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« on: March 03, 2015, 11:59:15 pm »
BitAssets are a lot like 'paper gold'. They are owned by people who don't really need the underlying thing it's tracking, they just want exposure to its price.
I was just thinking about this today, and came to some interesting conclusions. Consider this:
For any asset that exists, its value has two aspects:
- utility as a store of value
- utility that is not as a store of value
For example, gold has utility as a store of value (gold coins, bars, etc.), and utility as not a store of value (jewelry, machinery, electronics, etc.). There is often overlap (jewelery can be considered having both aspects).
When BitAssets are created, they inflate only the store-of-value aspect of that asset, while the not-store-of-value aspect of the asset remains unchanged. In other words, you can't use BitBTC as if it were actual BTC, but BitBTC has the same store-of-value. Likewise, you can't make a gold necklace out of BitGOLD, but its value will track the weight value of the gold you would need to make that necklace.
It gets hairy in the kind of situation you described. What it comes down to is this: how much of the value of Bitcoin is in its store-of-value aspect, and how much of its value is in its non-store-of-value aspect? If most of bitcoin's value comes from its store-of-value properties, then creating tons of BitBTC will drive BTC's price down (and thus BitBTC's also).
My main realization today was that we should really be working on BitOIL. Since oil does not have very much store-of-value in itself (it is not easily fungible, storeable or obtainable by the general public), creating BitOIL should not drive its price down, or should do so negligibly.
Why do people want Gold and Bitcoin? To store their money, possibly speculating on its value going up. Why do people want oil? For energy / industrial purposes; it is consumed. You can't consume BitOIL and get energy.
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