Bitcoin vs. Gold

[ulhaq]

I have heard arguments that bitcoin can function as a store of value only (eg, if it does not work out as a currency), but I am not seeing it. I am going to present a few arguments for both sides below. Please give your arguments and rationale, but also just for bitcoin vs. gold in general.

This is a self-moderated topic to prevent low quality posts.

Bitcoin
- limited supply (capped at 21,000,000). While gold also has a limited supply, the amount of extant gold is not known and the amount that will be mined per year is not known, so bitcoin has more transparency
- minimal storage cost compared to gold

Gold
- has been coveted for thousands of years.
- limited supply
- has some use (fashion, industrial)

Some people say that bitcoin is more divisible and transferrable than gold and hence advantageous, but this will easily be solved with blockchain technology - tokens can represent ownership of gold in a vault, and thus becomes secure, divisible, transferrable.

Price appreciation is not a reason for bitcoin to be a store of value, because as a store of value people are looking to preserve what they have, not make profits. And it is a backwards argument anyway, because if people are buying it because it is a store of value, then that is going to drive up the price and cannot be a reason to buy it in advance.

Given all the above, right now I do not see why anyone would want bitcoin as a store of value when gold is available and has a longer history. The only advantage bitcoin has is storage cost, which I imagine does not add significantly to the cost of gold, especially when one considers some of the other utility of gold.

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[fatalbert]

Store of value:

If BTC is accepted by the world as store of value then price will settle into a much tighter non-volatile range. This would be around $200K or so USD.

That has to happen 1st.

By that time who knows if they figured out how to use BTC core for transactions. Let's hypothetically say they don't but with lightning, 1,000 alt coins, etc, the block time for transactions are 10 minutes to the T.

I think BTC core would work better than gold as a store of value on the simple principle its divisible and can travel over the internet in 10 minutes vs. gold.

I think BTC can replaced your savings account. You withdraw from savings account 0-6 times a month.

Think of BTC as a bank/ATM in modern day. Your at lunch with friends. You go to pay "short, I don't have any cash (BTC in the future) it takes 10-30 minutes to go find an ATM. This will be the same time to transfer BTC to your friend or whoever lent you the cash for lunch.

Also, when you withdraw $20 from your ATM, your account doesn't actually have paper $20 bill in it. It has 1's and 0's. And the ATM spits out fiat and reduces your balance.


So going back to BTC as savings account to store value, when you withdraw your $20 in BTC, maybe it spits out ether, xyz coin as that xyz coin will be the cash part. (and all done via phone but just painting picture)

I can see BTC as store of value/savings account, and you convert it a few times a month to xyz coin.

BTC can be savings account, xyz coin can be checking.

[ulhaq]

I think BTC core would work better than gold as a store of value on the simple principle its divisible and can travel over the internet in 10 minutes vs. gold.

But this can be easily done with gold, and people are working on it now:
https://digix.global/dgd/

So in the near future there will be the ability to send gold over the internet in 10 minutes and it is divisible.

[Dexion]

yes, I agree with you that bitcoin is just a store of value, I think gold is the same. the difference is that gold is real and become a valuable item in the eyes of society.
the value of gold with bitcoin certainly larger bitcoin, but from the side of luxury may be more dominating gold. I can buy hundreds of grams of gold with just 1 bitcoin, but gold can buy 1 bitcoin with hundreds of grams.
both have a period where it will be exhausted. and nothing else, so the day I prefer bitcoin to invest

[fatalbert]

I think BTC core would work better than gold as a store of value on the simple principle its divisible and can travel over the internet in 10 minutes vs. gold.

But this can be easily done with gold, and people are working on it now:
https://digix.global/dgd/

So in the near future there will be the ability to send gold over the internet in 10 minutes and it is divisible.

I could see that as small niche.

The problem with that is you don't have control of the gold, it has to be insured, it has to have storage cost. So theoretically, say gold stayed $1,000 and never moved, eventually that contract aka your gold would be worth $0 due to years of fees. Costs lots of money to store physical gold and insure it.  

But that could be a great stable payment system/coin. Low volatility and not meant for store of value but 1 year or less type thing. aka checking account.

[uszaty43]

Yes, THIS, is the real truth. They all have the same function, only that if you are investing in bitcoin you have a little risk, you can just lose all your funds in a night (no one wants to see it happening of course)

yes, I agree with you that bitcoin is just a store of value, I think gold is the same. the difference is that gold is real and become a valuable item in the eyes of society.

No one is talking about luxury in here, the OP is just comparing the good sides of bitcoin and gold, in fact, they have the same function.

but from the side of luxury may be more dominating gold. I can buy hundreds of grams of gold with just 1 bitcoin, but gold can buy 1 bitcoin with hundreds of grams.

anyway, i have always dreamed about having dozens of gold bars on my room.. i hope that it can be done in a few years, but i am just joking.

