Bitcoin Vs Gold

Mayank Gupta
Sep 1, 2018 · 6 min read

A mere human wondering what all this fiasco is all about.

Image Source: coinpupil.com

Gold — the most precious metal on earth, the most precious commodity, the most valued currency and a safe heaven investment; not just today but from thousands of years for various civilizations on this planet (we really don’t know if it’s valued on others). Gold has the most coveted place in hearts of many (if not all) and suddenly a new born to the world (hint: bitcoin born very late in 2009) is being described as a threat to it’s throne. Let’s take a look and put it face to face with bitcoin; what we have begin to call digital gold of today. Stiff competition ahead!

Gold is a metal and like all other metals it is mined from earth. Bitcoin is also obtained from mining but the mining is virtual which happens from complex computations and the production of bitcoin is actually a reward or an outcome for maintaining it’s ledger (aka blockchain). They both are identical in that sense. Bitcoin is being touted as the digital gold because of the very high value it has gained over just a few years. What’s making bitcoin so precious? Let’s understand what makes gold precious first.


Gold is precious, I wonder why. Why ladies and gentlemen love it so much (ladies like to wear it, gentlemen like to sneak it), why Egyptians were so fascinated by it that they even took it to their graves. Is it a magical element which can raise the dead or is it something without which the world will come to an end? Let’s take a look at the uses of gold which are following:

  1. Jewelry — It is shiny and attractive and of course it glitters. It can be sculpted and does not stain. All these things make it perfect for jewelry. More than 3/4th (78% as many websites says) of the world’s gold production is consumed into jewelry.
  2. Investing — Gold is being used as currency in many civilizations since ages. Even in modern world it is “considered” a safe heaven investment. Gold in financial sector is in the form of coins and bullion. The central banks around the world store it (as a financial backing for the currency). Many High Networth Individuals or even retail investors store it heavily too either in physical or digital form; in digital form equivalent amount of gold is physically stored by the custodians. However, gold is a heavy metal and to use it practically as a currency would have difficulties in carrying it around.
  3. Electronics — Gold does not tarnish and is a very efficient conductor of electricity. Due to these two characteristics it is widely used in electronics both devices and their manufacturing.
  4. Medicine — Used in dentistry because in crowns, bridges, fillings as it is chemically inert, non-allergenic, and easy for the dentist to work due to being malleable. Very few other medical uses exist.
  5. Aerospace — In aerospace gold has some good uses as lubricants or reflective films which is very crucial for the system going to space.

Gold is malleable — can be drawn into wire as well as into thin sheets, alloys with many other metals, very high conductor of electricity and does not tarnish. Despite all this, gold finds little industrial use. If you look at point 1 and 2, they are not actual uses but a perceived value we have associated with this metal. I don’t have the figures for gold consumption for points 2–5 but considering points 1 and 2, it seems like at least 85–90% of the world’s gold does nothing except making people happy for god knows why. This figure can be even higher. On a very fine day, the human civilization might wake up and decide that gold is just a useless metal of not much use. For practical uses we have more than enough of it.

Palladium, platinum and silver are the most common substitutes for gold that closely retain its desired properties. Silver has far more industrial uses than gold. If we have to imagine a world without gold, I am not sure what the society would lose. Imagine a world without iron (black gold) and it will give you shivers.

So far, we can easily understand what value gold is adding to our civilization. I had to write so much to explain this just because some folks argue about the value of bitcoin. Value is a perceived notion and it has no co-relation to the usefulness of a particular substance. If bitcoin has no value then so does gold, at least close to it.

If bitcoin has zero value, so does gold.


Let’s come to the currency part. For anything to be used as currency, four factors are considered — rarity, portability, durability and divisibility. Gold meets them all and so does bitcoin. Gold is in limited supply (rare), can be carried around in coins (portable), does not defile (durable) and can come in different weights (divisible). Bitcoin has a limited supply (max it can go up to 21 million), you just need a bitcoin wallet to carry it (portable), does not get automatically destroyed (durable) and can be exchanged for payments in whatever number you prefer (divisible). So, bitcoin can very well be accepted as a currency.


There are regulatory concerns around bitcoin but they can be tackled in the same manner as the government tackles gold. Both eventually have to be converted into fiat currency in order to buy things. Government is afraid that people will exchange bitcoin for transactions and there will be no record of that to audit. The same can be done via gold but that would be difficult. Money laundering and tax evasion are concerns with bitcoin but these doesn’t make it any more unusable.

Can bitcoin replace gold? Why not?


So the big question is, can bitcoin replace gold?

If gold can be valued, I say why can’t bitcoin. We just have to trade one junk for the other, for that matter, who just happens to share these four properties of currency. Bitcoin actually functions better than gold in some aspects:

  1. Easy to store — you just need a wallet, paper, hardware or electronic, unlike gold where you would need a vault.
  2. Easy to transact — Transfer from one wallet to another is easy and quick, though some charges are deducted. Transaction amount can also be a wide range. Gold is not easy to carry around especially in different denominations.
  3. Global transaction — Bitcoin can be transacted across the globe and that too very quick. Certainly that cannot happen with gold.

Benefits of gold over bitcoin:

  1. Zero electricity — No electricity needed for the transaction to happen. Do we really transact with gold? For the digital transactions we do need electricity.

Some people argue that bitcoin is not digital gold because of the benefits it provides as a currency but the way it can be used to store value just like we use gold. Store it as a safe heaven.

On a laughing note, if gold mints launch gold coins with bitcoin symbol, I guess it will appeal to all.

Image Source: mic.com

Disclaimer: Everything shared here is my personal opinion which has also come from my research, study and personal experience. Use your own better judgment to evaluate things.

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Mayank Gupta

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Curious about almost everything, a student of life and still a learner. Get connected here https://goo.gl/NSoRd6 | https://goo.gl/7wQXWR | https://goo.gl/7yqTWK

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