Max Keiser Says "Bitcoin is Peer-to-Peer Gold, Fight Me": Challenge Accepted

-edited

Max Keiser challenges anyone to dispute his claim that "Bitcoin is Peer to Peer Gold". I accept the challenge.

Bitcoin is Fool's Gold

Bitcoin has some rare and interesting properties. Like gold, Bitcoin is easily divisible. But what about scarcity?

Proponents claim Bitcoin is scarce. Alleged proof of the claim is that only a certain number of them will be mined.

The claim is on shaky ground. Nothing stops a majority of miners from agreeing to double, triple, or quintuple the number of Bitcoins.

That will "never" happen claim the proponents as it would kill the price.

But it already has happened. Twice.

Bitcoin has taken two hard forks already. At the first fork, holders of Bitcoin received an equal number of Bitcoin Cash. Then Bitcoin Cash forked into Bitcoin SV. As a result of these forks, there are already three times as many Bitcoin lookalikes as promised.

That's just the beginning of it.

Top Twenty Cryptocurrencies

Note that Ethereum, created to fix a scaling flaw in Bitcoin, has itself hard forked.

There are double the number of Ethereum coins as originally promised.

Cryptos Are Like Fiat

Despite mining claims comparing cryptos to gold, cryptocurrecies are like fiat. They can be conjured out of thin air like nothing.

Proof is irrefutable: There are over 2,500 cryptocurrencies all claiming to be scarce like gold, each claiming to have added value.

Crypto Descriptions

I asked William Entriken, the lead author of the "token standard" for tracking physical assets using blockchain (ERC-721) for a synopsis of the leading competitors to Bitcoin.

The following bullet points are from Entriken.

  • XRP (the company) clears cross-border treasury transfers for international banks. This works on the normal underlying fiat currencies. But the XRP token you can buy actually has nothing to do with that.
  • ETHEREUM lets you run applications on a blockchain. It is one global computer that everyone can use and, we assume, nobody can hack. Ethereum is a public-access computer but actually it inspired many other similar projects, some of which are not public-facing. One big limit of Ethereum is it costs about $0.02 for each transfer or program run and takes about 20 seconds each time.
  • BITCOIN CASH is the same thing as Bitcoin except that the number of allowed transactions is higher. Bitcoin and Bitcoin cash only allow a certain number of transactions every ten minutes. So if you really want your transaction to settle now then you must pay a higher fee. Otherwise your transaction settles later. The Bitcoin Cash fork was motivated because Bitcoin consistently has more people wanting to clear transactions than
  • EOS is also a global computer. We usually judge global computers (blockchain that can run applications) against Ethereum because Ethereum is best known. Comparatively, EOS made some very different design decisions that make the system able to run faster but also require it to rely on a small number of central operators.
  • STELLAR is one specific payment system application. They are a non-profit that is focused on customers which do not have access to traditional banking services.
  • BITCOIN SV is one more fork on BITCOIN CASH. There are a lot of technical details that are changed with no visible end-user impact.
  • TETHER is a blockchain application where somebody with a business address of "incorporated in Hong Kong" and no phone number hold $3B in US Dollars on your behalf. You hope that these funds will be available if you want to cash out. But you won't sign any contract with anybody that actually entitles you to take out your share of the $3B.
  • LITECOIN is an early copy of BITCOIN except it works 4 times faster.
  • CARDANO is nothing. Maybe it will be something later, like a competitor to Ethereum.
  • MONERO is a single blockchain application for payment processing. But it promises to be more resistant to forensic analysis of payments than Bitcoin.
  • TRON wants to copy the Ethereum idea but allow more transactions.
  • IOTA is nothing. Maybe it will become a competitor to Ethereum.
  • DASH is a payment system which promises to run instantaneously, in contrast to longer times for Bitcoin.
  • In summary 90% of these applications are focused on somebody printing their own currency, then getting other people to use it for business transactions, and hoping regulators won't stop them.
  • All of these other projects are deriving their value only in comparison to Bitcoin.

Illusion of Scarcity

What real scarcity can there possibly be in a model that allows infinite numbers of lookalikes all with similar properties, each proposing to fix some sort of problem in Bitcoin?

The logical, as well as correct answer, is none.

No Gold Lookalikes

In contrast to cryptocurrency madness, there are no gold lookalikes. There are no silver lookalikes.

There is gold and there is silver.

Gold and silver have unique properties that cannot be conjured out of thin air by a computer algorithm.

