According to its proponents, Bitcoin is digital gold. (Interestingly it’s not an “electronic currency” anymore even though that was the original title of the 2008 whitepaper. I suppose Lightning Network or something is supposed to fix that with new transaction layers backed by the Bitcoin gold.)
One aspect of gold’s historical value is that it’s traditionally recognized even in societies in collapse. I’ve never understood how Bitcoin is supposed to hold its value in such an event — something on the scale of nuclear war, or Germany in 1945.
After an EMP wipes out data centers and cell phone towers, you can probably still bribe people with Krugerrands. Who’s going to accept Bitcoin transfers when the infrastructure is either gone or under military control?
Or is the idea that Bitcoin will be valuable again when the wealthy finally crawl out of their New Zealand bunkers and reestablish the financial system?
> After an EMP wipes out data centers and cell phone towers
If such a thing happens on a large scale there will be hundred of millions of deaths. All major cities will simply collapse.
See recent articles how London can only survive for 4 days without electricity, after that there will be no food.
The modern society is incredibly fragile. Everything is just in time, there are no stocks or buffers. Bitcoins will be the least of your worries in such an event. Your Krugerrands will also not be of much value. Nobody will be stupid to give you food or gas for a piece of metal.
I really think this opinion is short-sighted. And it comes from a less extreme version of the same place that 9/11 deniers operate from; normal humans don't want to naturally think about loss of control and what that loss of control would look like. So its easier to just say "if this happens we're all fucked, don't even try"
There is practically no evidence in history where gold had fungible value then became worthless. Nothing else matters; everything else is conjecture, opinion, and extrapolation.
Yes, we live in a very fragile society. Yes, if complete collapse happened, there would be a period of extreme chaos when millions, hundreds of millions, die.
But the chaos would stabilize, barring any extenuating factors like a T-Virus. And in that world, maybe US Dollars would still hold some value. History says Gold probably will. Bitcoin though? Bitcoin requires a global network of miners. It would require having access to the original blockchain that gives your wallet value. In the best likelihood, the currency would splinter into every small network that can still run miners. And when energy is so expensive that you need all of it to power your lights, vehicles, and medical equipment, why would anyone spend it on an expensive mining rig, even if all the complex computer equipment necessary to make it run were widely available?
And then a guy walks into town with a bag full of gold. Suddenly Bitcoin isn't looking all that valuable as a currency. I'll sell my extra food to the guy with the gold, because the guy with antibiotics down the street would also sell to the guy with the gold, and the guy in the town over with car parts would also sell to the guy with the gold. That's what makes currency work; people, not software.
That guy with a bag full of gold will most likely not be the one who had that bag of gold when chaos erupted, that was my point.
Those who survive the chaos will be the ones strong enough and ruthless enough to organize themselves into powerful gangs. The nerd with a bag of gold will most likely be killed and it's gold stolen.
Being a prepper with an underground bunker will also not be of much value, you will just be seiged out.
If you are rich, what you'll need is a small private army to protect you, a small working force to feed you and the army, and the political skills to be able to enter into the right alliance after that.
That's why more and more people getting involved in scams and get-rich-schemes on a platform with superlinear and unbounded energy upkeep is something that worries me deeply. Energy and climate is something that very well may break our society.
> Energy and climate is something that very well may break our society.
Unfortunately, if you run almost any process that humans are doing right now that has even 1% growth, in 1000 years, that's a factor of 21000x (.5% is 146x), and we're dead. So pretty much everything has to reach an S curve and stabilize, or we are totally F'd. Population, energy usage, land usage, food, trash, inflation, everything.
That's another reason to invest in space exploration :).
But yes, we should be minimizing wasteful growth where we can. Food will have to grow in lockstep with population, but the growth of trash is something we can reduce. And there's especially no need to add artificial high-growth energy sinks like cryptocurrencies to the mix.
Your points are valid. IMO the key tradeoff b/w gold (analog) and bitcoin (digital) is extra resiliency vs usability.
If there were a systemic collapse breaking governments, knocking off power and telecom networks etc, gold would be immediately most valuable. But more quickly than fiat, bitcoin would be useful.
