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Meet the New Money; Same as the Old Money; We Won't Get Fooled Again

BitCoin gets its value similar to how gold and silver got their value, but with one very important difference.

Dedicated to my wife: I'll always be wrapped around her finger

"I have only come here seeking knowledge--
things they would not teach me of in college.
I can see the destiny you sold,

turned into a shining band of gold.

I'll be wrapped around your finger"-- Sting

This approach to understanding the value of BitCoin doesn't stem from code or protocol, but from considering BitCoin as a commodity, and determining how that commodity achieves a value.  BitCoin is a commoditized asset, similar to steel i-beams or gallons of gasoline refined from barrels of crude oil.  BitCoin is commoditized information, and Dr. Craig Wright is the one who commoditized it via protocol-- allowing informational/computational containers to function potentially as money. 

"Money, it's a gas"-- Pink Floyd

Do you know how Gold achieves it's value?  How about wampum (Wampum: https://sym.re/DgeqAPd ), and barrels of oil?  But BitCoin has a slight difference to those.  Let's compare gold and BitCoin to see the difference:

Que the music:  


There are three different ways to obtain gold:

1. Mine it.

Thus, gold mined will typically sell for a premium to the cost getting it out of the ground. "Proof of Work" is the cost of getting it out of the ground and minted into coins of the realm (with Caesar's bust on them and a serial number)

2a. Buy King Tut's Mask,

and melt-down the 321 troy ounces of gold it contains, then mint the coins. The gold will sell for whatever raw gold sells in the open marketplace, PLUS the cost to melt and mint new coins of the realm. Just one problem with this method. King Tut's Mask brings in 10 million tourists a year thru a museum charging $50 per entry, thus has a cash-flow income stream attached to it. This means the mask as a financial asset is probably worth something like $2.5 to $10 billion. 321 troy ounces melted is more like a half millliion dollars. So ONLY crazy people will do this-- crazy people like barbarians who one day sack Egypt and steal all it's treasures after burning the city to the ground.

"Born in Arizona,
Moved to Babylonia (King Tut).
(King Tut) Now, if I'd known
They'd line up just to see you,
I'd trade in all my money
And bought me a museum. (King Tut
Buried with a donkey (Funky Tut)
He's my favorite honky!"-- Steve Martin

2b. Buy some gold nuggets

which were stored in your nieghbor's grandpa's safe. It's not a ring with a cool inscription, or a fun piece of jewelry, it's just some nuggets above ground already. they will sell at a DISCOUNT to coins of the realm because the nuggets will still need minting work added, which will be a cost.

3. Buy coins of the realm.

This will cost the market price for 1 troy ounce coins, so $1,900 per ounce in 2020. If you melt down these coins of the realm to make "New & Improved" King Tut's Mask 2, 2020, put it in a museum and sell tickets, well, now you've created cash-flows which give the gold a potentially higher price.

Spanish "Pieces of Eight" likely mined in Old Peru; predecessor to US Dollar

With #2 not really efficient, #1 and #3 will compete with each other. Is it easier to buy gold coin MONEY, or mine it? that depends on the willingness of people to part with their above-ground gold. In an inflationary time, this will be quite expensive and your bidding for gold will push up it's value.

In a deflationary collapse,

gold will be sold to buy even-cheaper assets, such as Florida homes in 2009-2011. Mining investment will increase along with the gold price, but over long stretches of time, mitigated by technological advances in mining, the work to get gold out of the earth will likely increase as all the "low hanging fruit" gold has already been found/mined. Eventually we send spacehips to other parts of the solar system, Avatar-style, to look for cheaper mining methods.

But what are the ways to obtain BitCoin?

Is the "gold" under the roots of the "Tree of Souls"?  Or is the Tree of Souls the new gold?


1. Mine it.

Well, we know this only lasts so long as the mining subsidy is > 0. We're at 6.25 right now. At scale, we expect this to go to zero eventually. So let's discount it as an option.

2. Buy it from someone else,

who holds satoshis. This is like #3 above, satoshis are "coins of the realm"-- there's a fixed supply of 2.1 quadrillion of them. As people obtain more for data-purposes, less available for "money" purposes.

3. Print 0-satoshi-coins,

just ask your friendly neighborhood Tokenization company (Jay Leno for Frito-Lay, "we'll make more!") to "issue" you some.

#3 is the cheapest option. So theoretically, unless missing something, it should be used most often.  If so, then why should BitCoin have any value at all, above zero per Bitcoin (for 100mm sats)?

If your argument is transactions and transaction fees, well, then things like paying Nodes in fiat suddenly seems a LOT more important, doesn't it? And what would you be paying for?  Moving around worthless zero-sat coins?  Isn't that what AWS and iCloud already do-- without all the protocol headaches?


