The Subjective Valuations Of Bitcoin & Gold

In this editorial I aim to contend that the physical properties in gold are the same found in the digital properties of Bitcoin. That both are "social contracts" or spoken and unspoken agreements between humans, which can be considered intellectual property as well.

“There is no value outside the process of valuations” 

~ Ludwig von Mises 

Bitcoin and gold revolve around their usefulness and this is an indirect result of their demand. Consensus in computer science and mathematical equations are a reality. Just as the reality of time and physical space equations. Computational distributed consensus can also be related or an analogy to the biological genetic process. All of this is held between a social contract of consensus of humans to agree and disagree upon.

For thousands of year gold has been a commodity for the human race.  Its only significance in ancient times was its value in making pretty things, and you could make coins with it and trade as well. For many years chemical equations of the physical reality we know as 'gold' cannot be copied. Or at least to the point where it would take massive amounts of power and energy to recreate. Just like the Bitcoin network it would take large amounts of wealth and extensive energy to recreate a Bitcoin or double spends. Gold can be recreated, it is a complicated process which requires nuclear power to make even the smallest fractions of gold. Gold is based off the subjective valuations of the human race. Cryptographic hash is no different than the physical and chemical relations of gold. The trust we put into them, is based off the belief that they are scarce. This is a spoken and unspoken agreement among the people of this earth.

Bitcoins have more in common with gold than fiat. Bitcoin meets all five qualities of sound money: it's durable, scarce, has a trusted value and network effect, it's highly divisible, and is portable. Bitcoins mathematical equations are agreed upon by the network and outsiders. Like most computational consensus networks, it is the trust is in the system's reliability to thwart faulty processes. Bitcoin does this and achieves it through ‘Proof of Work’ a measure in economics to deny service attacks.

The belief is that we trust the network, its mathematical equations and dynamic network consensus subjectively. We all agree and trust in the encryption itself just as we do with the chemical properties of gold and its physical space.

“There is no value outside the process of valuations” Mises once said. As of now there is no conventional method of computing that can break the digital properties of Bitcoin. This is a subjective valuation of humans brought upon by demonstrated preference. The mathematical equations of Bitcoin hold the same reference to the physical properties of gold and its objectivity concerning reality. Subjectively subscriptions must be made by individual perceptions. However, this can be confusing as the ends or the rules of the game are often mixed with the means and physical givens. Again, both Bitcoin and gold lie in the latter not the former, and point of reference is demonstrated preference.

Encryption has always been one of the many concepts humanities have used as a form of value. In cryptography, encryption is the process of encoding and decoding messages or numbers. The earliest known ciphers were written in hieroglyphs. In time infamous forms of encryption, such the “Caesar Cipher” came into use in ancient days. Giving the value of encryption, this subscription humans use is no different than gold or its matter of age. The value can be regressed just as far as gold can. The use of mono-alphabetic ciphers were used often and trusted by humans until the late sixties and seventies when computational encryption came into effect. Alice and Bob were born into this world adding more depth into cryptography and game theory. Public and private key cryptography have been given even more extreme value by humans with a class or identification of asymmetric mathematical equations used by the public daily.

So what really is the difference between Gold and Bitcoin in physical and intellectual space? You know our human subjective valuations. If the Bitcoin's can be contained in a form of property or held in a device mathematically, then they are indeed property. Although this is only a social contract or agreement between the owners of such property with its users, miners, and coders in the network. Also between non users of the network. That the coins can be held as property and cannot be reforged in a different fashion. The same goes for the physical aspects of gold and its aspects in alchemy. The network or world, including outside forces are unable to break the "social contract" or "trust" just as the physical elements of gold or certain metals cannot be copied by a human/alchemist.

