The Digital Gold Paradox

[Invariant Core]

The Digital Gold Paradox: If Bitcoin wants to become digital gold, people will tend to hoard it without trading it, reducing on-chain transaction fees. After multiple halvings, when transaction fees are insufficient to cover the original block reward, miners will shut down their machines, lowering the on-chain hash power. When this hash power is insufficient to withstand a 51% attack, a double-spending event will occur on the Bitcoin network, causing errors in the Bitcoin ledger and ultimately preventing it from becoming digital gold.

In other words, the more Bitcoin aspires to be digital gold, the more vulnerable it becomes, ultimately contradicting the goal of becoming digital gold.

[Ucy]

Bitcoin is designed to be a store of value, so we can't neglect this in order to please those who want to see it as a medium of exchange. The solution to this is to make it act sufficiently as both Store of value and Medium of exchange by encouraging holders to only spend their bitcoins on things that are as valuable/profitable as Bitcoin. For example, instead of spending your bitcoins on junk foods like the centralized world commonly do with fiat currencies, you spend it on food that could make you very healthy and productive enough to build stuff or create products or services that benefit Bitcoin community especially.. You could as well spend on things that earn you as much or higher profits than Bitcoin, so that in the future when Bitcoin price goes too high up you won't regret spending your bitcoins in the past.  If upto 20% holders are spending this way, price of Bitcoin could increase so much beyond their imaginations, because they spent their bitcoins in ways that positively build things up on the Bitcoin network , increase demands and values faster than Bitcoin supply deflation could achieve.  This will be more than enough to  drastically increase hashrate, even though Bitcoin does not solely depend on increased hashrates to prevent 51% attack and double spending. The honest nodes are more important in protecting the network from attacks. Besides, Bitcoin is extraordinarily protected in ways not known to ordinary minds.
Also note that even if people are just holding Bitcoin without spending it much, price would increase high enough to compensate for the less fees, and if/when the subsidy ends, there will always be nodes to compete for fees(regardless of the amount) and property secure the network


The sufficient use of Bitcoin as Medium of exchange and Store of value is basically what the Bitcoin Community is working towards, and we want to accomplish most of this according to Bitcoin principles such as decentralization, transparency, immutability, privacy, censorship resistance, trustlessness, permissionless,,etc. This is what most alltcoin, if not all, failed to do. They seem to be breaking the rules or cutting corners to win the scaling and utilility race, meaning they are building on faulty foundation or deviating from the solid foundation of Bitcoin. This will consequently lead to fragile systems or networks that can't stand the test of time. By the way, it's important to note that Bitcoin is not competing with dollar or any other fiat. Fiats are centralized, run contrary to the principles and goals of Bitcoin. So you don't compete with what is moving opposite you in that manner. Our goal is to fully exist on a seperate and independent system (more like a nation existing in countries), with decentralized  and independent marketplaces, stores, industries, institutions, etc that use Bitcoin as native currency enabling it to be exchanged by its global members in peer-to-peer, decentralized, trustless, and permissionless manner.
The Bitcoin Community is also building auxiliary systems such as sidechains (for the independent Bitcoin system/nation) to complement the Main chain

[CTO114]

The Digital Gold Paradox: If Bitcoin wants to become digital gold, people will tend to hoard it without trading it, reducing on-chain transaction fees. After multiple halvings, when transaction fees are used to replenish the original block rewards, miners will shut down their machines, lowering the on-chain hash power. When this hash power is insufficient to withstand a 51% attack, a double-spending event will occur on the Bitcoin network, causing errors in the Bitcoin ledger and ultimately preventing it from becoming digital gold.

In other words, the more Bitcoin aspires to be digital gold, the more vulnerable it becomes, ultimately contradicting the goal of becoming digital gold.

  Just like Gold, Bitcoin provides value over time, reasons why some individuals would want to hoard it, just like they do with gold, it can also offer financial autonomy to its holder, as a result,but comfortably competes with gold as a store of value.

Not forgetting it's downsides; Bitcoin is volatile, and it's still in the phase of evolving economically and legally.

Off course being considered the next digital gold makes it more visible, more politically sensitive, and even much more regulated, but that visibility also gives birth to; confirming Bitcoin's legitimacy, and anchors it's role in the global monetary debate.

What's vulnerable is the ecosystem around Bitcoin, not Bitcoin itself, Bitcoin's design eliminates those vulnerabilities; no Central issuer to regulate, no CEO to charge etc.