Is Gold Money? Bitcoin?

The SEC ruled Bitcoin is a "commodity".

But what is money?

In What Has Government Done to Our Money, a free download on Mises.Org, Murray Rothbard writes ...

"Money is a commodity. Learning this simple lesson is one of the world’s most important tasks. So often have people talked about money as something much more or less than this. Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a “claim on society”; it is not a guarantee of a fixed price level. It is simply a commodity. It differs from other commodities in being demanded mainly as a medium of exchange. But aside from this, it is a commodity—and, like all commodities, it has an existing stock, it faces demands by people to buy and hold it, etc. Like all commodities, its “price”—in terms of other goods—is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it. (People “buy” money by selling their goods and services for it, just as they “sell” money when they buy goods and services.)"

Bitcoin vs Gold vs Tulips

Historically speaking, gold has always been valued as money. When gold and silver have not been available other commodities have functioned as money. Beaver pelts, salt, copper, cigarettes have all served as money.

That aside, Bitcoin has one major role speculation. It is logically the equivalent of tulip bulbs, another commodity.

That said, I am willing to accept both Bitcoin and Gold as money. Both can be used as money to buy things.

Some places will accept Bitcoin as money. For the sake of argument, let's accept that as sufficient.

What about gold? Via a Bitgold debit card, gold is accepted as payment at millions more places than Bitcoin.

Bitgold is not a cryptocurrency, it is a genuine 100% gold-backed deposit. Via a Bitgold debit card, any place that accepts a debit card accepts gold as payment.

Bitcoin proponents may object because gold is converted to a local currency at transaction time.

However, all but a relative handful of companies do not hold Bitcoin. Rather, they immediately convert Bitcoin into local currency after the transaction.

It makes no difference whether currency conversion happens just prior to the transaction or immediately after.

Hype vs Reality

  • Gold has thousands of years of history as money. Bitcoin has hype.
  • Central banks hold gold. They do not hold Bitcoin.
  • Via Bitgold, many millions of places accept gold as payment than Bitcoin.
  • Gold is scarce. Cryptos offer fake scarcity.

Like it or not, those are the facts. Granted, Bitcoin has first mover advantage, but that is it.

Where to From Here?

I don't know the coming price of Bitcoin or gold, nor does anyone else.

People pretend they know. Gold proponents speculate at $20,000 an ounce.

Bitcoin proponents are truly crazy, speculating on $1,000,000 per bitcoin.

​That is how absurd the hype is.

Fool's Gold Substitute

Bitcoin is a fool's gold substitute with unlimited supply in actual practice.

The above statement does not imply no use for blockchain.

I expect blockchain will eventually be a major success at low volume, high value transactions such as recording of deeds and titles.

I also expect a wave of digital currencies sponsored, then required by central banks.

If Bitcoin stands up to that, I expect it to be outlawed, timing uncertain.

Bitcoin Is Not Gold

Bitcoin is not peer-to-peer gold because it is not gold at all.

There is no limit to the number of coins running the exact same algorithm as Bitcoin. Scarcity is a mirage.

Let's not get caught up with arguments about mining or what is or isn't money.

Instead, pay attention to irrefutable facts.

JP Morgan famously stated “Money is Gold, and Nothing Else”.

I propose this simple refinement:

Bitcoin is not now nor ever will be peer-to-peer gold because Gold is Gold, and Nothing Else

Addendum

Pater Tenebrarum at the Acting Man blog passed on this note:

"There are many more BTC forks already, not just three. There is BTC Gold, BTC Diamond, Z-Cash and its forks (Horizen and ZCoin), BTC Dark, Decred and more. I have actually stopped counting them. "

Mike "Mish" Shedlock

Comments (47)
No. 1-20
Walski
Walski

You need to read the Bitcoin Standard Mish. I don't dispute the merits of gold, but in the digital age, holding physical gold is not practical and holding gold any other way means you need to trust a third party. Millennials and Z's do not trust third parties. Yes, Bitcoin can be forked, but original Bitcoin will remain, and there is no incentive for miners to act in way that goes against the protocol, it's just not profitable. The beauty of Bitcoin is that it is trustless and free from central bank lunacy, and you don't need deep pockets and a strong belt to walk around and buy anything, you just need your smart phone. The more it is attacked, the more people will want to hold it, the people will eventually decide what is money, the old guard will shout it down all the way up, but those voices will simply become irrelevant.

