think you (and a lot of advocates) are understating how difficult it is for bitcoin to evolve. Do you know what a "hard fork" is for bitcoin? Some kinds of changes would require a hard fork, effectively creating two competing alt coins, the old bitcoin and the new, with the hope that the new will squeeze out the old. Getting everyone to go along with a hard fork would be hard too. But these kinds of things are much, much easier for a new alt coin designing from the ground up based on lessons learned from bitcoin.

First link that came up, but I think it hits some of the main ideas:

Yahoo made mistakes, all first movers make mistakes, but how many are hampered in their ability to evolve the way bitcoin is?

Second, maybe we're not on the same page about infrastructure.but the real issue is barrier to entry. That's usually connected to infrastructure, AFAIK, in sentences like "Examples of industries with barriers to entry are the telecommunications and energy industries, because of the high cost of infrastructure necessary to begin operations." But we can focus on the concept of barrier to entry, which is what the real point is. Vorhees tried to say that infrastructure in some sense was a barrier, and you did too, both referring to the network.

But the network is a p2p network, and that's not much of a technical barrier. If you want to see how little barrier that is, Litecoin is a ready example -- one guy did that in his spare time, while holding down a full time job. So other than market share, I don't know what the barrier to entry argument is supposed to be.

Your point of hardforks is a

Your point of hardforks is a valid one, but those scenarios you outlined, I already am aware of. While I do believe that TBTB will eventually be forced to move to destroy BTC, I'm fairly certain that they won't attempt such an action in the foreseeable future, not until they have made the definite conclusion that BTC is a real threat. Why? Because, these people know that staying in the background is much smarter than actively waging war in the open. The banking families like Rothschild realized long ago that declaring their intentions was a major mistake and was one of the reasons their central bank scheme failed in the past. Subtlety is key and keeping the public in the dark, that's the way to succeed.

The above is the reason why they will hold off any overt actions that might lead us to them, because attacking the BTC network right now takes quite a sum of money. This is why people will be hesitant to attack the BTC network, cause when only millionaires can attack the network, the list of suspects can be seriously reduced. And perhaps they might be able to hide their tracks, but the very attack itself will fuel paranoia in the people, something they definitely don't want. They need people asleep, not paranoid and erratic.

What i am relatively certain of, is that these banking families will eventually be forced to act, because bitcoin threatens the very core of their monopoly. But they will delay this decision of an active strike to the very last until they have no choice. BTC will be vastly larger by then.

As for the change in block size, I suspect this will be resolved democratically, because they know how much damage a hard fork causes. The inflation problem is something far in the future.

Will there be other things that might require a hardfork? Possibly. Frankly speaking, I think most of the problems that will pop up short term will be similar like the miners fee. Those problems will likely not result in a hard fork, exactly because people know how damaging these are. And the issues will most likely be small enough that even if altcoins incorporate the better option, it likely won't give them much of an edge. The scenario of hard forks are more due to outside forces forcing the hardfork (banking families, hackers, etc). If a situation actually pops up where a choice NEEDS to be made, the hardfork has more chance of success than an altcoin.

As for the barrier to entry, the difference in the barrier to entry to pour resources for either Bitcoin or an altcoin is actually not that big. But this again doesn't take into account the infrastructure that BTC alread has. Infrastructure is not just the code, the code is relatively simple to copy. It's the goods and services (companies, exchanges, ATM's, Trezor, etc) based on Bitcoin that are the most important part of its infrastructure. And yes, technically, these services can easily incorporate another altcoin software wise, but you severely underestimate the necessary steps for this to actually happen. These companies and the exchanges are run by people. These people must actually be convinced of the merits of the altcoin to decide to incorporate it in the site. Most won't do this, because BTC itself sucks up most of their time and resources. It takes time to study an altcoin, you will have to be sure your site can handle the extra volume, you will have to be sure that people will actually use it as an alternative to BTC, etc. All of this, while BTC already takes up considerable amount of time to actually study and is still in the experimental phase. And then we are not even talking about the hardware side of things, where changes are not so easily made and take time to implement. The services to easily add altcoins to (for example) existing POS systems needs to be coded as well and while such is relatively simple to do, the decision still needs to come from management and you will have to be lucky for a manager that has studied the market enough to actually try an altcoin. It might take months for something so relatively simple to be finally coded. I could go in more detail, but I see so many things that can slow down altcoins, i would need to open up a skype chat to actually talk about it. It's too much to type out.