Power and telecom systems are more resilient to systemic collapse (& have more bouncebackability) than a functioning government and its currency. Some semblance of critical systems would come online whether put up by government, armies, warlords, cooperatives etc (See Somalia as an example). When those systems are online, bitcoin can be sent and received.
In short:
in terms of usability: Fiat > Bitcoin > Gold
in terms of resilience: Gold > Bitcoin > Fiat
You need a hash rate at least vaguely close to the pre-collapse hash rate, or else the network will grind to a halt. Will they be physically capable of that?
This assumes a sudden collapse event happening within the 10 minutes that it takes to reset the hash rate. I'm struggling to think of global scenarios where that can happen so quickly.
What are the chances that collapse is a sudden event vs a cascading deterioration event?
Sure! The difficulty is supposed to adjust approximately every two weeks, and it readjusts based on how quickly blocks were found after the previous readjustment. The target is for blocks to take an average of 10 minutes.
The trick is that the difficulty adjustment time is not actually measured in weeks (or seconds), but in blocks. Since blocks are supposed to take 10 minutes, the difficulty readjusts every 2016 blocks. It looks at the time needed to complete the last 2016 blocks, and readjusts so that the next 2016 blocks will take two weeks at that rate.
If the hash rate is steady, then that readjustment will happen close to the two-week mark, and of course it will do very little because the rate is steady.
If the hash rate is increasing, then the period becomes smaller. As a simplified example, consider what happens if the hash rate is constant for the first week of an adjustment period, and then doubles. The first 1008 blocks took a week. The next 1008 blocks will take about 3.5 days. The next readjustment will therefore happen after about 10.5 days, not 14 days. The real Bitcoin network looks a little bit like this: over its lifetime, the actual difficulty readjustment period has averaged 13.17 days, not 14 days, because of the steadily increasing hash rate.
Now consider the opposite case, where the hash rate is cut in half after a week. The second batch of 1008 blocks will take two weeks, for a total of three weeks.
Worse, consider a case where the hash rate is cut in half every week. You'll (probably) never reach the next difficulty readjustment, and blocks will take longer and longer to mine until they're taking days or weeks instead of just 10 minutes. You could get into a spiral where a single event that significantly cuts the hash rate results in the network becoming much slower and less useful, so people use it less, so miners earn less, so they drop out and the hash rate drops further, etc.
It's hard to say just how the real-world hash rate would change in response to a catastrophe, of course. Maybe that sort of shock wouldn't happen. But this is the general idea of why Bitcoin could run into trouble due to a quick but not quite immediately apocalyptic decrease in the hash rate.
If you're concerned about an EMP wiping out electronics systems worldwide then surely it'd be smarter to horde weapons, food and antibiotics, than Bitcoin OR gold.
Youre basing your argument on the assumption that ALL datacenters have been wiped out. Its unlikely the entire world will engage in global warfare on a scale large enough to disable the internet, which the bitcoin network relies upon. Also, historically government currencies destabalize during war, so bitcoin would probably retain or increase in value, not diminish.
And that is why Bitcoin is designed against these kinds of events. It's very unlikely that everything would be wiped out or everything would be under military control. There's always strong economic incentives to keep it running and secure.
> Or is the idea that Bitcoin will be valuable again when the wealthy finally crawl out of their New Zealand bunkers and reestablish the financial system?
The idea is that the transactions are irreversible and you cannot rely on any number of police officers or judges to fix a theft.
The bunkers are for security's sake, not preserving-wealth-in-an-apocalype's sake.
The police officers and judges can put you in jail, which is generally worse than having your assets confiscated. I’m not sure how Bitcoin helps.
What I’m trying to understand is how Bitcoin advocates’ promise of it being a store of value independent from governments can be valid when the system depends on extremely sophisticated infrastructure that was built and enabled by governments.
One aspect of gold’s historical value is that it’s traditionally recognized even in societies in collapse. I’ve never understood how Bitcoin is supposed to hold its value in such an event — something on the scale of nuclear war, or Germany in 1945.
After an EMP wipes out data centers and cell phone towers, you can probably still bribe people with Krugerrands. Who’s going to accept Bitcoin transfers when the infrastructure is either gone or under military control?
Or is the idea that Bitcoin will be valuable again when the wealthy finally crawl out of their New Zealand bunkers and reestablish the financial system?