Mish
Mish

Editor

"The more it is attacked, the more people will want to hold it, the people will eventually decide what is money, the old guard will shout it down all the way up, but those voices will simply become irrelevant."

Then why did it fall from 20,000 to 4,000?

Bitcoin itself will be irrelevant. It has absolutely nothing other than first mover advantage.

If you disagree then please state what it has.

Harry-Ireland
Harry-Ireland

Max Keiser is an entertainer first and foremost. By no means should you take any financial advice from him. Before Bitcoin, silver was his schtick. While I value PM's very much, anyone hyping them up to ridiculous heights loses credibility. In todays centralbanking clownworld, cryptocurrencies seem highly attractive, but I agree with Mish's assessment; Only Gold is Gold..and nothing else.

michiganmoon
michiganmoon

I agree with Mish's points against Bitcoin and Cryptos in general. However, gold scares me as well as it might come out of the air literally.....asteroid mining could in theory in the next decade or two dilute the precious metals here on earth.

Tengen
Tengen

I like Max and I see why he got into Bitcoin back in 2011, hoping it was a viable alternative to the banker ZIRP universe. I believe he also made considerable money getting in so early. However, even he has said that the opportunity to bypass bankers was lost, that adoption did not reach the level needed to create a serious threat. Now the bankers themselves are dabbling in crypto.

It's an interesting concept and completely understandable that people sought something other than fiat in these blatantly corrupt times, but realistically we're going to have to figure this out the old fashioned way with PMs and paper. We also need to repair trust in society, not only in the monetary system but in general social terms. That won't be easy no matter what form of money we use.

gdpetti
gdpetti

Max should know better, he's seen this rollout of trial balloons before by those who control it, and this time it's part of the SG script of global regime change, 'out with their OWO, in with their NWO'... global crytpo CDR... NSA did the early studies on this, isn't that enough of a clue?

Remember the PTB/SG are calling this the 6th extintction.... they have been talking about population reduction down to 1/2 billion for quite some time as the OWO is outed for their NWO... not the psycho puppet politicians, but those pulling their strings.... BC is just a trial balloon to prep the waters... but once MOther Nature arrives in force within a decade, it won't matter... PMs neither... which are just a transitional tool as well. But Max pushing their NWO dope is a little obscene and he should know better that do the piped piper routine... but this is how we all learn here in 'Purgatory'... a school consciousness... no pain, no gain....Plato's Cave analogy... you don't find the exit by trying to find a better tool to 'fix' the OWO... that's typical con game BS... to distract the herd.. keep them busy, apathetic etc... herd management... money won't matter in the NWO... markets won't be needed etc.. which is why 'this time is different'... anything goes, because there won't be any reset in the NWO... CHina doesn't seem to understand this either.... very few do... which is why very few survive.

douglascarey
douglascarey

Mish is right, although a bit late to the realization that bitcoin is Tulip Mania 2.0. I cannot believe Max Keiser is buying into this mania. Mish hits it perfectly on the head here, "Despite mining claims comparing cryptos to gold, cryptocurrecies are like fiat. They can be conjured out of thin air like nothing.

Proof is irrefutable: There are over 2,500 cryptocurrencies all claiming to be scarce like gold, each claiming to have added value."

This is all we need to know. Cryptocurrencies can be created again and again, gold cannot. Call them what you will, most of these cryptos are the same idea. Therefore the real value of all of them is $0.

Stuki
Stuki

As you say, despite Gold being a "better" money than cigarettes, cigarettes can serve as money as well, in situations where Gold isn't practical. Even when Gold is available, day to day transactions have often been conducted in other currencies. From Silver to Copper to hope-and-a-prayer promises written on pieces of paper.

There are an enormous number of use cases, where Gold is less suitable than a crypto currency. Moving money from China to Vancouver being one of them. Buying acid another. Guns and ammo in totalitarian hellholes a third. Paying someone to do productive work remotely, without having the leech army steal half of what you pay him, a fourth. Bribing politicians a fifth. And so forth and so forth.

It's not Gold vs Bitcoin vs Silver vs Monero vs whatevercoin or whatevercommodity. But rather a palette of choices, depending on exactly what you are trying to accomplish.