In BitCoin, transaction fees are similar to minting fees, you're paying to have the coins of the realm verified as authentic.  Think of this "proof of work" as similar to when mints must remove old worn coins, and replace them with new restamped fresh ones.  You SHOULD have to pay for this, but the best money system will be efficient and make you pay as little as possible.

King Tut's helmet still has a melt-down price for the gold used in its form, regardless of whether it sits in a museum with tons of transactions to see it, or whether it sits in a basement of some billionaire. (see "Gail Wynand").

Gail Wynand, art hoarder

Transactions can equal improved pricing information, but it doesn't give gold it's value or price. Transactions are GREAT for the museum, and transactions are GREAT for BitCoin Nodes. But are they great for BSV?

All ships sink with the lowering tide; all ships rise with the rising tide.

BSV is the tide, who is economically incentivized to make sure it doesn't go down to zero like the waters of Lake Havasu, if it is not ALL OF US?

Californians suck at water conservation but at least limited supply keeps them somewhat honest; will BitCoin community be conservative with its bounded resource?
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Some more gold-musing: https://powping.com/posts/dfe00eef569ea778dbfd7d114936efa94f76c66045d19710a81c60b845b55caa For those interested in how commoties might get their price/value.
Is it possible to print 0-satoshi-coins with some of the tokenisation implementations released on BSV now? Or is that what some are lobbying for right now?
john replied:
The dust limit was just reduced from like 500-something sats to 100-something sats with the intention of taking it back to zero in the coming months. Original BitCoin limit was 0 or greater. So no one can do it now. But when they lower it back to zero it will begin. Obviously the tokenization companies will need customers to go that way too. So it will probably happen.
liam replied:
Ok I'm gonna have to study to understand this more. But does this effectively remove the limited supply of BSV then? How does this change your valuation model of BSV?
jack replied:
Doesn't remove limited supply of BSV. Would mean that there is no limit to the number of potential UTxOs (some of which would contain 0 satoshis)
john replied:
Liam, my answer would be maybe. Attila put it accurately. Number of sats remains 2.1 quadrillion. But number of coins is unbounded— assuming we can call a ZST a “coin”. The final answer on valuation would depend on whether I’m missing something about the transactional value of ZSTs as well as understanding exactly the forces exacted upon Nodes in competition with each other— both risk and reward. Attila thinks more about the risk side (for Nodes) and I’m thinking more about the risk side for BSV— assuming I understand@attila position. But our thoughts are currently similar/same in solution atm.
If there isn’t a limit to data per UTxO, then a 1-sat requirement can’t really be a fundamental underpinning to Bitcoin’s value. Why distill the valuation to this one point? Bitcoin has a major advantage already - complete nativity to the worlds most efficient, useful ledger. That’s the fundamental that matters imo.
john replied:
While it may be true that using multiple pushdatas can insert a lot of data into a single UTXO (just like a building has no virtual height limit), there are still limits. 1. Ownership limit. My data is not your data, and with 6-10 billion people on the planet by 2040 there’s some restriction. 2. Complexity limit. Mixing white rice with black rice is reversible, but the task of separating becomes worse with small scoops of scale. 3. Unknown limit. Since no one has really gotten to play with the PUSHDATA very much due to continuing unfurling of hard cap limits (similar to dust limit not yet breaking double digits) we don’t have any experience yet with large size on coin, particularly breaking the 4 GB limit as it pertains to how Nodes treat it on a technical Performance basis. This could be akin to # of transistors on microchips. Remember, saying we can scale and scaling are two different things— one brings back memories of Joe Namath and another can bring back memories of the Titanic. But also we can think about building height “limit” not being an actual limit but a technical hurdle. 4 speed limit. That which is small can be fast. Speed of information has value. If my dictionary is slower than yours, my dictionary may suffer competitively. 5. Economic limit. When the seed of the New York city was young there was room enough on Manhattan for a few multi-acre farms and even some hunting/game land up where Columbia University stands. When price is cheap we can be liberal with our asset. But once all the UTXOs are used for simpleton purposes we will find a beautiful discovery of economics driving innovation and efficiency. When all the open shoe racks of your closet fill up you will need to dispose of the pair you dislike most to add a new pair of shoes you just bought and love. Forced efficiency and improvement. This is why Manhattan is so wonderful— it’s the geographic constraint of the River which is costly to traverse. There may be others but I gotta get to work.
jack tipped:
jack replied:
You are making a great case for 0-satoshi outputs
john replied:
Not seeing that. But open to understanding it better.
More Great content John.
john replied:
Thank you. It is theoretical in nature, so if right than fantastic, and if wrong then perhaps it pushes other hypothesis to the forefront so we can learn faster.