Bitcoin vs. Gold
Many people compare Bitcoin to gold. So let’s take a closer look at how they differ.
Why is gold still so popular today? Primarily because it is the oldest known form of money – people have used it for centuries. Gold has passed the so-called “test of time”, and its long-lasting presence in the economy and culture is one of the main reasons why so many people still trust it.
Unlike modern fiat currencies, gold has a limited supply. We are restricted by the amount of gold that exists on our planet. Even though technological progress has made gold mining more efficient and allows extraction from previously inaccessible locations, we still know that its total amount is finite. This is why gold is considered a good store of value.
However, gold also has disadvantages. Gold is difficult to divide. As its value increases, it becomes more and more impractical to use as everyday money – nobody wants to pay for a coffee with a tiny gold fragment. This is one of the reasons we later moved to paper money, which served as an easier representation of gold. In the past, banknotes could be exchanged for physical gold – for example, US dollars once carried text guaranteeing redemption in gold.
You won’t find that text on today’s banknotes anymore. Money stopped being backed by gold in the early 1970s – specifically in 1971, when US President Richard Nixon officially ended the gold standard.
The Five Key Properties of Money
- general acceptability
- portability
- durability
- divisibility
- scarcity
Gold satisfies most of these – it is scarce, durable and historically accepted. But as mentioned earlier, its weaknesses are portability and divisibility. If you tried to save a larger amount of wealth in gold, you would soon run into problems with storage, security, and especially with transporting larger quantities.
Is there any form of money that satisfies all five properties?
In my opinion, Bitcoin comes closest. It is highly portable – you can send it anywhere in the world within minutes. It is durable because it exists as digital information that cannot be physically destroyed. It is extremely divisible – one Bitcoin can be split into 100 million units called satoshis. It is scarce because its maximum supply is limited to 21 million. And finally, its general acceptance is constantly increasing – it is being adopted by companies, funds, institutions, and even entire nations.
So let’s summarize the main differences between gold and Bitcoin:
Scarcity
Scarcity is what makes both assets suitable stores of value. Gold is scarce, but its true supply is not precisely known. New discoveries and better mining technologies can gradually increase the amount of gold entering the market.
Bitcoin is even stricter in this regard – the total supply is mathematically fixed within its protocol. There will never be more than 21 million bitcoins. This limit is absolute and unchangeable, making Bitcoin the first asset in history with a perfectly defined and immutable total supply.
Portability
Portability is another significant difference. Gold is heavy, bulky and requires special security during transport. Try moving just a few kilograms of gold across a border and you will instantly encounter bureaucracy, legal checks, risk and high costs.
Bitcoin is completely different. You can send any amount – whether it’s five euros or five billion – anywhere in the world within minutes and for minimal fees. You can literally carry your entire wealth in your memory in the form of a seed phrase – without owning a single physical object.
Divisibility
Divisibility is another area where Bitcoin has a major advantage. Although gold can be divided, it is limited in practicality. Coins can be melted or split, gold dust can be weighed – but it will never be as precise or convenient as Bitcoin.
One Bitcoin can be divided into 100 million units – called satoshis. And if needed in the future, even satoshis could theoretically be divided further. This means you can own and use extremely small fractions of value.
This flexibility makes Bitcoin an ideal form of digital money not only for large transactions, but also for everyday micro-payments.
Durability
Durability is another shared strength. Gold is practically indestructible – it is chemically stable and does not corrode, making it ideal for long-term value storage.
Bitcoin is digital, yet its durability is ensured by a global network of thousands of independent nodes. As long as just one computer maintains a copy of the blockchain, Bitcoin will continue to exist.
General Acceptability
General acceptability is perhaps Bitcoin’s greatest challenge – but also its greatest growth opportunity. Gold has been trusted worldwide for thousands of years. It has history, reputation and credibility.
Bitcoin is still at the beginning of that journey – yet adoption is rising rapidly. It is accepted by major financial institutions, multinational companies, merchants and individuals. At the time of writing this book, two countries have already recognized Bitcoin as legal tender, and many others are considering similar steps.
It is therefore reasonable to expect that Bitcoin’s global acceptance will continue to grow.
Conclusion
Bitcoin is the natural digital successor to gold. It did not arrive to destroy or replace gold – but to bring its key properties into the digital world and open the door to a new era of money that is digital, decentralized, durable, scarce and free.