Rumpelstiltskin
Rumpelstiltskin

As far as I know, the only peer-to-peer gold system is kinesis where 'coins' are limited in number, backed by allocated gold and pysically redeemable -

JonSellers
JonSellers

Everything Mish said plus: bitcoin transactions require bitcoin mining to settle transactions. The payment for the effort of mining is new bitcoins. When the last bitcoin is mined, no more mining will happen, no transactions can be settled in bitcoin and all bitcoins immediately become worthless. In gold, this is analogous to the end of gold mining causing the value of gold to become $0. It makes no sense. Bitcoin is a fraud. It is not what people hype it to be. That doesn't mean it won't go to a million dollars next year. People are people.

And gold is not money. An IOU from a trusted source of payment is money. Gold can be a reserve stock from which IOUs gain their value. Bank checks are essentially IOUs. I'm old enough to remember when local businesses would endorse checks they had received from customers over to suppliers as payment.

Credit cards are IOUs as are Federal Reserve Notes. Essentially, money is any token of an individuals credit within a community.

Mish
Mish

Editor

Addendum

Pater Tenebrarum at the Acting Man blog passed on this note:

"There are many more BTC forks already, not just three. There is BTC Gold, BTC Diamond, Z-Cash and its forks (Horizen and ZCoin), BTC Dark, Decred and more. I have actually stopped counting them. "

Mish
Mish

Editor

"Mish is right, although a bit late to the realization that bitcoin is Tulip Mania 2.0. I cannot believe Max Keiser is buying into this mania."

I compared Bitcoin to Beanie Babies years ago. Way too early, in fact.

Jackula
Jackula

Somebody is going to be eating their own dick!

Bardenio
Bardenio

To me, the biggest point missed is the incredibly complex and expensive cost of mining. Unlike gold mining to find it, Bitcoin only lives on with constant mining. As soon as the cost of becomes negative, a negative loop it's created, the cost of transactions goes up reducing value even further. Gold has none of this. It doesn't take massive inputs the keep it alive. To me that is the real please of Bitcoin.

Walski
Walski

It is clear that both Gold and Bitcoin have their inherent advantages and disadvantages, whatever side you are on, I think everyone can agree that most importantly, both are a hedge against FIAT.

El Capitano
El Capitano

When the conquistadores arrived on the shores of the Americas, they did not come as ambassadors for peace, trade or goodwill. They came with technology and weapons. They were an invading force whose goal was to steal gold and silver from the new world and bring it back home to Spain.

If you search the web you will find "The primary purpose of the Encomienda system was to indoctrinate the Indians in the Catholic faith. The Indians were expected to pay a tribute to the Spanish Conquistadors in return for protection and religious instruction." So, under color of forced religious "education", these thugs made their way to a foreign land in order to steal as much as possible.

Note that they did not come with mining tools. They did not come to work. They came to steal. And they did not want pelts and shells, they wanted gold and silver. Not gold in the dirt or in the stream bed. Not silver ore. They wanted mined and refined gold and silver objects of value even though they had never been there before.

Amazingly, that is exactly what they found. Everyone on the planet agreed that gold and silver were money long before they even knew others existed in lands far away and separated by oceans. That is why gold and silver are money, everything else is just noise and stupid talk by people who will believe pretty much anything as long as it's new.

Walski
Walski

People who own Bitcoin, will not dispute the worth of Gold, and most probably own both. Gold is and always will be money, but that is not Max's argument.

He calls Bitcoin peer to peer gold (Bitcoin only, not crypto's in general or forked Bitcoin), due to its fixed scarcity, the supply cannot be inflated. Yes, it’s worth now is speculation, yes, it is infinitely more fragile than Gold as it is a technology. But for the millions or billions of people in the world who have not had the luxury of a relative stable economic system, it is infinitely more accessible.

psok
psok

I like to say there are two types of people interested in Bitcoin. The first type is only interested in the "gold-like" aspect of there being a limited supply of coins. The second type is in it because the protocol allows for the trustless transfer of value through the internet in a way that never existed before.

The first type is useless to me, there is no reason to have a strictly limited supply of Bitcoins. For the last 10 years there has been inflation in the supply and the technology works just fine. The more interesting part of cryptocurrency is that underlying technology making something possible that was impossible previously. That is the part that we should be building on, that is the part that should be giving these coins value.

Sidharth
Sidharth

I agree, “Money is Gold, and Nothing Else”.

Tegknot
Tegknot

Me - Gold isn't scarce. There are many metals, and a lot of them are more useful!

Mish - But those metals have different properties.

<Reads list Mish included in article showing the different properties of different cryptocurrencies, and scratches chin.>