The Case for Bitcoin as a Store-of-Value, Can it Really Rival Gold Going Forward?
Grayscale Investments, a crypto asset fund overseen by Barry Silbert, has announced that it will launch an advertising campaign in a few weeks that takes aim squarely a gold investors. The advert compares the futuristic investment vehicle of Bitcoin and other digital currencies with the historic store of value gold.
Although the advertisement is for Grayscale Investments and not specifically promoting Bitcoin, Barry Silbert has stated that he wants the #DropGold hashtag to become the crypto community’s go to rallying cry. He claims that the main aim of the TV campaign is to start a narrative about the similarities between gold and Bitcoin, and highlight the overall superiority of the latter.
Gold vs Bitcoin: Are the Gloves Ready to Come Off?
Bitcoin has been compared to gold many times before. In the advertising campaign announced earlier today, in 30 seconds, Grayscale Investments attempts to portray the historic store of value as a dated, inferior, cumbersome relic versus the asset of the future, Bitcoin.
In the fast-paced advert broadcast earlier today on Grayscale’s website, we see young investors frantically chasing after something through a metropolitan centre. These individuals are free to move at breakneck speeds, whilst ancient bankers lug wheelbarrows full of gold around. Evidently, such imagery is supposed to indicate the convenience of Bitcoin over gold.
— Barry Silbert (@barrysilbert) May 1, 2019
Silbert himself gave some commentary on the advert to a panel hosted by Yahoo! Finance earlier today. He first describes gold as an “easy target to go after”, before stating:
“Bitcoin is nothing more than our generation’s version of gold. It’ll be a huge success.”
He did go on to admit that the technology could be used as a payment rail and for other applications, before outlining the goals of the advert:
“The objective of the ad campaign is to start an honest conversation about gold and why it may not be a great investment long-term and then talk about why Bitcoin is going to outperform gold as our generation of investors inherit tens of trillions of dollars over the next 25 years… Will it all go to Bitcoin? No. But Bitcoin will be a beneficiary.”
The Case for BTC as “Digital Gold”
Natyrally, the format of a 30 second TV advert is poorly suited to outline just why so many analysts believe that Bitcoin is a better version of the shiny precious metal coveted for centuries. That, as demonstrated by Saifedean Ammous in his book The Bitcoin Standard, would take many hundreds of pages to begin to get to the heart of.
However, here are a few of the key points for anyone wondering why Bitcoin is so hotly championed by those in the know to eventually replace gold.
Firstly, the absolute quantity of Bitcoin is already established and this total will be released at a known rate until there are no more of the 21 million original coins left to issue. Gold was typically used as a store of value because it was notoriously difficult to recreate (i.e. to inflate the supply artificially), and it was not in abundance. This made it superior to other materials for monetary use since people couldn’t devalue the gold held by others by creating more for themselves.
In the twenty-first century, gold looks increasingly like a less-than-perfect form of sound money. If there is a scientific breakthrough in mining technology, there are literally thousands of tones of the stuff that could be hauled out from deep within the earth and completely crash the market. Bitcoin, by contrast, has its supply enforced by the largest network of computers on the planet. To cheat this system has proved to be impossible thus far. With ever-rising hash rates securing the network too, this will only get more difficult in the future.
Likewise, Bitcoin trumps gold when it comes to ease of transportation. Compare how much it would cost to send $1 million worth of gold to the other side of the world with that of a similarly sized Bitcoin transaction. You are talking tens of thousands of dollars difference. The same can be said about securing Bitcoin. There is no need for vaults, security personnel, and custodian solutions with Bitcoin. You are the master of your own monetary sovereignty with crypto.
This point extends when we consider that anyone prepared to threaten enough physical violence can take an individuals’ gold. It is there for all to see and it can be physically lifted out of a vault if there is no one there to protest. With Bitcoin, even if the holder of a private key dies, the Bitcoin cannot be stolen by anyone.
Gold doesn’t fare any better when it comes to divisibility either. Expensive machinery is needed to melt down the metal and recast it into the smaller units needed to make everyday purchases. Bitcoin, of course, is hugely divisible. If fees weren’t an issue, you can even make payments of less than a cent using the payment method. Imagine trying to divide a gold bar into 1c worth. Impossible.
In fact, if you consider every quality that has made gold a historic store of value, Bitcoin beats it across the board. There is only one thing that continues to make gold the favourite investment vehicle of the two and that is its historical precedence as a store of value. Being as it has been a fixture of human history for literally thousands of years, attitudes towards the asset are well and truly entrenched.
Although we have no historical data confirming it, we can only presume that the transition to each new form of monetary technology was accompanied by many naysayers who originally scoffed at the latest innovation. When gold replaced seashells and other primitive currencies, people presumably dismissed it and would continue to prefer to accept the older currency for many, potentially thousands even, of years. Likewise when paper money became the norm in favour of actual gold. People outright rejected it. After all, how could this piece of paper be worth anywhere near the same as a lump of shiny yellow metal?
Each of these new monetary technologies offered something new that the previous didn’t. It might have been portability or a more sound monetary policy but eventually people began to see the benefits of using the new technology and the old ways were phased out. This process will likely occur once again with Bitcoin. However, in the crypto asset’s corner is the most powerful data sharing platform ever known to humanity – the internet. That should speed things along nicely.
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