Majormax
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September 18, 2018, 12:08:30 PM


Crypto, on the other hand is liquid in electronic markets. A far higher portion of the coin supply is traded in the sense of possession remaining with ownership. This puts cash-settled markets at a disadvantage because they are "outside the loop"in a way that they aren't with gold.



How is this Possible ?
It basically comes down to the feature widely known as "public-private key cryptology". If we superimpose the model of bitcoin on gold, both public and private keys are co-incident. That means we need custodial services because gold hodlers cannot allow the metal to leave their posession and still retain control over it.

With public-private key cryptology, a cryptographic asset can be allowed to sit "out there" while retaining mobility, resistance to counterfeit and be under the control of the owner. That is the huge advantage in value that Bitcoin has as a monetary asset over precious metals. It's also the property that gives it far greater resistance to the kind of manipulation from derivatives markets that we see in PM'S.


This is the key to the attractiveness of digital currency.  The downside is that an owner has to take responsibility for their own security.

With a custodial service, there is an insurance/assurance that the registered owner cannot have the asset stolen, without compensation from the custodian. Disenfranchisement can only come from the contract terms, or failure of the custodian.