Much has been said about Bitcoin and its advantages. However, nothing speaks better of its features and importance than comparison with the rarest of metals. Bitcoin as the digital gold is the phrase everyone uses nowadays. What does it mean and how did we reach this point?
Those of you who are a bit older, may remember that once upon a time dollar was pegged to gold, the same way British pound was pegged to sterling, for example. It meant that each dollar had its equivalent in gold and was backed by it. It was a guarantee of value.
However, gold was scarce and could not back all the money we needed. So, in 1971. dollar ceased to be the currency pegged to gold. At the time, an ounce of gold was estimated at $35. In the meantime, we also continued exploiting gold. At the moment of writing of this text, the price of an ounce of gold is set at app. $1,570.76.
The Scarcer, the More Valuable
Analysts often compare Bitcoin to gold, due to its scarcity in the first place. Nevertheless, this is not the only reason for Bitcoin to be considered a” digital gold”.
Its scarcity is projected. However, from the historical point of view, we could say that producing Bitcoins is the process that takes time and diligence. You can look at it as fine filigree work of a jeweler. It entails planning, proof of work, testing, blockchain network development and upgrading – just to name a few. Let alone the knowledge and skills we need to put all of this to work.
The value is embedded in its production, but also in its supply and demand. Moreover, it is also enhanced every 4 years due to the Bitcoin having. This event which should happen in May 2020 means that new bitcoin issuance will drop from 12.5 to 6.25 new bitcoins minted every ten minutes. It will make Bitcoin scarcer and in demand, eventually increasing its value. The increase we have seen back in 2012 and 2016 was as high as 13,000% and 12,000% respectively.
Bitcoin is Easier for Transport Than Gold
Yes, BTC is scarce. Only 21 million units in circulation has been projected. Apart from the fact that it is rare, Bitcoin is available for transport through digital channels, decreasing the costs significantly. Comparing to the transportation of gold, the costs are negligible.
We Can Verify the Provenance of Bitcoin
Another very important advantage concerns the power it has put in the hands of regular users. They are able to confirm the provenance of Bitcoin, unlike buyers of gold. Not every ounce of gold is of the same quality, nor is every golden piece of jewelry made of pure gold. However, as a regular buyer, you cannot know this.
The advantage of the Bitcoin network is that it has allowed computers all over the world to run full nodes and verify the network. This is something that we have not seen before in any other industry. The ability to keep public records of all production, buys and sales of a certain “product” is the main feature of Bitcoin blockchain. That way, Bitcoin promotes transparency as its most attractive feature.
More Advantages of BTC Over Gold
Bitcoin secures privacy in transactions, excluding third party. It is also more convenient to deal with comparing to gold because it can be easily divided. Nowadays, we can send tiny fractions of Bitcoin, whilst we cannot melt down gold easily to send it in tiny pieces.
These are just a few advantages of Bitcoin over gold as the store of value. For more information on Bitcoin in general and some of the other advantages, we invite you to read our previous blog posts.
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