Gold has long served humanity as a “Store of Value.” There are multiple reasons for that, and today we will talk about Bitcoin vs Gold and why Bitcoin is a better choice to store your wealth.
A “store of value” should have some essential attributes. Today, we will discuss Gold and Bitcoin based on these properties.
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Durability is a fundamental attribute for a monetary asset. For example, let’s say you buy $1,000 in tomatoes, you will lose all the value in the next 2–3 days.
Gold has the best durability among all the monetary assets known to humans. It was here before; we had kings or even Gods. You can leave Gold for thousands of years, and it will not change its composition or lose its quality or quantity.
Bitcoin came into existence in the last ten years, so it’s very early to talk about its durability. But Bitcoin shows some good signs as the nation-state failed to seize the Bitcoin network, and the system has not been taken over by any entity.
Other than that, companies are developing an alternate infrastructure for Bitcoin (For example- GoTenna), which strengthens Bitcoin’s durability by not relying on current Internet infrastructure solely.
Bitcoin beats everything when it comes to portability. A private key/mnemonic can control billions of dollars in value, and you can write it down on a piece of paper and travel anywhere you want.
In addition, you can move billions of dollars worth of Bitcoin in a matter of minutes without using any third party. Can you do it with Gold?
You will need extra security to move and specialized transportation to move billions of dollars worth of Gold. Only the government does this occasionally nowadays.
In 1971, Nixon suspended the convertibility of the US dollar into Gold ending the Bretton Woods era of fixed currency exchange rates against the US dollar.
France sent a warship to New York harbor in early August 1971 with instructions to bring back its Gold from the New York Federal Reserve Bank. Guess what happened? Do you think America gave France its Gold? Nope.
Other than Bitcoin, there is no asset exists which can’t be confiscated by governments. It is a critical property for the people living in countries that do not have democratic values. Authoritarians seize people’s properties all the time.
How many people do you know who can identify if a piece of metal is Gold or not? You need understanding and specialized equipment to do so. It costs money and creates a risk of counterfeiting.
On the other hand, Bitcoin can be verified with mathematical certainty without any extra cost. Bitcoin software only recognizes the Bitcoin, so no counterfeiting, and you can prove your ownership with a cryptographic signature.
Bitcoin is divisible to eight decimal digits. So you can buy a coffee with it. However, you can’t divide Gold without melting it, and you never heard of people buying coffee with Gold. It’s just weird.
Gold has the best fungibility as you can melt it and remove all the traces of its previous history. Fungibility is an essential property to preserve censorship resistance.
There are chain analysis companies that threaten Bitcoin’s fungibility. But technologies like Coinjoin are helping to make Bitcoin more fungible. Besides, other technological advancements are happening to make Bitcoin more fungible.
Scarcity is a property that directly co-relates to the asset’s price. Bitcoin is the most scarce asset in the world where we already know the max supply. There will be 21 million Bitcoin ever, and over time these Bitcoins will be lost because people will lose their private keys.
Gold has 1–2% inflation/year, and this number is based on current technological limitations. There is a whole domain called space mining, where companies are planning to mine in other planets or meteorites in the future. This can change the dynamics of Gold’s scarcity.
In Bitcoin vs Gold, a predefined Bitcoin supply will drive its price in the future.
Many criminals used Bitcoin in its earlier days. They thought that Bitcoin is anonymous and impossible to track even when the whole transaction history is publically accessible by anyone.
But unfortunately, Bitcoin is sudo-anonymous and can be traced using forensic analysis. Such analysis weakens Bitcoin’s censorship resistance, but there are technological improvements in progress to tackle this problem.
Gold has better censorship resistance because you can melt it to remove all the traces of its history.
Gold has the most extended history among all monetary assets. Gold has seen the rise and fall of civilizations and empires. There are thousands of stories around Gold. And they have been passed on to the generations for thousands of years.
In the case of Bitcoin, we have only 10 years of history which is nothing in comparison to Gold. But let me ask you a question. Do you think we will ever lose the Internet in the future? I firmly believe no. It’s not just a technology; it’s part of our life, which keeps us alive now. And we got the commercial Internet in the 90s. Yes, only 30 years back.
Bitcoin already survived ten years, and according to the Lindy effect, it will survive at least next ten years in the worst-case scenario. But I believe, In the upcoming years, It will become the backbone of the new financial infrastructure that will be impossible to shut down.
In conclusion, we think Bitcoin is a better “Store of value” but it should prove itself in upcoming years. Let us know what you choose in Bitcoin vs Gold, in the comment section.