We already know that certain 'fakes' and real gold can be made. But it doesn't meet the world's criteria to fit the exact same mathematical and 'physical chemical' elements that make up mined gold. Otherwise we could all make shiny metals or we could all claim ownership to private keys in, which would manifest as the same as the next person. Unfortunately, we cannot. No one here has the necessary quantum computer power to break my mathematical SHA256 public/private key equation. No one can divide my Bitcoin. Not one person can claim ownership to my keys, how I store them in my brain, transfer them to hardware, or paper. Maybe I would hide them forever, so not one person could ever find these keys again. Until they do attain this power whether they attain it through code or through magic/alchemy it's is my property both physically and intellectually. Both mutually exclusive for the time being.


How is gold any more or less tangible than a contract of chemical elements humans have composed in books or on paper? It's a contract that cannot be broken unless the network or outside forces who oppose the network break the spoken and unspoken agreement. Same goes for gold. Gold is a "social contract" written on paper that cannot be copied or manifested differently. The physical elements of gold and its chemical makeup is a “white paper” for the whole world to agree to. These elements, thus far in our world have not been broken. The words written on the paper cannot be conflicted, with both Bitcoin and the physical elements of gold. If I were to create a fake gold with one chemical element missing from the equation, anyone could contest this with their peers over the difference. Otherwise, what's the use? It's a soft yellow metal that can be copied physically and can be tangible in the same way.

This "fools gold" can be made right now. But it doesn't meet the "white paper" on the physical and chemical elements that make up gold.

There is no difference between gold and Bitcoin in this fashion. It is agreed upon by its inherent demand and its value. Otherwise, it would not have demand or value properties among humans.

What do you think about the similarities and properties between Gold and Bitcoin. Let us know in the comments below. 

Images courtesy of Redmemes 

FBI Director Calls for Decryption Tools To Combat "Going Dark," Bitcoin Users Affected

The matter of security, privacy and whether or not the government officials can breach either of those two basic rights, will continue for several years to come. However, if it were up to FBI director James Comey, governments should have the right to lawfully access any type of device, even if it's encrypted by the user or manufacturer.

Also read: Gold-Backed Cryptocurrencies: Innovative or Redundant?

The So-called “Going Dark Problem”

Whenever government officials want to invade user privacy, they have to come up with clever new terminology. In this instance, the term “Going Dark” has been coined by FBI director James Comey, which refers to the fact how “keys necessary to decrypt communications and electronic devices often reside solely in the hands of the end user.”

"As a result, a proposal was pitched by the FBI director to force hardware manufacturers to “bake encryption backdoors” into all of their products. In doing so, manufacturers would allow lawful access by government officials, assuming they can provide a lawful court order that is."

"We are not asking to expand the government's surveillance authority, but rather we are asking to ensure that we can continue to obtain electronic information and evidence pursuant to the legal authority that Congress has provided to us to keep America safe. Mr. Chairman, the Department of Justice believes that the challenges posed by the Going Dark problem are grave, growing, and extremely complex." - Joint Prepared Remarks PDF

This joint statement is coming at a time when multiple rumours have surfaced regarding the US government - among others - working on decryption tools to break device encryption. According to the PDF file, “we [the government] should continue to invest in developing tools designed to mitigate the increasing technical challenges associated with the Going Dark problem”. Or to put this in layman’s terms, more funding is needed to continue on the development of internal decryption tools for all purposes.

Those rumours regarding the development of decryption tools by government instances are not entirely based on hearsay either. In recent weeks, multiple government officials have been calling for encryption backdoors. Especially Apple has been facing a lot of scrutiny lately, for making their latest iPhone encrypted by default.

It is important to keep in mind that, even though this joint prepared PDF has been made public, there are no congressional proposals to take things to the next level. As we have seen occur multiple times, these types of “guilt tactics” may force the hand of tech manufacturers in terms of compliance before making it a written law.

Senator Patrick Leahy of Vermont stated that:

“Strong encryption has revolutionized the online marketplace and protects American businesses and consumers from cybercrime, espionage, identity theft, stalking, and other threats on the Internet. Undermining strong encryption could make our data more vulnerable.”

