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Bitcoin was meant to replicate gold because it is a store of value, and gold has long been recognized as the finest value and money available. Humans have long loved gold around the world, despite the fact that it has no substantial “industrial” application, which makes it such a brilliant kind of money. It is easily accessible since people have been storing it since the beginning of time, yet it is also difficult to get. It is also flexible and easily divided. All of these elements combine to make gold not just a fantastic store of wealth but also a good medium of exchange.
Gold is generally plentiful, making it simple for a society to define its pricing in gold. Still, it is also difficult to obtain or mine, implying that it has worth and, more importantly, a stable value. Gold is the closest thing we have to deal with money in an imperfect world. As a result, Bitcoin was designed to resemble gold in at least two essential aspects. First and foremost, the supply is limited to 21 million bitcoins. Meanwhile, it is estimated that around 201,296 metric tonnes of gold have been extracted, with approximately 53,000 metric tonnes remaining in known reserves. Of course, additional reserves may be discovered, but their contribution to the overall supply is unlikely to be large. We’ve been seeking gold for years, after all.
However, probably the most significant resemblance between Bitcoin and gold is the cost of extraction, which today distinguishes it from the second largest cryptocurrency, Ethereum (ETH-USD). Mining Bitcoin takes costly technology and consumes a lot of energy, and Bitcoin is intended to be half the payout for mining a Bitcoin block every four years. This is analogous to gold, which becomes more difficult to mine as one digs deeper below the earth’s surface. All of the readily mined or surface-level gold, as well as all of the easily attainable bitcoin, has already been collected. (In 2012, a regular laptop could mine a large amount of bitcoin) What’s most important to realize is that the pricey mining procedure, like gold, bases Bitcoin’s value in the real world. Proof-of-work is equivalent to proof-of-value. As a result, Bitcoin has many of gold’s characteristics: it is practical and available but in a finite quantity. Its value is steady since it has no practical application and its supply cannot grow quickly. However, Bitcoin outperforms gold in at least three critical categories.
While gold is a malleable metal, it may be an exaggeration to state it is readily divided and countable. In actuality, gold was not a useful trading tool until it was coined into standardized coins. This, however, puts a huge wrench in the gold bull thesis. Minting and “standardization” were only conceivable when large power structures were established. Large governments, like the Roman Empire and long-standing Chinese dynasties, were among the first to produce coins that were so widely recognized and trusted that they could be exchanged anywhere on the earth. One of gold’s virtues is its capacity to function as a neutral and censorship-free form of money, but in order for this to be practicable, a centralized body capable of minting coins was required. Of all things, we all know how frequently the Romans devalued their currency. Gold certificates, in addition to coins, have been used as a practical manner of dealing with gold, although they are not without issues. While it is considerably simpler for independent banks to achieve this because there is no requirement for a centralized institution, we now confront another quandary: gold certificates are not comparable to gold. Even if the issuing bank has a 100% coverage percentage, the certificate is ultimately a promise to pay rather than gold itself. This puts the risk of a counterparty into the equation. Today, all fiat currencies are counterparties to government debt, exposing the whole economy to counterparty risk. What happens if the United States government defaults? total economic collapse. Physical gold has the advantage of having no counterparty risk, but it is impractical to trade. Bitcoin, on the other hand, may be exchanged in its purest form, with unadulterated Bitcoin transmitted between market participants without the need for an intermediary. This is especially true in today’s digital age.
objectivity:
Another important reason why gold has traditionally been regarded as a preferable form of money is its neutrality. Nobody has any control over it. It is unconcerned about boundaries or political loyalties. It is available for purchase by everyone and will be accepted by everyone. Of course, there are certain limitations. Although gold may be purchased easily in most nations, it is also true that the majority of the world’s gold production is concentrated in a few countries. Bitcoin is more democratic in the sense that it may be mined by anybody. You could join a mining pool even if you don’t have specialized gear. The other major concern is that gold, owing to its physician nature, must be secured, which gives the custodian significant authority. The graphic below shows how the United States built gold reserves during World Wars I and II. Many Allied countries transported their gold reserves to the United States not because they wanted to, but because they were terrified Nazi forces would capture the gold during the invasion, which is exactly what happened. This placed the United States in a position of great power, which, of course, led to misuse. Bretton Woods established a dollar-centered system in which currencies could only be redeemed in dollars, and dollars could only be redeemed in gold. However, it only took a few decades for the United States to break this pledge when Nixon “closed the gold window” in 1971.
This occurred due to gold’s inherent limitations. This would not have happened if Bitcoin had been used. Digital cash is far more convenient to keep and safeguard. This safeguards it against theft, fraud, and excessive accumulation.
Interdiction:
Finally, I would argue that, due to its digital features, Bitcoin is more immune to censorship than gold. Because gold is such a strong kind of currency, it has been subjected to censorship all across the world. Politically motivated fiat systems cannot compete with gold, which is why gold has been banned in various countries throughout the world. The Gold Reserve Act of 1934 prohibited individual possession of gold in advance of a huge dollar depreciation. As of present, retail traders in China are restricted from owning precious metals. Meanwhile, central banks are hoarding gold at a rate not seen in over 50 years. This does not seem fair; it is just another constraint that gold has but Bitcoin does not. Bitcoin may be transferred freely and anonymously. Legislation prohibiting bitcoin possession may be established, but how would it be enforced? There is nothing the government could do to confiscate Bitcoin short of torturing people for their private keys. Furthermore, even with a Bitcoin ban, commercial trade may still take place. Bitcoin peer-to-peer transactions cannot be halted by an order. Once again, Bitcoin outperforms gold.
Conclusion:
In conclusion, Bitcoin has significant benefits over gold as a store of value. This is not to suggest that gold possessions are without value. Furthermore, one point must be given to the yellow metal. Gold has a lengthy history of being used as a store of value, which makes it even more dependable. Bitcoin is just 13 years old, so it has a lot of history to create.
SilverlineswapSparc BetsGold vs BitcoinGold pricingBitcoin priceGold value changedEthereum (ETH-USD)
