A Bitcoin Standard: Lessons from the Gold Standard
This paper imagines a world in which countries are on the Bitcoin standard, a monetary system in which all media of exchange are Bitcoin or are backed by it. The paper explores the similarities and differences between the Bitcoin standard and the gold standard and describes the media of exchange that would exist under the Bitcoin standard. Because the Bitcoin standard would closely resemble the gold standard, the paper explores the lessons about how it would perform by examining the classical gold standard period, specifically 1880–1913. The paper argues that because there would be virtually no arbitrage costs for international transactions, countries could not follow independent interest rate policies under the Bitcoin standard. However, central banks would still have some limited ability to act as lenders of last resort. Based on the experience during the classical gold standard period, the paper conjectures that there would be mild deflation and constant exchange rates under the Bitcoin standard. The paper also conjectures how long the Bitcoin standard might last if it were to come into existence.
Original infographic from: JM Bullion
“Perfect security requires a perfect human”, also for gold. Hence, we can eliminate that commonality.
A competent user can secure something better than an incompetent user. This applies to both gold and bitcoin. Hence, we can actually eliminate that commonality from consideration, too.
What you’re left with is: it’s fundamentally easier to secure bitcoin than to secure gold (wrt: authentication, storage, transport, etc.).”bitcoin security is only as good as the person who owns it”. I agree Bitcoin has multiple factors that must be secure, in order for a user’s bitcoins to be secure. The assumption was that the network’s incentive structure is sound, and hence the network itself will remain sound.
If the issue is securing bitcoins, then that can surely be done by a competent user (whether by: paper wallet, custom hardware wallet like Ledger or Trezor, addition of multisig or BIP38, etc.). The assumption behind my statement was that the user is competent, and that’s the same assumption you originally made too.
It’s far easier to authenticate bitcoin than gold, it’s far easier to properly store bitcoin than any sizable amount of gold, ditto for transport, etc.
Proof for gold accounts? Proof for physical ever hear of salting?
Providing proof in both cases can be costly. Continual audits for gold accounts, which includes the entire chain of custody if it is ever moved. And you had better have access to an x-ray spectrometer if you stack phys, that is, if you really want to be sure. Then everyone who trades with you has to accept your proxies for proof, or provide their own. In all reality they rely upon a web of trust. Gold relies on trust. And if gold did not rely on trust, such as if it were actually used to fuel international commerce, the routine use of gold for transactions would look every bit as ‘dramatic’.Bitcoin does not rely on trust in the same way, because it has licked the ‘proof’ problem.I reiterate. Gold has a proof problem.