Privacy is a Basic Human Right & Should Not Be Invaded At Any Point

Regardless of what government officials may want to do, there is a good reason why manufacturers are encrypting devices from the start. Ever since Edward Snowden told the media about how the NSA conducts their business on a day-to-day basis, a lot of people have suddenly become aware of why privacy is so important.

And they should be. Even though most people have nothing to hide, and are in no way connected to any form of illegal activity, that does not endorse government officials to start snooping around. Granted, if they have a legitimate warrant, there is nothing that can be done. But the fact that government officials are openly admitting the development of their own decryption tools is rather worrying, to say the last.

What are your thoughts on this proposal? Let us know in the comments below!

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Source: Ars Technica

Images courtesy of Shutterstock

Bitcoin and Encryption are Protected by Freedom of Speech

May 22, 2015 was a special day in the tug-of-war of Between government, Bitcoin, and other encryption-related issues. On that day, the United Nations issued a report declaring encryption as a form of free speech.

What is encryption? The SANS institute’s definition of encryption is:

“Encryption is a mathematical process of converting: messages, information, or data into any form string of symbols that is unreadable by anyone, except the intended recipient. It is meant to protect the confidentiality and integrity of content against third-party access or manipulation.”

The UN's report mentioned that certain governments wanted to keep a less advanced version of encryption. More sophisticated versions were being fought by governments so they could have easier access to information. The document pointed out the obvious flaws in that strategy, saying that weak encryption can be cracked by people with encryption skills, giving them access to sensitive information. are exploits for people with encryption skills to break into said information. We can look at the recent breach of security in the US  for an apt example of criminal hackers taking advantage of poor information security. One part of the report, was very important for the crypto community, and may give an advantage to “pro-crypto” laws and legislations. Article 16 of the report stated that:

“Encryption and anonymity provide individuals and groups with a zone of privacy online to hold opinions and exercise freedom of expression without arbitrary and unlawful interference or attacks. The previous mandate holder noted that the rights to “privacy and freedom of expression are interlinked” and found that encryption and anonymity are protected because of the critical role they can play in securing those rights (A/HRC/23/40 and Corr.1). Echoing article 12 of the Universal Declaration of Human Rights, article 17 of the International Covenant on Civil and Political Rights specifically protects the individual against “arbitrary or unlawful interference with his or her privacy, family, home or correspondence” and “unlawful attacks on his or her honour and reputation”, and provides that “everyone has the right to the protection of the law against such interference or attacks”. The General Assembly, the United Nations High Commissioner for Human Rights and special procedure mandate holders have recognized that privacy is a gateway to the enjoyment of other rights, particularly the freedom of opinion and expression (see General Assembly resolution 68/167, A/HRC/13/37 and Human Rights Council resolution 20/8).”

The report also insinuatesd that any form of encryption may be viewed as art or expression through art ( paragraph 22). The logical question that follows is: What is art and how do we define it? Art is the expression or application of human creative skill and imagination. So we, like the UN, can argue that Bitcoin, altcoins and encryption related technology is art, just like  Piet Mondrian or Leonardo Da Vinci. Thus, this UN report is quite an important document that is outlining the importance of encryption and cryptocurrency. While the report isn’t binding, nor is it a resolution, it may be seen as a template for future UN action towards encryption and digital currency. For crypto enthusiasts and Bitcoin lovers, this UN report is good news. It points to the protection of encryption under freedom of speech and expression, and also as an art form. Most people will think, "so what?" This acknowledgement of digital currency and encryption validates the cryptography community and every community related to it -- like the Bitcoin community.

Should Bitcoin and encryption be protected by free speech? Let us know in the comments below!

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Images: United Nations

This author's views are not necessarily those of Bitcoin.com. John Doe 3GZPR3KtPqk4XD52VdcxMyH6t9UBVHBTf5