With the recent announcement of a potential joint-effort to mine asteroids, in combination with the acceleration in efforts toward commercial space-flight, some interesting tertiary considerations arise – especially in relation to the fundamentals of money.
Gold is valuable and stable. It is valuable in part because there is a stable supply. During the era of European expansion around the world, precious metals flooded the markets. That caused their values to decline, in some cases rapidly.
No matter what, gold has remained the most functional physical form of money thanks to its physical attributes. This doesn’t mean that it works best for price stability, though. What happens when supply increases rapidly? What will happen when asteroid mining hits its stride? An accelerating influx of resources would put pressure on market prices, of course. By one estimate, the amount of gold from just one asteroid could be more than 100,000 times the amount of all gold mined to date.
In the 2,900 cubic kms of Eros, there is more aluminium, gold, silver, zinc and other base and precious metals than have ever been excavated in history or indeed, could ever be excavated from the upper layers of the Earth’s crust.
That is just in one asteroid and not a very large one at that. There are thousands of asteroids out there.
Granted, these events may not happen for another two decades, but the likelihood of them eventually occurring is very strong. When that time comes, a currency under central control may work as the dollar has to maintain pricing stability. The question is: for how long? Looking at history, central control is guaranteed to fail. With gold experiencing a virtually unlimited supply as fiat currencies today, and becoming completely unwieldy when it comes to storage, another solution is necessary.
Anyone reading this site will quickly realise the solution is Bitcoin. Crypto-currencies in general will not just be an alternative, but absolutely necessary on many levels – especially ones structured as Bitcoin is, with a hard limit on supply. Unlike gold or any fiat/paper currencies, Bitcoin holdings today will be the same as they are a century from now – savings are both rewarded and protected.
Meanwhile, price stability is preserved by theoretically unlimited divisibility. For example: if I have 1 ounce of gold that’s worth USD$1,650 and want to buy something that’s only $165, I have a choice to make – walk away, or split up my gold ounce into tenths so I can use 1/10th as payment. Obviously, since gold is physical it can only be split so many times before keeping track of the divided pieces requires molecular tweezers. Even if it is held as a reserve in a Freegold or “reference-point” system, accounting can become unwieldy and prone to unscrupulous management. Any major influx of supply as discussed above would make its value plummet.
Bitcoin does not suffer these problems. Instead of expanding supply, it expands divisibility. It would be as if there were no more gold to be discovered in the universe and you could divide each ounce of gold into pieces smaller than atoms while still being able to easily keep track of it. Prices remain in a stable range and savings never erodes. For now, gold is an ideal money, and Bitcoin is a solution in search of a problem – what most don’t see is that the problem is approaching more quickly than we might think… two or three decades is a galactic sneeze.
FROM WIKIPEDIA
Gold in antiquity was relatively easy to obtain geologically; however, 75% of all gold ever produced has been extracted since 1910.[43] It has been estimated that all gold ever refined would form a single cube 20 m (66 ft) on a side (equivalent to 8,000 m3).[43]
Funny enough, gold is experiencing the same thing as oil where there have been many cases of *peak oil* claiming to be hit. Every time the price rises, it becomes more profitable to dig further down and more gold, or oil is discovered.
Also, it is expensive to trade in gold. Unless you own a gold business and are doing large volumes, you will never find someone giving you even 95% of less than 1,000$ worth of gold. Most buyers offer 70 to 90%. If someone sold me a bitcoin for one penny or a Euro cent under the bitcoin to fiat price, I would be stupid not to buy it!
Re: The article – Eris is in fact one of the largest Dwarf Planets, and is 2/3 the diameter of the Moon. Perhaps the quote is for 433 Eros, which is only 11×34 km?
Re: asd’s comment: perhaps a combination of bitcoin and gold would work well. Gold for it’s long term store of value properties, and bitcoin for low friction transactions. You pay for gold via bitcoin at the current exchange rates and get rights to fractional ounces of it stored someplace reliable, with it rarely being moved physically. This could be via the SPDR “GLD” shares
http://www.spdrgoldshares.com/sites/us/gold_bar_list/
which is a large vault full of gold, and each NYSE share represents about 0.1 ounces. So bitcoins get converted to GLD shares, and buying and selling of shares only happens when the aggregate demand requires it. In between, bitcoin transactions only shift ownership rights of fractional shares.
You’re correct – the article referred to Eros, not Eris. The post has been updated, thanks for catching that.
Sorry, this was my fault. I ‘corrected’ the article, incorrectly assuming Sy meant the dwarf planet Eris, not the asteroid 433 Eros (which I did not know of).
I just want to say one word to you. Just one word.
Are you listening?
Plastics.
Actually, according to Time, it’s time for diamonds! haaaaaaaaa!!!! Bunch of shit.
– http://business.time.com/2012/04/24/will-the-next-ten-years-be-the-decade-of-the-diamond
Before we start mining asteroids, we could probably double the amount of extracted gold by mining Antartica or oceanic crust. I’m pretty sure it would cost much less than mining other celestial bodies.
So unless the price of gold increases A LOT, I doubt we’ll ever mine the solar system.
If transporting ore to earth is the idea, I agree, but that would be besides the point, which is conquering space. To set up habitats in the asteroid belt, you want to use the raw materials found there.
This is even less realistic.
The purpose of asteroid mining is to extract things like rocket fuel and oxygen, products which are needed in space, and which currently cost 3 times their weight in silver or more to deliver to space. It just happens that asteroids have ~100 ppm platinum group elements in them, which is richer than ores found on the Earth’s crust. You may as well extract that too if you can do it for a marginal cost less than the current market value ($1000/oz average across the whole group of elements).
As a side note, the Earth is expected to have a similar total amount, since it formed from the same original Solar nebula, but the dense elements like platinum mostly sank to the core, where we can’t get to them.
The article says that Bitcoin is arbitrarily devisable. Not quite right. In many evven beginners tutorials one can read that the smallest unit is 0.00000001 BTC = 1e-8 BTC, i.e. Bitcoin is far less divisible than an ounce of gold is when we consider single atom. The article suggests the opposite.
For example, if we consider global BTC market capitalization being worth 21 Trillion Dollars = 21e12 USD (which is still much less than the money in the world today, but already quite a lot) and assuming that all 21 Million BTC are out and no wallets are lost, then 21e6 BTC = 21e12 USD, i.e. 1 BTC = 100,000 USD, or 1 atomar unit of the Bitcoin currency system = 1e-8 BTC = 0.01 USD = 1 cent.
I am not against Bitcoin, but I think we should abide to the truth!
Michael, that limit could be expanded by evolving the protocol.
Bitcoin still has a Speed of Light problem, where transaction and block mining information can only travel as a limited speed. This isn’t an issue if it’s just used here on Earth, but if space travel becomes more common, and we colonize other planets such as Mars, the 20 minute round trip for a radio signal would mean bitcoin between Earth and Mars would not work. Other planets will have to bootstrap and start mining their own blockchains. I used to bring this problem up half-jokingly, since it’s something we assume would only be a problem VERY far in the future, but maybe now not so much.
not 100% true, mars would not be able to clear bitcoin transactions (unless it could outmine earth); however mars still could transmit transactions to earth and wait a long(er) time until they get cleared.