The term digital gold gets thrown around a lot when it comes to Bitcoin, but what does this actually mean and why is Bitcoin the future of money?
Gold was originally preferred as money because it had better monetary properties than what previously existed.
Gold is:
- Portable
- Durable
- Homogeneous
- Divisible
- Malleable
- Cognizable
- Stable
As a result, it became the standard medium of exchange due to its stable value over the short term, coupled with its ability to act as a store of value over the long term, and ease of use as a medium of exchange.
There was a centralised component to gold, whereby the precious metal was eventually held by banks rather than individuals, and these banks issued paper IOUs based on the physical gold holdings at the bank. This formed the basis of the paper money system we have today, however, countries moved away from basing the amount of paper money that is issued on how much gold (or even silver) the bank held, and moved over to fractional reserve banking which moves your trust to bankers who are in charge of attempting to ensure that your money has all the properties we just listed. Spoiler alert: they don’t.
Much like gold, the idea is that Bitcoin can act as a trustworthy store of value over the long term due to its incorruptible monetary policy. Bitcoin also comes with a far superior system for transferring ownership anywhere on the planet in minutes, a feat that is unachievable with gold.
Experts like Nick Szabo, one of the pioneers of digital currency that lead to the creation of Bitcoin, even argued that governments would be better off holding Bitcoin rather than gold in their reserves for security reasons.
In many ways, Bitcoin continues to highlight the limitations of gold especially in terms of its utility as permissionless money in a digital age and knocks our current fiat currencies even lower than they previously were thought to rank on the scale of sound money.
Bitcoin continues to grow as a currency, a store of value and as a practical medium of exchange that completely outperforms any historical money in every way, so here’s to the future of sound money.
Revix is a crypto asset investment portal that enables customers to buy prespecified ‘Bundles’ of reputable well-known crypto assets such as Bitcoin, Ethereum, Ripple, and Litecoin. This post is intended for informational purposes only. The views expressed in this post are not, and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. All opinions in this post are my own and do not represent, in any manner, the views of Revix or affiliated companies.
