Bitcoin: is it hype, cash, or gold?
It’s an early evening after a long day of work, and you’re making a run-of-the-mill trip to the grocery store. You grab a colorful selection of fresh fruit, a few staples, and perhaps you treat yourself to pint of Ben and Jerry’s. With a full cart, you head to the cashier to checkout. Your local grocery store accepts digital payments, so you pull out your phone and decide which way you’d like to pay. Apple Pay is your go-to; it uses your bank accounts and credit cards, and it’s quick and secure. Alternatively, Bitcoin has been climbing in price, and the store accepts it as payment. Why not cash in?
Truth be told, this grocery store scenario could have concluded in a number of ways. Bitcoin might not be unconditionally ready for mass market adoption, but the outlook is far from pale. Despite increased transaction times and fees at periods of high volume, renowned minds in the technology field are working on solutions at a feverish rate. Bitcoin Cash confirms much faster than standard Bitcoin, and many lesser known “altcoins” offer sustainable payment processing technology. Moreover, Bitcoin as a payment method has serious merit in countries like Venezuela, where inflation makes the national currency unusable. With a standardized protocol, an established history as a store of value, and a decentralized structure, Bitcoin solves many economic problems from the ground up when a central bank falters. But as for established and stable economies, where does Bitcoin fit in among an environment of banking and credit card processing titans who charge limited fees and have instantaneous payment processing?
As for today in these economies, it fits in a role that goes beyond the short-term function that payment processing plays. At its core, cryptocurrency is the belief that centralized fiat currency can flounder. It represents the notion that there are simply too many factors at play for every central banking authority to perpetually make the right choices, and rails against the idea that the outsized power to manipulate a medium of value does not belong in the hands of a few. In eyes of early adopters, free-market currency that cannot be manipulated by a single authority is the future of our globalized economy.
Even among ambiguity of its final purpose, Bitcoin’s current role is clear: those that believe fiat currency has the capability to fail (as evidenced by Germany’s Papiermark, Argentina’s peso, and Zimbabwe’s dollar) can opt for a store of value created by the people, rather than by the state. This approach, at its core, follows the idea that giving absolute trust to institutions beyond our control is short-sighted and careless, and hedging against this is wise. Gold investment follows much of the same philosophy — an expanding school of thought that is responsible for much of gold’s rise from $35 per spot ounce to more than $1200 for the same quantity today. As we become more aware of the impermanence of these monolithic institutions, we realize the blind eye we turned away from the expanse of possibility within the global economic system. Much like gold, the supply is fixed, it cannot be fraudulently created, and ultimately represents an idea of what we would turn to in the case of a national or global monetary crisis. As for secondary purposes in today’s economic landscape, bitcoin shines where gold simply cannot: can you pay for groceries in gold?
