In this episode of BeInCrypto’s Video News Show, host Juliet Lima pits gold and Bitcoin head-to-head to see which comes out on top as the better form of money.
What is money?
To really understand the crypto vs gold debate people first need to understand their use as money. For something to be classified as money, it must be:
- Durable — Can it last? Is it not easily destroyed?
- Portable — How light is it? Can you easily carry it around with you?
- Fungible — Is it interchangeable with another unit of equal quantity?
- Verifiable — Can you guarantee what it is? Is it authentic?
- Divisible — Can it easily be divided into large and small quantities?
- Scarce — Is it hard to come by, difficult to create, or find more of?
Based on these characteristics, is gold or Bitcoin the superior form of money?
As far as durability goes, gold is reasonably robust. It does not rust because gold is mostly unreactive to the gasses and liquids it’s exposed to. There are gold coins that were lost in shipwrecks that were still in very good condition when found hundreds of years later.
Although gold is unlikely to rust, it is fairly soft and can easily be scratched, which is why most gold jewelry is mixed with other alloys that help strengthen the metal.
Bitcoin is also very durable. When stored correctly, meaning the private keys to the wallet are not lost, it will last as long as the Bitcoin network lasts. This could potentially be for as long as humans are around.
According to Juliet, Bitcoin wins in terms of durability. But she does admit that it was gold’s durability that helped elevate it to its current status as the “gold standard.”
Gold is very heavy. A typical gold bar is about 27 pounds. Whereas bitcoin, being completely digital in most cases, is so light it could literally be weightless.
Bitcoin obviously tops gold here.
The debate is a bit closer than the others when it comes to fungibility.
Gold is still gold no matter what form it takes, Juliet says. Someone could stamp or engrave gold to give it a unique number but anyone else could easily melt it down to its original state. It is universally accepted that there is one form of gold, which is what makes it the gold standard.
Whereas Bitcoin has a little issue with fungibility. Being on a blockchain everything is traceable. Where any of the money flows is visible from address to address, and if someone doesn’t like the people that are holding the money at a certain address they could try to blacklist the address. This has happened with the proceeds of hacks or other shady situations when authorities have tried to stop the flow of money into exchanges. There are mixers, to obfuscate transactions on the blockchain, but even they are under pressure, especially wherever there is any centralized aspect of the service.
Consequently, Juliet believes this favor would have to go to gold given its superior ability to be interchangeable with itself.
While gold is definitely verifiable, there are certain ways to fake it, like painted tungsten bars. People can look at something shiny and think it’s gold when in all actuality it really isn’t, giving rise to the term “fool’s gold.” These cases need special equipment to make sure they are not scams.
Gold is very much divisible, from huge gold bars all the way down to gold coins or even gold dust. However, dividing so granularly would be impractical in terms of reassembling it again.
Meanwhile, Bitcoin has superior divisibility, up to eight decimal places. These smaller increments are referred to as Satoshis as a nod to the inventor of Bitcoin himself. As far as divisibility is concerned, Juliet dubs Bitcoin victorious yet again!
In Juliet’s opinion, scarcity is the most important characteristic of money. It just wouldn’t be valuable if it were overabundant or more of it could be made too easily.
Gold fulfills the aspect of being scarce. It’s hard to come by, which is why gold has been used for money for thousands of years. Gold can’t simply be printed but must be physically dug out of the earth. Massive mining operations are undertaken to eke out any new supply.
However, Bitcoin is scarce too. There will only ever be 21 million of them. Considering the population of the planet of eight billion people, the proportion is put into scale a bit more. Juliet also believes Bitcoin to be the winner here. Whereas gold keeps getting mined out of the ground and the supply is ever-increasing, there is a strictly fixed amount of Bitcoin.
The idea of Bitcoin is something brand new compared to the amount of time gold has been around. And whereas gold has history on its side, Bitcoin has comparatively no track record. There could be a bug in the code and the house of cards would all come crashing down. Also, governments around the world could potentially censor Bitcoin somehow.
Something similar happened when gold was confiscated by governments from its citizens throughout history, like in the United States as recently as 1933. Would they try this again with Bitcoin because it’s a threat to their system? How would people react? And more importantly, how would bitcoin react?
The post Be[In]Crypto Video News Show: Bitcoin Vs Gold appeared first on BeInCrypto.