Indeed that makes sense. Bitcoin is in early days. I think it has room to grow into a new digital era of money, as long as governments don’t get in the way totally.

Actually, let’s stop crying “bias” when we think a person has set forth a faulty argument unless the evidence of bias is clear. Let’s just call people “wrong” instead. I guess I’m biased against arbitrary charges of bias. I think they’re wrong.

 I disagree that physical money is not useful if not represented by a paper note or token. Physical Silver and Gold transactions still take place around the world, such as in India, Hong Kong, between some banks, in Utah, in NH, and between Liberty minded individuals. Transactions can take place over the phone, and for large transactions that often is how they take place. Transactions are fundamentally based on trust between the two parties. Commodity transactions often take place between farmers and others outside of a note or electronic system. In fact many ‘preppers’ and others believe that this is the preferable type of transaction.

 Hackers can not just as easily attack electronic Gold accounts, because for example in the Bullion vault system one can only extract electronic tokens through the Bank account one funded the Bullion vault account with, and that can’t be changed. A physical item like Gold simply can not be as instantly and irrevocably moved around as electronic tokens. A hackers attempted electronic transaction of some type might be possible, but the physical transfer of Gold will take at least one day, and is highly likely to be found and reversed within that time. The only way that Hackers could be sure to get none reversible money out of the leading Gold account systems, is to hack multiple banks, gold accounts and vault accounting systems simultaneously, and show up at the Swiss vaults and try to trick them into handing over the physical Gold. Good luck doing that.

 It addition, Gold is not required by it’s nature to be in an electronic controlled Banking system. One can keep Gold coins in a vault or buried, and remove coins and take them to western union or similar as needed when transferring needs arise. Gold Money and other account systems could easily add this type of feature also if customers asked for it-the simple requirement to only authorize transfers by phoning the customer and asking for a password recorded only in a paper book, or through use of a written one time pad for unbreakable none electronic security.

 Thus if hacking became an issue, the customer would use 2 accounts on 2 separate systems, one a savings account with a one time pad, and the other a ‘checking’ account which he would occasionally transfer small sums of money too. Thus Gold can and already does readily exist in plentiful use in both transactions and ‘storage only’ outside of being linked with the tool of electronic accounting systems.

In order for gold to be useful in a modern monetary system it must be represented by notes or tokens otherwise electronic transactions would be impossible.  Thus, all of your arguments along that line of thinking are moot.

Hackers could just as easily attack electronic gold accounts or normal bank ledgers. This is a problem all currencies have to deal with.

 A money retaining value in extreme circumstances defines what a reliable, strong and Real money is. DHS recently shutdown hundreds of url’s with no warning or appeal. A Canadian law is in the works to mandate logging of all ISP activity. The kill switch can easily be envisioned to be applied selectively, as has already happened to hundreds of domain names.

 Concerning your notably strange claim for an Austrian that Gold transactions are ‘assured’ to actually be done in paper instead, I’m not sure where to start, but here goes: I have never met a goldbug who didn’t go into gold for the very reason of avoiding ever using paper. The University of Texas recently took physical delivery of 1 billion in Gold for the very purpose of reducing it’s reliance on paper. Ron Paul talks constantly about the need to get rid of legal tender laws and use Gold as money. Using Gold as money means Gold coins and bars, Gold, not paper.

Judging from your article on the ‘Gold Standard’, it seems that your mixing up the ‘Gold Standard’ government regulation of Gold prices period with the actual use of Gold as money. The ‘Gold Standard’ was just a coercive step in between real Gold money and fiat money with no Gold redeemability of any type.  The Gold coins that FDR confiscated up until that time were used as money for their Gold value, not their government regulated price value-as was the case afterwards.

 Gold is easily divisible, one of the aspects of real money. A .999 gold coin  can be melted and reformed or even chiseled easily into two pieces. This is because Gold is a soft metal. The smallest Gold coin is a 1/20 Canadian maple, which is about 2/3 dime sized, and worth around $75 in trade for dollars. Small cash transactions would be done in silver, as they have been for most of history, including the US.

 Software-information systems like Bitcoin can be backed up in many ways, just like the electronic ledgers in fiat banks are daily. Both of those systems depend on external human managed work and effort to function, and Both are in a constant natural hacker arms race. Recently Bitcoin crashed in value world wide by orders of magnitude because of failures in that human managed work. That has never happened to Gold, ever. Nor can it because Gold is not dependent on any type of external work or electronic support system.

 You have asserted that Gold is only or even close to exclusively purchased primarily for it’s investment value. Do you think solid gold wedding rings are purchased only for investment value? Why not just buy plated rings? Did you buy your wife a plated wedding ring, or if not tell her ‘I bought this solid Gold wedding ring primarily as an investment’ ? Do you think the many people who wear solid Gold chains, bracelets, rings, watches and earings at nightclubs and countless other social events bought them primarily for their investment value? Walk up to the next person you see wearing a Gold chain or ring and ask them ‘is that plated and did you buy it for investment value’ and see what the reaction is.

 Finally, since you claim to be an Austrian, it’s worth noting that Mises solved the question of ‘how does money originate’ by explaining that money originates as a commodity that is bartered for consumptive purposes. He further explained that all money types that are contrived into temporary use by other than a bartered consumptive commodity are doomed to eventual natural failure. Bitcoin has no natural consumptive use outside of Both the software system and political environment it operates in. If legal tender, drug and tax laws didn’t exist, there would be no reason to use Bitcoin, because the services of Gold Money transfer agents such as e-gold would than be legal and tolerated in the US.

As far as the durability of gold over bitcoins is concerned, I already explained why this isn’t sufficient reason to say bitcoins are inferior to gold.

Consider that when gold is represented by paper cash, if the cash is lost, it is the same as if a person lost the gold associated with it.  Since gold can not be divided easily to facilitate transactions directly with gold, it is almost assured that transactions will take place in some kind of cash representation.

Thus, your durability argument is moot since cash is far more vulnerable to destruction than bitcoins are.  Bitcoin wallets can be backed up to remote servers, backed up to cell phones, backed up to thumb drives, all at the same time so that if one is lost, the others would still be accessible.

Consider for example how I have secured my coins:

I have double drives on my local PC, so I have duplicate copy of my wallet in an encrypted file on each drive.  I also store an encrypted file on my Gmail account and on a thumb drive.

I keep the bulk of my coins in these replicated files.

It would literally take an act of god for all of those copies to be simultaneously destroyed.

Contrast that with gold backed cash or a gold coin.

Further, consider that my spending wallet resides on a wallet site. So I don’t have to keep a copy of the file on my cell phone directly, I simply use my phone’s web browser to send coins from a website.