Now, SOME people might have actually studied the market enough to actually do all of this. But this process takes time. Usually, the only reason people would do such onerous things on short notice, is if the first mover made a fatal mistake. I don't see many fatal mistakes at the horizon, since there's not much difference between the altcoins anyways. Now, this might change tomorrow, because you can't be prescient. But the way I see it, the chance of either of us being right is 50/50. So, why not stop judging us for being too naive and simply admit that while it could play out like you said, it doesn't necessarily have to be the case. Because from the way you are talking, it's like first movers ALWAYS fail. I'll acknowledge that first movers can fail, heck I even deem it likely that one day it will be overtaken. I'll also acknowledge that my scenario doesn't necessarily have to be the case. Heck, I do deem it quite possible that most of us are in hype mode and that we are far too optimistic about things. It's a thing I've considered and still keep considering.

I hope this is a good enough of a compromise?

One of us

has misunderstood the kinds of things that could require a hard fork, and that could be me. My impression is that a lot of the kinds of things that are being discussed for competitors need a hard fork for bitcoin to copy them. I was looking at zerocoin recently, and the need for a hard fork thing kept coming up there:
Zerocoin ended up deciding to go off on its own as a new alt currency instead, and if it takes off bitcoin may have to play catchup at some point. That's just one example. Bitcoin is designed to be hard to change.

For competition, yeah, we'll see who's right. I hope to see multiple competing digital currencies, preferably not all based on block chain architectures but using as many different approaches as possible. Competition is healthy, and multiple options using multiple technologies makes it that much harder to attack.

And just to be clear I'm not saying that the first movers always fail. I just can't find an example where it didn't happen, especially with internet-based technologies.

No, they don't need a

No, they don't need a hardfork for Bitcoin to implement the features of competitors. The reason people were talking about a hardfork, was because some BTC devs (namely Mike Hearn) wanted to discuss coin tainting (the ability to distinguish between good and bad coins), which would have underrmined BTC's fungibility. Mike Hearn seems to be pro government and wanted to make it easier for the government to detect evil doers. The BTC community was in an uproar and threatened to hardfork the code if they ever decided to do that without their consent.

There was a group that said, screw the government and wanted to implement zercoin's features within the BTC code. Gavin and most BTC devs disagree, cause they needed to sell BTC to the US government (and other governments), so trying to implement zerocoin's features right now would be a bad idea.

Hardorks only exist when there's a vast disagreement between the bitcoin users on which way is the best way to go. One group would go with one fork, the other with the second fork.

Zerocoin devs eventually decided it would be better to bring it out as an altcoin, because it would be more easy to test the concept in the wild as an altcoin, with less risk to BTC. If it would eventually prove succesful, its code could still be brought into the bitcoin code without causing a hardfork. This is better, because I do admit that Bitcoin's pseudonomity has some advantages as well. Its transparency can be a shackle on people with too much power.

If the government ever abuses its power, the devs will have a good reason to implement zerocoin's features. It's basically like a sword of Damocles hanging over the government's heads: You better not pull that crap you pulled on us like you've done with the NSA, otherwise you'll give us an excuse to implement zerocoin's features and we'll have public consent to do so. Beware.

Like I said, one of us is wrong

If it's me, I'd like to figure it out. But for example;

Hardorks only exist when there's a vast disagreement between the bitcoin users on which way is the best way to go.

That's a possible scenario for a hard fork, I guess, but there are also also kinds of changes that can't preserve backward compatibility that would require a hard fork even with unanimous support. It's not uncommon at all to see discussion of possible features / improvements and whether it could be done without a hard fork or not. Here's a page that suggests that alt coin developers should focus on things that would require a hard fork, i.e., things that would be very hard to accomplish with bitcoin:
There are a number of flaws with Bitcoin that cannot be corrected without a "hard fork". Any serious alt chain should at least attempt to address these concerns and issues.


but the network does have value, which is growing all the time. That's where the value comes from. It's true that doesn't give the same assurance for a store of value gold does, but it doesn't need to.

As I often say, use gold for what it's best at (storing value) and Bitcoin for what it's best at (transacting value). That means you can have both - probably a significant part of your wealth in gold, and some small fraction, based on your intended use of the currency, in Bitcoin. Simple.

It is because of the network

It is because of the network it has value, that and due to scarcity and rising demand.

