I want to get this published so let me know what you guys think. Any feedback is welcome.
Why Bitcoin is better than gold
First a quick introduction: Bitcoin is a relatively new digital currency. Its rules are enforced by math and open for anyone to see. Its security comes from those who participate
and dedicate a portion of their computer's resources to the bitcoin network. They in turn are rewarded for this and so the network is reinforced and self-sustaining.
Already it is the largest distributed computing project the world has ever seen, despite being in its infancy still.
Currently there is one key area where gold beats bitcoin. That is confidence. The track record of gold spans thousands of years and it has been valued highly for
generations. Such a reputation is respectable. But it is also not something that can't be beaten. Bitcoin has trodden along for only 4 years now, and it is beginning to garner more trust with the reliability the network has shown.
You might think that gold has more practical use than some "digital money". It is decorative and pretty to look at to some people. It conducts electricity very well.
But that pales in comparison to the practical usage of bitcoins. Bitcoins can be used like a currency, but one more versatile than has ever been seen. To illustrate
this I will just give a few examples of how someone can utilize bitcoins as a form of money.
Say that you work in the United States and have family in South America. To help support them you send them money. Doing this, however, is typically a slow process and it is rife with fees for doing something that should be rather simple. With bitcoin, you can send bitcoins to your family, and they will arrive almost immediately. The fee for this would be minor, if any. As another example, say that you are a seller of some good or service. Routinely you have been scammed by people who buy what you offer when they later issue a "chargeback" on their credit card. With bitcoin this kind of scam is impossible because payments are irreversible. And one more example: say we enter another Great Depression. During the Great Depression of 1929 there was no shortage of people. There was no lack of skills or willingness to work. There wasn't a lack of materials and resources. There was a shortage of money. Banks have the power to contract the money supply, and with that comes dark times. If bitcoin was used on a wide scale then such a contraction would be relieved(something that gold couldn't really solve as well as bitcoins, because of their high divisibility which enables them to perform like a currency. Try buying a loaf of bread with a gold coin worth 500 loaves of bread for instance.). To demonstrate another example.... you, the reader, if you had bitcoins you could even "tip" me right now for writing this article. You could from the seat at your own computer send any amount to the address that I will post at the bottom of this article. All you would need are some bitcoins... and with my address and no other information you could send bitcoins to me immediately. >: )
You might think that since gold has such great confidence it beats bitcoin as a store of value.... well it does for now. However, I believe bitcoin is poised to take the lead eventually. There is a hard limit of 21 million bitcoins that will ever be created. Counterfeiting and duplicating them is impossible. Bitcoins are created at a predetermined rate. That rate is halved every 4 years until no new bitcoins will be created. The current amount of bitcoins that have been created so far is 10.772 million (so a little over half that will be created have been).
There are a few characteristics that make something a great store of value. Rarity is the main characteristic. If something is rare enough then it doesn't take a large amount of it to represent great value. If something is rare then that also typically means it can't be duplicated or overproduced. Gold fits this description well. The rarity of gold can't directly be compared with bitcoins. There will only be 21 million bitcoins. There is already over 21 million pounds of gold mined. The amount of gold that has been extracted from the earth is an estimation, and the amount that will be further extracted is also an estimation. Additionally, in the future companies are already looking to mine asteroids and other extraterrestrial objects. So any gold sourced from there will dilute the value of all other gold by some margin. So while I can't say bitcoins are more rare than gold or vice-versa exactly, I can say that at any point in time you know how many bitcoins exist and you know how many will exist later. And there are few enough that 1 bitcoin ,if needed, can store a great amount of value.
Even though only 21 million can be created... one bitcoin can store more units of value than a dollar. For example a dollar is 100 cents. 1 cent being the smallest unit. A bitcoin is 100 million "satoshi's".
A satoshi is the smallest unit. So the smallest bitcoin unit looks like this 0.000 000 01 . The smallest unit in USD is .01 . This divisibility will allow bitcoins to be usable as a form of money even
if they reach a price parity with gold.
To add to how bitcoin compares with gold as a store of value... I will mention storage now. The storage of bitcoins is more versatile than gold. You can store bitcoins embedded into a bar of metal, or a coin.
You can print them on a paper bill in the form of a barcode. You could even write them down and store them on a napkin and put it in a safe. While it's stored in the safe you can even add to your bitcoin collection
without opening the safe. You might wonder how this is possible. To possess bitcoins you need a private key. From this key, you generate a public address that can be shared with anyone. Bitcoins can be sent to this address and the bitcoin network will assign them to your private key even while it is held locked away. The only time you need your private key is when you spend your bitcoins. Furthermore, you can store them on a computer that is offline. Or you could even store them entirely inside of your head if you wanted (but which I don't recommend since without a backup your bitcoins would become lost if forgotten).
There are a variety of ways to store bitcoins and how secure that storage will be is up to you.
Lastly, bitcoins have already won the online currency war before it has even begun. They have so much momentum... so much entrepreneurial spirit behind them that even a duplicate currency with identical code
couldn't compete with them at this point. Expect to hear more about them in the future.
Here is my public address: 1P3RQHZEBa2ncLRCiw8Zm2cZNTqdbxvpNc
(please note: in time an address like this will be changed to a more "user friendly" looking one... similar to how an email address looks).
