What exactly is Bitcoin? Is it any better than Gold?
Bitcoin is a peer to peer version of digital currency where one party can make transaction to another party without a intermediaries like banks and financial institutions. The purpose is to eliminate double-spending issues occurred in the current financial world by using peer-to-peer network.
Bitcoin relies on a universal ledger called Blockchain, this is to prevent the risk double spending to occurred in the current financial system. Blockchain technology broadcast each transaction to a network of nodes and verify it through the consensus mechanism called Proof-of-Work (PoW). One party needs to prove to the other party that a certain amount of computational effort has been expended.
Once a transaction has been verified through the Proof-of-Work consensus, the record formed on the blockchain cannot be revert. Any party in the Bitcoin market can sell or buy tokens through peer to peer or third party exchanges. Newly minted Bitcoin are run by a complex computer rigs to solve complicated puzzles in an effort to confirm parties transaction called blocks: upon success, this blocks are added to the blockchain and Bitcoin miners are rewarded with a small amount of Bitcoins.
Upon its launch, the Bitcoin mining difficulty is 1. As of now, the difficulty has reached an all time high of 22 trillion. Overtime, the difficulty of mining a Bitcoin gets harder when blocks and Bitcoin mining business increases. Bitcoin rewards are becoming thinner when Bitcoin is halving. As Bitcoin prices are increasing every year, more and more miners are swarming the Bitcoin network, making mining more competitive.
What does Bitcoin Halving means?
Bitcoin Halving is an event occurred when newly minted Bitcoin is halved, which means that Bitcoin miners received 50% less Bitcoin for every blocks they verify.
Sources: CoinMarketCap.com
Is Bitcoin an Asset to hedge inflation?
Sources: CaseBitcoin.com
Rewind back a decade ago, the Compounded Annual Growth Rate for each an every Asset. Despite having high volatility in Bitcoin, the annual growth rate of Bitcoin has outperformed every asset class.
Sources: Messari.io, BitcoinCharts.com
Sources: Microstrategy.com
Why Does it Matter?
Based on Bitcoin historical price table, we see Bitcoin’s extreme performance against other assets. As of 2021, Bitcoin has a total market capitalization of 700 Billion US Dollars. With Bitcoin’s strong fundamental properties, it is expected that Bitcoin would exceed the market capitalization of Gold which now sits at 12 Trillion US Dollars in this decade.
Bitcoin Better Store of Value Than Gold?
Sources: Multiple Bitcoin Charts
Lets take into consideration of the important traits that an asset needs.
Scarcity — How much supply exist?
Both Gold and Bitcoin are scarce source of asset and their supply is limited. The halving of Bitcoin’s mining reward ensures that all 21 million Bitcoin will be out of circulation by the year 2140.
But the problem with Gold is that we don’t know how much Gold is there to be mined from the Earth whereas Bitcoin has only a limited supply of 21 million unit. Study shows circulation of Gold cannot be completely verify to every ounces whereas you can verify every Bitcoin mined.
Established History — How long has the asset been around for?
Gold became naturally accepted as a form of payment over the last decades and centuries. It is no doubt that Gold has a longer established history than Bitcoin. Gold was scarce, fungible, durable and had all the properties that money should have. Our parents and grandparents have all used Gold to store their wealth.
But here’s the catch, if we look back at history during 1933, President Roosevelt issued executive Order 6102 during the Great Depression where all citizens have to surrender their Gold to the government. Gold was even banned in March 1933 where Gold Coins, Gold Bullion and Gold Certificate are prohibited under the continental of United States. Gold invites Violence in the past.
Portability — How easy it is to send money?
Just imagine having 800 Million Dollars worth of Bitcoin and Gold. If you were to send all this Gold from one place to another, how many securities, guns, time and effort to move all this Gold to another location. While with Bitcoin, you could send 800 Million Dollars worth of Bitcoin to anywhere in the world with just your mobile device.
Gold needs to be store in a vault which required heavy military, weapons, resources and money to protect Gold safe. While Bitcoin can be stored safely in a Ledger where the owner of the Ledger have the Private Keys to Access their Bitcoin. It is highly secured and encrypted with complicated algorithm. The only reason people lost their Bitcoins is when they lost their Private Keys, scammed by Exchanges or simply misplacing their hardware. It is undeniably, Bitcoin is one great invention. Hope you enjoy your read and have a great day ahead! Cheers. Read Bitcoin Whitepaper https://bitcoin.org/en/bitcoin-paper Read more at https://dailytokenomics.com/?p=2750