[pushups44]

As I have written many times, both bitcoin and gold are a store of value and scarce. Gold has the advantage of having a much longer history and lately has been less volatile. While revolutionary, bitcoin has plenty of maturing to do as an investment.

[Paranuatu]

Bitcoin is NOT gold. You can all talk about how both have a limited supplz but here's news. Gold is actually limited phisically, bitcoin on the other hand is a bunch of code that could potentially be simply started again with the same code from scratch. Bitcoin is trully limited just because of faith people put in it and is not actually limited in my view, whereas gold is.

[ulhaq]

from Roger Ver:

Gold's usefulness as a store of value comes as a secondary effect from its other uses.
If it didn't have those secondary uses it would never have become a medium of exchange or a store of value.

https://twitter.com/rogerkver/status/939916815563739137

Saying that bitcoin will not be useful as a store of value since will be supplanted by other crypto that has more use.

[ulhaq]

Bitcoin is NOT gold. You can all talk about how both have a limited supplz but here's news. Gold is actually limited phisically, bitcoin on the other hand is a bunch of code that could potentially be simply started again with the same code from scratch. Bitcoin is trully limited just because of faith people put in it and is not actually limited in my view, whereas gold is.

This is a fallacious argument. All the computers running the same code IS the bitcoin network. If someone else started from scratch with that code, they would be joining the bitcoin network. If a change is made to the code, then it is no longer the same as bitcoin. You cannot say that ether or litecoin or bitcoin cash are bitcoin, it would be like saying that Apple and Microsoft and Google are the same.

Similarly, persons say that when new cryptocurrencies are invented, it dilutes the market and the value should go down. But do new IPOs dilute the stock market and cause the overall value to go down?

[ulhaq]

I could see that as small niche.

The problem with that is you don't have control of the gold, it has to be insured, it has to have storage cost. So theoretically, say gold stayed $1,000 and never moved, eventually that contract aka your gold would be worth $0 due to years of fees. Costs lots of money to store physical gold and insure it.  

But that could be a great stable payment system/coin. Low volatility and not meant for store of value but 1 year or less type thing. aka checking account.

This is the same as bitcoin. If the value stayed the same and never moved, the value gets reduced by transaction fees, and so eventually it would be worth $0 (using the same logic).

[gourish]

I would always prefer gold over bitcoin for a very simple reason. The question asked here is which is better for investing? Gold is an asset which can never go to zero. Bitcoin is a cryptocurrency which is not backed by any asset. The value of bitcoin can easily fluctuate south. Gold is a safe haven when it comes to uncertainties. It is still at the lows and has the potential to move up. Silver for that matter is an excellent investment.

Bitcoin is a hype. I understand the importance of Blockchain technology and I would invest in the technology, not in the products. Bitcoin is a gamble and no doubt it is surging its way up and may go higher but at the end of the day, there is no logic behind this rally.

USA has not regulated bitcoin as a mode of payment. Until Uncle Sam waves “Yes” to the cryptos, it is just like peeing in the wind.

[ulhaq]

I previously did not believe that there was a reason for anyone to choose bitcoin over gold as a store of value, because after all, gold has been coveted for thousands of years and has industrial and cosmetic uses, whereas bitcoin does not have any of these. How can something that does not have intrinsic use have more value than gold, with its intrinsic use? But I now believe that bitcoin is superior to gold for the following reasons:

• there is a fixed upper limit of bitcoin (unlike gold). As more gold is mined, the value of everyone's current holdings decline, because it is not as scarce
• bitcoin is more divisible (each bitcoin can be divided 100,000,000 times), which is good to distribute for ownership
• bitcoin cannot be confiscated. In 1933 in the United States private gold possession was outlawed, and people were ordered to turn it into the government for exchange. This policy existed for more than 40 years! In addition, gold was stolen from defeated people during World War II, and probably in many wars
• bitcoin is much easier to transfer (can be sent to anyone around the world)

[BTCforJoe]

I love this topic.

I often make comparisons of Bitcoin to Gold whenever I'm introducing someone new to Bitcoin. Usually, the first question that I receive is that gold is a physical asset while Bitcoin is not. I usually answer that by using an analogy (vs. trying to explain to them the reality and tangibility of the blockchain) by asking if they use cloud storage, such as iCloud or DropBox. If they answer yes, I then ask them if they use the service to host pictures that they take from their devices. If they answer yes, I tell them that the photos aren't physical. They're also digitally produced, but feel real because you can see them and store them on their devices and cloud storage.

When these people ask me how Bitcoin is like money, I kind of shape the conversation into saying that Bitcoin is like gold; that it's more like a store of value and investment versus a currency.

