There has been a recent rise in the number of those asking the question of bitcoin VS gold. Which among the two should you get? And we know how that gold has always been a haven to investors. But could bitcoin with its many similarities to gold be a viable alternative?
Some people refer to bitcoin and other cryptocurrencies as of today’s equal to gold. This statement rings true in certain respects. But there are distinct differences between bitcoin and gold that merit discussion.
The connection between bitcoin and gold is one that only a small part of our populace knows. But this article provides you with a detailed comparison between the two.
We at Cloudfaremine, are on the front lines of bitcoin mining. And we see ourselves as crypto miner experts. Hence, it is our job to explain the functions of cryptocurrency in the economic environment today. And what it might be in the long run.
Bitcoin VS Gold Similarity: Scarcity
Gold covers 0.000031% of the total earth crust. And that means gold has a limit to its supply. Hence, it is scarce. But its scarcity makes it valuable, and that is why we all want to have our share of the rare commodity. So, what if there was an alternative to gold? What if we can transfer this other option through communication channels, unlike gold?
Well, bitcoin is even rarer than gold. It cannot ever go above the cap of 21 million for the number of Bitcoins that can ever exist. This top limit has established a discernible scarcity. And this guarantees supply-driven hyperinflation can never reduce the value of bitcoin. At least, not to zero.
Bitcoin VS Gold Difference: Liquidity
Today, it is no news that bitcoin is not as real-world-ready as paper money. For instance, your local filling station might not be ready to accept your bitcoin in return for gas. But, imagine the days when many card readers, retailers approve bitcoin debit cards. It’s not a wild idea to believe bitcoin will be as user-friendly as the U.S. dollar.
You can’t make the same argument for gold. Gold is much less liquid compared to cryptocurrencies. And if we could have replaced the dollar with gold, we would have done so ages ago.
So, have you ever wondered why gold is not the national currency? Well, one tangible reason is that gold is not a valid tool for buying and selling goods and services.
The Bars of Gold is heavy — They can’t be so broken up (as you might make a dollar change). Or transfer via digital means (as you might transfer funds via debit card, or a Bitcoin wallet). Gold prices are always fluctuating. Even open-minded traders refuse to consider gold as payment. At least, until they get a sum well above the cost of the products or services they offer.
Contrary to this, bitcoin is digital. Bitcoin owners transfer digital funds daily via the same payment modes as dollars. Merchants with the available infrastructure can take payment through a Bitcoin debit card.
This real-world, day-to-day use proves bitcoin a favorable alternative to gold. The difference is critical. And that’s why bitcoin advocates believe that one day it can become a universal currency.
Conclusion: They are Alike, Yet Different
Both gold and bitcoin fluctuate in value. The two are both valuable, gold due to its physical properties, bitcoin due to the nodes/users that back it up. You can exchange them for paper money. Their rarity gives them a level of inherent worth that fiat currencies do not provide. Bitcoin and gold are similar in these ways.
But, gold is more or less a store of value and not a realistic medium of exchange. Bitcoin has no restricting characteristics, such as weight and indivisibility. And thus, it has no hindrance to its potential of becoming a universal medium of exchange.