Thoughtful Analysis

That was a thoughtful analysis written by someone who is obviously intelligent. I think, albeit I am not the end all of understanding here, that he is overlooking the fundamental flaw that bitcoin has. Bitcoins has all of the fundamental flaws that fiat currency does in that it relies on someone's desire for it. There is huge counterparty risk with bitcoin. Gold has allayed that fear by being accepted for thousands of years by vast swaths of people for reasons that are intrinsic to the metal itself (it's shiny, used for jewelry, and is a luxury). Because of that fact, there is reason to be skeptical. I'm not saying that Voorhees has a bad, or even flawed argument, or further, that he should be flogged for believing in the value of the network that exists and is being created currently for bitcoin (which is how the other side sometimes portrays believers in something other than gold). I am just saying that he may be overlooking one of the fundamentals. As a money alternative, it must be measured as money. If he is simply valuing the network, well, then, this is all a specious argument and people are arguing across purposes. So, for the purposes of this discussion, people should be talking about the value of bitcoins as a currency (or medium of exchange), not about the value of the network itself.

As much as I hate to quote one of the biggest money printers of all time pertaining to the value of sound money, I believe Alan Greenspan said it best (obviously before he became Fed Chairman and was instead an Ayn Rand follower):

"What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron." The whole text can be found here and is quite a valuable read (if for no other reason than to laugh at how much power can corrupt) http://www.constitution.org/mon/greenspan_gold.htm

Bitcoin is not a luxury, nor is it necessarily durable (debatable, but I guess I don't understand it fully). Because of that, it may not pass the test of time like other time honored currencies (Gold and Silver, the former being better than the latter as a currency).

Personally, I think everyone should do what is in their best interest and the market will sort it all out (if it is allowed to do so). I don't fault people working for dollars currently even though it has serious faults (even if the counterparty risk is, at least currently, much less of a risk). Consequently, I don't fault people who see the value of bitcoins, even though I personally think it is speculative and lacks some of the fundamental qualities that make money, well, money.

Merry Christmas to all those at the DP.

ALL money relies on someone's desire for it

Including gold. There are cons to bitcoin but this isn't one. In fact I think the article nails it.

Bitcoins are a good medium of exchange, but not so good a store of value, but it is still a store of value.

Gold is a good store of value, and not so good a currency. (because it's physical and the gangs can steal it and interfere with its use)

I think if we ever had a free society we would have gold or physical commodity backed e-currencies. But for now, bitcoin is the best answer.

And just a reminder. Bitcoin is not fiat currency, because there is no fiat.

Because of that you can know whatever value they have is real at any point in time because no one is forced to use them.

Interesting Take

You too are missing the point in my humble opinion. People want gold outside of it being a medium of exchange... that is why being a luxury item is so important to the fundamentals of what makes gold money and one of the reasons it has sustained as a store of value (and as a medium of exchange) for thousands of years.

That's true but again that value is subjective

In fact if you think mathematically it's a little more clear.

The value V, of a unit of money is:

V = A + C

Where A is the subjective value as an asset, and V is the subjective value as a currency.

In fiat money and crypto currencies A is effectively zero. But in fiat money C is a bubble by definition, it's an artificially elevated value, that suffers the fate of all bubbles. In crypto currencies A is not a bubble by definition. The value placed on each unit is the market clearing value.

Gold has a positive value of A but (because of impediments placed by governments) a much lower value of C.

So lets walk it through historically.

In the beginning gold had A and C as zero.

People found some use for it and A came to be positive.

Because it also had the properties of a good money, durability, divisibility, portability, it came to have a positive value for C.

When C reaches some threshold gold becomes money, and for most people the A value isn't nearly as important as it's C value.

And of course today governments have attacked gold and reduced it's C value to almost zero. Goldbugs hope for a time when it's C value comes back up. I think that's a very plausible scenario.

Right now though, while bitcoins have zero A value, they have massive C value. Why? Because it has the properties of a good money, durability, divisibility, portability.

Bitcoin is also a bubble. Because it is a reaction to statist monetary activity. People are in bitcoins over gold because bitcoin is safer than gold currently and safer than fiat for different reasons. The C value of bitcoin is higher than it should be. But that doesn't mean it doesn't have value, just that we can know it is higher than it would be otherwise.

The collapse of fiat would increase bitcoin C value.

The liberation of gold as money would decrease bitcoin C value.

Which do you think will happen sooner?

Regardless the argument is still that the value of a currency is primarily it's C value, not it's A value. People almost never actually consume their gold. They keep it to trade.