Gold Versus Bitcoin: What Gold Proved Unable To Do In 100 Years, Bitcoin Has Managed To Do In 10
Gold Versus Bitcoin – What Gold Proved Unable To Do In 100 Years, Bitcoin Has Managed To Do In 10
There has been a dramatic difference in the crypto market, and it's one that has only become more glaringly apparent. This is very much the case when we consider the current price tag for Bitcoin as of this week. To put its growth into perspective – you could have bought over 10 million of them for the same price as one is now. How long has that taken overall? Ten years.
Over the span of a decade, Bitcoin's price has exploded over the same stretch of time. Boasting a market cap of over 130 million dollars, this equals a price surge of a mind-boggling 720 million percent since it was first introduced. If we compare this to its more physical counterpart – Gold – the latter has only increased by a meager 64 times by contrast, and this was over a century. According to its value as of 1919, Gold was valued at approximately $19.95 per ounce.
It is thanks to this meteoric rise over such a short period that Bitcoin has successfully acquired a status that Gold has never managed to reach. The virtual currency has managed to rapidly blast past the four separate stages of evolution as they relate to money. In stark contrast, fiat currencies and precious metals have taken a considerably long stretch of time in order to advance through these same phases.
So what are these four stages of evolution as they relate to currencies? These are that they need to be collectible, a viable store of value, a strong medium of exchange and an effective unit of account. These are the four criteria that need to be fulfilled by any asset or entities in order to be legally regarded as an equivalent to money.
It's the journey across these various stages that have allowed for a large number of assets being traded today to evolve significantly. According to Stanely Jevons, a very well known economist, Gold has followed this exact same journey and has become a strong measure of value as a result of this. He goes on to explain:
“Historically speaking … gold seems to have served, firstly, as a commodity valuable for ornamental purposes; secondly, as stored wealth; thirdly, as a medium of exchange; and, lastly, as a measure of value.”
So how is it that we solidly define a collectible? A collectible is a kind of item that has a far greater measure of value than it previously used to, thanks to its high level of demand and/or rarity. Some of the earliest examples that we see are various shells, metal Obols, glass beads, silver coins and especially gold, all of which have served as collectibles at some point in time, or continue to be. Each of these collectibles took on this function before they obtained a classification as a different form of money.
In contrast, the underlying store of value is a kind of asset with a robust value which remains consistent over time, while not undergoing depreciation. A collectible is then able to transcend its previous definition and status once it has come into a high enough level of demand by the community, and once it has managed to obtain this increased rate of demand, this same good will begin showing the same kinds of qualities that make it a viable store for value. This causes another knock-on effect of increasing its purchasing power.
It is only a limited number of assets like gold, among other precious metals that have been proven, over time to make for a good storage of value over time. Meanwhile, there are day to day items like milk that are simply unable to adhere to these criteria.
Any kind of asset that is able to firmly represent a standard of value, serves as an item which can express or measure the value of other items in a mode of reference, while also being regarded as an acceptable alternative mode of payment for the buyer and seller through the trade. If it manages to check off all of these existential boxes, then it can qualify as a medium for exchange.
Now let's take this same evolutionary model and frame it around Bitcoin. It was first introduced as a virtual collectible after the publication of its white paper in 2009 and was later being used as a medium of exchange for its various users, allowing holders to exchange them for US Dollars.
What this demonstrates is that Bitcoin, in conjunction with the untrollable and decentralized nature of the virtual asset, allowed it to rapidly speed through these evolutionary stages. This is in stark contrast to the likes of precious metals like gold, which had to go the long route, which spanned hundreds of years to go from a collectible to medium of exchange before Gold was finally designated as a unit of account.
Beside the metric of price, the underlying performance and growth of Bitcoin has been remarkable and demonstrating a measure of performance that outpaces many others. Today, there are a large number of people, along with governmental institutions and multinational companies who have demonstrated an increased eagerness for putting Bitcoin to use. It is because of this that the buying and selling of BTC has become increasingly convenient through the use of crypto exchanges that have placed a greater emphasis on the user experience.
This is some pretty remarkable evolution when we consider the fact that just years ago, there were only a handful of fringe level coin exchanges that were in operation, allowing a small underground population of Bitcoin holders to trade. In addition to this, this digital asset has managed to dramatically disrupt the world thanks to the anarchistic, revolutionary nature of the currency and technology.
Bitcoin was never the kind of asset to be warmly welcomed by the established order of financial institutions and banks. They feel overtly threatened by the advent of Bitcoin, thanks to the fact that it enables users to rapidly transfer money over the internet at a fraction of the cost. This is what sets Bitcoin apart from this same established system. Banks have, for a long time, demonstrated that they're not set up for the small user, while Bitcoin has this same user at the center of its thinking.
With an extremely low transaction fee, along with the complete lack of a centralized entity [or middleman], this allows for peer to peer transactions and transfers to be completely decentralized, and responsible for processing thousands of transactions containing what can often be billions of dollars worth of assets.
In the past, even major figures like the head of the International Monetary Fund – Christine Lagarde, accepted and even welcomed the kind of disruption introduced by Bitcoin. Stating the following:
“I think the role of the disruptors and anything that is using distributed ledger technology, whether you call it crypto, assets, currencies, or whatever … that is clearly shaking the system.”
While we consider the progress of Bitcoin meteoric when we compare it to the progress demonstrated by precious metals, there are some opposing viewpoints on this correlation. One of these is the impression that Bitcoin has demonstrated a significant degree of incompetence, especially in comparison with gold and fiat currencies. Bitcoin, due to the high level of market volatility that it experiences constantly, is unable to retain price stability. This is a major requirement for any item that is going to be considered as medium of exchange and measure of value.
In addition to this, there are those out there that regard Bitcoin as being unable to translate to the value of other things in its own regard, meaning that it wouldn't wholly qualify as a unit of account in the same way that gold and fiat do. Hypothetically speaking, if a restaurant decided to accept Bitcoin payments, the reality is that it is not the true price of Bitcoin, essentially. Instead of being a full translation of BTC, this would merely be a US Dollar translation of Bitcoin prior value.
While it is well and truly admirable that Bitcoin has managed to make such a spirited level of progress over these various stages, it has a longer path yet to walk in order to be truly accepted as a payment solution regardless of the kind of exchange rate it has relative to fiat. The same sentiment was previously confirmed by the Co-Founder of the CyberMiles Foundations. Dr. Michael Yuan had argued to this effect with the following:
This shows that bitcoin despite marking steady progress in several phases has a long way to go before it can be accepted as payment option irrespective to the bitcoin exchange rate against fiat currencies. Previously, Dr. Michael Yuan, Co-Founder of The CyberMiles Foundation, confirmed the same sentiment while talking to BlockPublisher. He stated:
“TBD. Neither bitcoin or any other cryptocurrency (e.g., Ripple) is currently used as an everyday currency because they’re treated as a store of value” vs. a true utility token to pay for everyday goods and services.”
We, among many other Bitcoin enthusiasts out there, can take pride in the kind of spectacular performance that it has enjoyed over the past decade. But it has a way to go before it can truly become a currency and take its rightful place at the forefront of payments solutions.