From Gold to Code: Bitcoin as the New Standard
Beyond the history of economics, gold has enjoyed a privileged position as the revered contender to the ultimate form of money. Thus, its physical characteristics, such as scarcity, durability, and divisibility, have ensured that it is well suited to serve as a medium of exchange and measure of wealth.
However, in the digital age, a new contender has emerged: That is why different types of currencies exist, like Bitcoin. Indeed, by labelling it as ‘digital gold’, one can draw quite a lot of similarities to the actual gold in its modern implementation, yet it is and only is a digital commodity.
This transition from gold to code is a progression worthy of an alchemist, and it places Bitcoin in the omnipresent form that is more suitable for the post-industrial world we live in now.
Bitcoin, launched in 2009 by an unknown individual or group under the alias Satoshi Nakamoto, was designed as an electronic payment system. Nevertheless, in years subsequent to the G7 Accord, the gold/bills ratio evolved from one in which gold was solely used as a medium of exchange as required by the hard exchange rate into a medium of stored value and an inflation hedge.
Just like gold, Bitcoin is limited; the number of them that will ever be circulated is 21 million. This fixed supply is particularly remarkable when comparing it to fiat money, where the central bank can issue as many units as it deems necessary, thus devaluing the currency with inflation possible.
Through trading, holding, or investing in bitcoins, the following advantages come from the digital nature of Bitcoin compared to physical gold. First and foremost, Bitcoin is highly portable as it can be easily transported across borders without facing the problem of the hitches associated with physical transactions, intermediaries or even theft.
Digital wallets can enable a transaction to be processed in less than five minutes, and this takes place irrespective of the customer's geographical location because the Bitcoin ecosystem is comprised of a distributed network of computers. This level of security and efficiency makes BitGo unparalleled in the sphere of traditional finance.
Also, no single entity or government controls Bitcoin because of its decentralized nature. Decentralization is achieved through a consensus mechanism called proof-of-work, where miners compete to validate transactions and secure the network.
In return for their work, miners are rewarded with new bitcoins. This is a system of checks and balances compared to the centralized control of traditional systems where monetary policies and decisions can be manipulated by politics.
Another reason Bitcoin is digital gold is its transparency. The Bitcoin blockchain is a public ledger; all transactions are recorded and can be seen by anyone. This transparency brings trust and accountability, which are missing in traditional systems that are opaque and corrupt.
Bitcoin’s role as an inflation hedge has become more relevant recently. The fear of currency devaluation has grown as governments worldwide have printed more money than ever to combat economic crises. Investors looking to preserve their wealth have turned to Bitcoin as a safe haven, just like they have to gold in the past.
Critics of Bitcoin say its volatility is a major flaw. True, Bitcoin’s price has been all over the place since its inception, and some say it’s not a store of value. However, proponents say volatility is part of Bitcoin’s growth as it becomes more mainstream and stable. As more institutional investors and companies adopt Bitcoin, its price volatility will decrease and become more digital gold.
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