I used to dismiss this view, because it seems so impropable that an arbitrary digital asset would be able to fill a role like gold. But it does seem to be happening, and I am coming around to the idea. What is gold after all but a commonly agreed upon medium of value transfer, suitable because of scarcity and divisability, but other than that rather arbitrary too. If enough people decide that bitcoin is a good medium, then so it will be, and that momentum itself will keep it that way. And bitcoin does have a lot of attributes that make it suitable.
There is a lot of money looking for a place to go and be safe (from loss and inflation). There are very few 'pure' ways to simply store that value, even gold is difficult to invest in, at least if you want actual ownership and not merely a promissory note. Bitcoin (or another cryptocurrency) could be one of these ways.
Do you have the same mindset in regards to physical gold? Gold has very little, if any, intrinsic or practical value, yet generations of humans have been motivated to acquire more of it. With digital currencies like Bitcoin, I think we're seeing the birth of a new type of scarce resource that will motivate generations of people to come.
Nah, bitcoin has all manner of practical issues. A core element of it is that it closely emulates gold. And gold has been found to be impractical for day to day consumer trades. Even back with the Romans, even while they had gold and silver coins, used copper coins for most of their daily exchanges. Or even just made agreements about paying in produce once the corps were harvested.
Gold is susceptible to global adversary (government) attacks. You can't have instant payments over internet with physical gold -- you need some kind of virtual banknotes to change hands instead, and to be redeemable in physical gold sometime later. That would be perfectly fine in a world with small, reasonable governments, but in the real world we live in, it's not. Two problems arise:
1. Sending physical gold for payment clearance, especially though state borders, is problematic (just plain illegal in some countries, may be taxable, etc). Doing it often and in small portions is also economically unfeasible [you need economy of scale to lower security costs, logistics, etc]. The usual market solution for that is creating big clearinghouses, with branches everywhere, etc. But:
2. Running a big clearinghouse for gold makes you effectively a bank. Running an unregistered unregulated bank is a crime in most countries. So you have to register, get all the licenses, keep all government requirements fulfilled, you can be subjected to all kinds of inspections, etc. On top of that, in some countries gold payments violate legal tender laws or something else, and since you are already on gov radar, it's a non-starter. After E-gold crackdown, we know these are not purely theoretical concerns.
Bitcoin is free from these limitations. Instantly redeemable, no vulnerable physical storage, distributed, no need for high profile points of failure, etc. Bitcoin still lacks one of the standard requirements for commodity money, though ("must have some non-monetary use/value"). How critical is it? We'll see :)
You're kinda dismissing it without respecting that it's no different from gold as far as people wanting to hoard it. People also do use Bitcoin when convenient to move money. I personally used it to pay someone in Brazil for some mechanical keyboard services when PayPal failed to transfer the money. Totally legal and organic demand exists.
Gold is not really practical for modern commerce without first converting it into an alternate currency (passthroughs in dollars, for instance) or trusting a third-party. Bitcoin can be traded really easily, no conversion or trusted intermediary (unless you count the btc swarm) necessary.
Bitcoin is not for these times directly, but for after.
With gold, historically governments have tried to get a hold of it with draconic punishments if they found someone tried to hide it.
With gold you are more in danger and you can't easily move it. Bitcoin is better, but certainly not optimal. Still, if you were to flee from your country, you might not be able to take gold or money with you, but for bitcoin it's much easier. So someone in government will think twice before putting heavy restrictions if they can easily be circumvented.
How would that be better than holding gold? Fees for large transactions of btc are getting higher than the cost of physically moving gold anyway, and the chances to lose it or get it stolen are higher.
Bitcoin’s ambition is to become the new gold: something that has been ingrained in human culture as “money” for so long that people accept it as such by habit.
Bitcoin is digital gold. The technology of it needn’t evolve further than the technology of casting a gold ingot, storing it safely or transporting it.
And FWIW, transporting $1M worth of gold in a secure way is going to cost you significantly more than BTC’s worst Tx fee day.
Other coins can serve the purpose of everyday transacting etc.
Gold has been used as currency (medium of exchange) at multiple points in history. It's not now. People are trying to use bitcoin as a currency atm - but it's very difficult with its fluctuations in value. It may perhaps be more successful as a medium of exchange in the future - but that won't be for a while.
Thing is, if someone needs a store of value that's not controlled by the bank, gold is already there - and, for most people, it being physical is actually an advantage (easier to secure in a way that they can understand and verify).
Then again, most people who hold crypto today, do so in third-party wallets on platforms like Coinbase. At which point the "gold equivalent" would be to buy gold certificates from your bank of choice.
Thus, the only practical value proposition of Bitcoin is that it can do long-distance transactions outside of the established bank network and its regulations. I'm not saying that dodging regulations is always a bad thing, but regardless of that it's a very niche use case by definition, never mainstream.
The reason why it is so popular outside of that niche is speculation. Which is also why we're seeing those wild swings - if the current price was anything resembling its real utility, it would be a great deal more stable.
The point is that physically sending the gold is not the equivalent sense of the word transfer in this case. There will of course be some differences, but the gold ledger is the best gold analog of a bitcoin transaction.
There is a need to have a medium of exchange for trade. Barter has its limitations. For all of history, people have created new forms of money for exchange. The primary characteristics you would need is scarcity, clear ownership, transferability and fungibility. Gold serves this purpose, and Bitcoin even more so.
The fact that gold is a shiny pebble is not adding anything meaningful to the conversation.
reply