An Essay On Bitcoin, Gold And The Future
Bitcoin is probably the most important invention in history in terms of the economy. In the short time since its creation Bitcoin has had many ups and downs and experienced quite a lot of difficulties. There have been times when you would read everywhere that it is, in fact, in its last days. Despite all that, Bitcoin's resilience in the face of all the uncertainties and difficulties has always attracted more and more people to it. Everytime that Bitcoin dips you can hear the usual voices deriding it and reveling in its ostensible demise.
Yet, after some time Bitcoin rises again from the ashes and proves the detractors wrong. Bitcoin has been around long enough for those of us with a certain level of intelligence to trust in its bright future. After so many years we can at least be somewhat sure that it is a legitimate and secure currency. Although there are those who want to cast doubt on the future of Bitcoin by invoking "quantum computers" or other fanciful concepts, the average person is more or less certain that Bitcoin is relatively secure for the foreseeable future. Of course nothing is absolutely perfect in this world. Everything has its shortcomings and vulnerabilities. But in order to assess the usefulness of anything we have to compare it with its rivals. Bitcoin's rivals, then, would be fiat currencies and gold among other things.
Of course fiat currencies are inferior to both Bitcoin and gold in many different ways so we don't need to discuss them here. However, gold seems to be a somewhat competent rival to Bitcoin particularly when we think of it as a store of value. Gold has been used as a store of value by millions of people for thousands of years. Whenever we think of gold we think of wealth. Of course this didn't happen by accident. Gold's properties make it a really useful store of value. For example its supply is limited by nature. You cannot make gold out of anything. Chemists tried for hundreds of years to turn copper to gold but without success. So is gold actually superior to Bitcoin as a store of value?
To answer this question we have to look at both gold and Bitcoin critically so that we can identify each one's pros and cons. Let's consider the total supply of gold first. It has been observed before that gold's supply is limited. However, there are many big companies extracting more and more gold from new mother lodes that they are discovering every now and then. The earth is a really big place. Who knows how much more gold will be extracted in a few years, inflating its supply and thereby making those who hold it as their store of value gradually poorer? Meanwhile the total supply of Bitcoin is 21 million. Bitcoin has this hard cap so that inflation is non-existent in it.
What about the quality of gold. Gold is a metal and so it can alloy. This presents a huge problem because making sure that your gold coins are pure or alloyed can be too difficult for the average person. Most people cannot understand the difference between pure gold and any yellow metal. Bitcoin, on the other hand, cannot be forged and the process of making sure of its authenticity is entirely carried out by softwares. If you know how to handle your bitcoin assets with a trusted wallet you can have a high level of certainty that the bitcoin in your wallet is legit.
Another important shortcoming of gold is that it has a host of utilities unrelated to what we want to keep it for, that is to store value. For example gold is commonly used to make jewelry and watches. Bitcoin cannot be used to make anything. It is exactly what it should be.
Apart from gold there are other things that people might buy to keep their money from losing its value. You can buy land and hope that you can sell it some time in the future and not keep worrying about inflation. However, this option has its own problems. For example this leaves out a lot of underprivileged people who cannot afford to buy a piece of land however small. The barrier of entry is simply too high for many people. With Bitcoin there is no such problem. Thanks to bitcoin's divisibility into extremely small units, called Satoshis, virtually anyone can buy some of it.
Although gold has always been thought of as the only secure store of value in the long term, it is becoming increasingly clear that Bitcoin is a really good rival for it. Bitcoin has many attributes that make it attractive as a store of value in the long run. The fact that Bitcoin's network is decentralized and very secure make it very reliable. Decentralization in this context means that the need for trusting any central party has been eliminated.
Gold and Bitcoin are both really good stores of value but Bitcoin seems to be better in a lot of ways. Although gold has been around for much longer than Bitcoin it hasn't been able to solve many persisting economic problems that Bitcoin might solve in the future. Perhaps it is still too early for Bitcoin to find its place as the primary store of value in the world but it might do so much sooner than many expect.
I am not a financial advisor. Cryptocurrencies are highly volatile and investing in them can be very risky as prices are constantly fluctuating. You are responsible for the decisions that you make. This piece was written for entertainment purposes only.