Bitcoin’s a Digitized Tally Stick… Not Gold

This article also appears on The Duran

Steve Brown

The tally stick was a medieval medium of exchange and conjured form of currency that worked like this:

Split tally

‘The split tally was a technique which became common in medieval Europe, which was constantly short of money (coins) and predominantly illiterate, in order to record bilateral exchange and debts. A stick (squared hazelwood sticks were most common) was marked with a system of notches and then split lengthwise. This way the two halves both record the same notches and each party to the transaction received one half of the marked stick as proof. Later this technique was refined in various ways and became virtually tamper proof. One of the refinements was to make the two halves of the stick of different lengths. The longer part was called stock and was given to the party which had advanced money (or other items) to the receiver. The shorter portion of the stick was called foil and was given to the party which had received the funds or goods. Using this technique each of the parties had an identifiable record of the transaction. The natural irregularities in the surfaces of the tallies where they were split would mean that only the original two halves would fit back together perfectly, and so would verify that they were matching halves of the same transaction. If one party tried to unilaterally change the value of his half of the tally stick by adding more notches, the absence of those notches would be apparent on the other party’s tally stick. The split tally was accepted as legal proof in medieval courts and the Napoleonic Code (1804) still makes reference to the tally stick in Article 1333. Along the Danube and in Switzerland the tally was still used in the 20th century in rural economies.’ (wikipedia)

Money has not been money since August 15th, 1971 – at least where the US dollar is concerned – and Nixon’s fiat proclamation that the Nixon Shock will be temporary is now known to be a lie. So the digital-age parallel universe evolution of a digitized tally stick to the fiat USd is not unexpected. What is unexpected is comparing the digitized tally stick to gold. Bitcoin bears no relation to gold. Let’s consider why, based on a previous example of the Persian gold daric to prove that case.

The gold daric dates from the ancient Achaemenid empire of Cyrus the Great, circa 2,400 years ago; it consists of 8 grams of gold and sells for about $3000 US depending upon condition. The daric has an artistic rendition and composition, can be physically held and stored, and has maintained its value — and much more! — for a score and four centuries. The daric (or any gold coin) does not require an internet connection or electronic wallet to exist. The daric has nothing in common with blockchain, the only intersecting feature being a value assigned by rarity… except blockchain is not “rare” or scarce.

To say that blockchain has value because blockchain is limited in scope based on the overall number of blocks that may be mathematically calculated does not mean that blockchain is scarce or rare. The emperor’s clothes consist of 21 million possible blocks, each block divided into 100 million parts. That’s many quadrillion lines of code – not scarcity. And there is no way a rare physical metal can in any way be compared to a line of mathematical code. In the 2,400 year daric example, we are willing to part with by-decree dollars for a unique physical rendering of art and history in a rare metallic form, of limited quantity, that we can hold and physically store, and will maintain its long-term value which our progeny can inherit. None of the foregoing applies to Bitcoin.

Not even the bit about limited quantity. Beside the fact that one bitcoin equals 100 million smaller bits (“satoshi”) that is only a numeric differentiation, not qualitative; and the elusive and mysterious character whose name roughly translates to “Central Intelligence” might mysteriously reappear one day to modify the protocol. Cryptoheads disagree, but that’s not the point. At present, the Bitcoin difficulty rating can be changed when solving the hash takes less than ten minutes. But from twenty leading zero’s to two, or to one hundred … is the protocol truly inviolate? Who knows for sure that the National Security Agency built no backdoor into SHA256 (which forms the basis for blockchain) and that it will never be exploited? Or that the Fed will never mandate the Federal Reserve Digital Dollar to be used as the basis for trading crypto instead of tether which is only “backed” by a shady bank in the Bahamas…? or that the SEC will never securitize tether …? Or whatever… the list is virtually endless. And none of the foregoing applies to physical gold. Even though the bitcoin crowd will endlessly argue about it – at least for the next 130 years or so — there is less than zero equivalence between bitcoin and gold.

Now, do central banks consider Bitcoin to be gold? Of course not. Central Banks hold gold for reasons stated above: that gold is and always has been the standard for money even after the Nixon Shock; that gold is a real scarce substance and can physically be held and stored for centuries. Gold can be swapped and leased. None of that applies to Bitcoin. Central Banks don’t hold Bitcoin (in any significant amount) because Central Banks expect to be here for more than 139 years when “central intelligence’s” blockchain is (theoretically) exhausted. And real gold can still be traded in an emergency when all computers and networks are down.

Which provides a real analogy. A limited number of gold darics exist. Is that a comparison to blockchain? No. A BTC hash will not be collectible 139 years from now. Or one year from now.. or ever. When BTC blockchain is exhausted no one will pay some amount for one example of a SHA256 crypto line of code over another… or anything at all. But 139 years from now a Persian gold daric will be worth far more than $3000 US is worth now, while an example of BTC hash will be worth nothing.

Point being, the BTC hash code is not “scarce”. The code is not “rare” in any physical sense. A BTC hash code has no physical intrinsic value at any time. Not now. Not 139 years from now. Bitcoin’s SHA256 hash code is only worth what it can be digitally converted into, for now. And that’s why Bitcoin can never be equivalent to gold…

twitter: @newsypaperz

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