Personally, I prefer to store Bitcoin as a personal asset over gold. Why? Here's the reality of a hypothetical situation that could possibly happen within our lifetime:

If the economy crashes, and the currency of your country becomes worthless overnight, what will save you? Gold bars? Imagine trying to buy a loaf of bread with gold. How do you do it? If your economy is worthless, how do you convert your gold? Into what form of currency? Do you use the gold AS currency itself? How do you weigh it? How do you measure it? Do you carry the gold bar with you, along with a chisel and a scale? The risk of the physical bar being taken from you is high.

Now, with Bitcoin, you can send an allotted pre-designated amount from wallet to wallet. Risk of theft is low. Yes, someone can put a gun to your head, but if they murder you, they will never be able to access your bitcoin. You can make an instant (dependent upon transaction times lol) transaction for any goods or services.

The only downside with Bitcoin is the volatility of it, unlike with gold. How will it fare? No one can say, for certain, but I feel that Bitcoin is the "gold" standard of cryptocurrency. Yes, it sucks as a currency exchange, but I truly believe that BTC will become the store of value leader for crypto.

[BitcoinGuruOne]

There has been a lot of speculation about the amount of gold . A lot of information out there states that there is much more gold bought and sold ( in market) that there have been ever mined. This is not entirely speculation in my mind because actually a lot of banks havent shown any proof of their allegedly gold reserves for decades. If this is true no token nor no financial instrument can actually represent the actual gold amount.

That being said if there was an exact number ,weight of gold that is represented by some token or other finacial instrument who would we trust to scale it? I think noone could be trusted in such situation but on other hand we all know the BTC amount and it can be changed.  Thus the advantage over gold and your proposed solution.

[jlanzago]

I wouldn't compare Bitcoin with Gold, but people insist on doing that (even calling Bitcoin the "Digital Gold" which in my personal opinion is not. However Bitcoin still has a lot of inherent value for diversification purposes.

[CryptoRobert]

Bitcoin and Gold have been compared but they are entirely different things, the only thing they have in common is that they are not the bankers FIAT money. My view is that the safest non-mainstream portfolio is 50% in gold and 50% in Bitcoin/cryptos.

[ulhaq]

There has been a lot of speculation about the amount of gold . A lot of information out there states that there is much more gold bought and sold ( in market) that there have been ever mined. This is not entirely speculation in my mind because actually a lot of banks havent shown any proof of their allegedly gold reserves for decades. If this is true no token nor no financial instrument can actually represent the actual gold amount.

That being said if there was an exact number ,weight of gold that is represented by some token or other finacial instrument who would we trust to scale it? I think noone could be trusted in such situation but on other hand we all know the BTC amount and it can be changed.  Thus the advantage over gold and your proposed solution.

This is a really good point. One cannot easily verify the gold holdings of banks. But the bitcoin ledger is perfect and knowable by all at any time.

[bitfools]

I think come will come bitcoin is more value than gold.  Bitcoin is a digital then gold is you need find it to the mountain so hard. Meaning bitcoin is more convenient than gold.

Well if you hide GOLD really well, then it can NEVER be stolen, hide it where gov never think to look with their TECH

But BTC, if you use an exchange or wallet, I can steal your btc,

If I know your address, or public, I can steal your bTc

GOLD is big and heavy, so you can't move it around, that is the negative, GOLD has a 100K year old human love affair, BTC is code that his a 10 year hack, that could collapse tomorrow

Short term BTC ok, long term GOLD good, problem is you need to MOVE during civil war, how to bring your gold? Can't hide it anymore modern tech can find your gold,

...

Biggest problem with BITCOIN I can see in this forum is that 99% of the people are idiots, and have no idea how weak BITCOIN is, as a software system, and as a collection of old/weak crypto algos.

[bitfools]

There has been a lot of speculation about the amount of gold . A lot of information out there states that there is much more gold bought and sold ( in market) that there have been ever mined. This is not entirely speculation in my mind because actually a lot of banks havent shown any proof of their allegedly gold reserves for decades. If this is true no token nor no financial instrument can actually represent the actual gold amount.

That being said if there was an exact number ,weight of gold that is represented by some token or other finacial instrument who would we trust to scale it? I think noone could be trusted in such situation but on other hand we all know the BTC amount and it can be changed.  Thus the advantage over gold and your proposed solution.

This is a really good point. One cannot easily verify the gold holdings of banks. But the bitcoin ledger is perfect and knowable by all at any time.

GOLD is well established you don't HOLD it you don't own it, ... BTC is same, you don't hold the private-key, you don't own it,

Problem with BTC is also that if somebody else can 'guess' your private key, then now it has a new owner, and there is not SHIT U can do about it, ...

With GOLD, U can hide it on MTN ( or out in desert with GPS), where no authority could/would ever guess you could/would hide it, with BTC, all it takes a serious party to target your account and its GONE