Five reasons why crypto beats gold.
You may have heard the phrase “Bitcoin is like digital gold.”
But why is that the case?
Vitalik Buterin, founder of Ethereum, just made a couple of arguments in support of that claim...sort of.
He didn’t argue that Bitcoin (and crypto in general) is like digital gold, he argued that it’s better than gold.
Let’s break down his reasoning:
Physical gold is “incredibly inconvenient.”
I.e. dividing/trading it, is a pain. Whether you're buying a coffee or a car, you want to be able to transact digitally.
To transact in gold would mean lugging around a sack full of the stuff, sorted into varying weights & values.
“It’s difficult to use, especially when transacting with untrusted parties.”
Without the people/companies on both ends of the transaction being verified (currently done through KYC / KYB regulations) the opportunity for fraud is immense.
“It doesn’t support safe storage options like multisig.”
‘Multisig,’ short for ‘multi-signature,’ is a method commonly used by the crypto community to store, retrieve and send crypto. It requires 2 or more methods of authentication to sign and send a transaction.
(Similar to two-factor authentication, on Gmail).
Easy to do with digital currencies, not so much for physical gold.
“At this point, gold has less adoption than crypto, so crypto is the better bet.”
Today, more people own crypto than they do gold. While the price of gold may fluctuate less than some cryptocurrencies, overall if we had to choose one over the other to be the ultimate store of value, it makes more sense to go with the one that more people already own - so again, crypto wins.
The founder of Uniswap then chimed in to really bring the point home.
“Gold also has the risk of huge centrally controlled inflation due to asteroid mining.”
A wild comment! But true...
Whilst gold may be a scarce resource on Earth, things could all collapse once the powers that be figure out how to cost effectively mine asteroids for precious metals like gold.
That would seriously reduce scarcity and possibly destroy the value of gold.
With many cryptocurrencies (like Bitcoin), there is a limited total supply (21M Bitcoin ever, to be precise) - and that, right there, is true scarcity.
To balance things out, we'll finish with the most common counter argument from gold bugs (i.e. folks who love gold), to all of the points above:
Governments will never let Bitcoin get to the point where its value rivals that of gold, because it's a monetary system they cannot control (they'd sooner ban it).
Which is/was a solid argument...but it's lost more and more momentum over the past few years, as the mood of many governments seem to now be changing to:
Let's embrace this new technology, so we can become global leaders in the space.