[Itz-prisigold]

I see your point of view; however, I think you are being too optimistic regarding the risks. The "digital gold" label does not mean that Bitcoin will just sit there doing nothing.  Just like gold is rarely used in everyday commerce,  yet is constantly being moved around from one custodian to another, settled in large blocks, etc.,  Bitcoin can follow the same pattern, with small payments happening on Layer 2 while the base layer is used for big, high-value settlements.

Furthermore,  network security is based upon the potential value of block rewards and fees and not necessarily the number of transactions, as the price of bitcoin increases, individuals will naturally be willing to pay greater fees to ensure their payment is final, thus providing continued incentive for miners, Miners do not disappear simply because rewards diminish,  they adjust as long as it remains profitable. Additionally, an attempt by someone to launch a 51% attack at such an enormous scale would be both extremely costly and economically self destructive. Therefore, changing its status to  "digital gold"  may result in different uses of Bitcoin; however,  it doesn't automatically make Bitcoin fragile or insecure.

[yudi09]

Bitcoin ledger, but more commonly known as blockchain.
It is referred to as digital gold because Bitcoin has been proven by many users over the years to be a store of value. Bitcoin, based on the white paper, is an electronic cash system where Bitcoin is a system in terms of transactions, networks, and several other aspects.
Hedging has attracted interest because not all users can use Bitcoin as a legal currency or payment method.

[Joy_learns_crypto]

Bitcoin is designed to be a store of value, so we can't neglect this in order to please those who want to see it as a medium of exchange.

There is no proof that bitcoin was designed to be a store of value, did you read that bitcoin is a store of value in the white paper.
Bitcoin was designed for privacy transactions it was investors that made bitcoin a store of value.
Gold is a store of value because it does not compliment or improve the fiat transaction.

[HONDACD125]

Aren't we overthinking? Even if a lot of people start hoarding Bitcoins instead of buying and selling or using them, the blockchain won't cease to exist because there will still be transactions happening. We can't expect every single person involved in cryptocurrencies to be only buying and holding bitcoins, so many people trade bitcoins and other cryptocurrencies because there can't be so many purchases every day from only holders because we can see trading volumes in only the BTC/USDT pair in Binance going above a couple of billion dollars, which means that there are so many traders. Don't they make transactions, you think?

About miners stopping their operations, the last block with Bitcoin rewards will be mined in the year 2140, and we are still in 2026, don't you think we are thinking about something that is way too far from now? We should think about things that happening right now, or things that can happen in the near future, and I think what we are discussing here is not going to happen in the first place, and even if it does, we have a lot of time for that yet, and there will surely be some solutions and changes, things don't stay the same way forever.

[red4slash]

In other words, the more Bitcoin aspires to be digital gold, the more vulnerable it becomes, ultimately contradicting the goal of becoming digital gold.

I think in this case we are pushing too much for something that is not yet clear and is only based on guesses.
Bitcoin has never claimed to be digital gold and the concept of storing value I think is just the word of investors who see the potential to stay in the hodl.
But bitcoin is still operating because not all of those in bitcoin only store bitcoin even every day transactions for bitcoin are still running even when I write this there must be transactions made.

So in this case we think too much about uncertain things, indeed more and more are in bitcoin as investors in the hope of hedging but that does not mean this can affect because transactions will continue to exist.

[PrivacyG]

You are using the verbs as if there is no other possibility but the one you present.  It is a good thing that you have your own opinion but we are about a century away from the moment Transaction Fees 'replace' Block Rewards and no body knows even what next year has in store for us.

By the time this happens, scientists may find out a way to perfectly replicate Gold in laboratory settings rendering your entire arguments and stress over what happens in 100 years pointless.

Is Peter Schiff hiring armies of FUD spreaders and trolls on Bitcoin Talk lately?

[Alphakilo]

I think that what qualifies Bitcoin to be considered digital gold, is by the value it provides. It has to provide value by proving itself as a good store of value like gold which has been so for ages and then as a currency of exchange, which is a secondary use case of it.
Any forced development to contradict the sequence it currently operates, can cause a disruption in its utility and adaptability and this is what it needs to survive.

[Hatchy]

Is Peter Schiff hiring armies of FUD spreaders and trolls on Bitcoin Talk lately?

I was going to ask op what's actually the aim of his post, judging from the looks of his account, he seems to want to pass Fud. His opinion is valid but it's way beyond a scenario that's likely to happen soon.. bitcoin is already acting as digital gold. Though people would not want to consider it yet due to it's volatility and continuous market cycle that's seems like a draw back on price. Regardless of that, even after the halving is complete and all 21 million bitcoin have been mined, that won't call for disruption on the network.. there might be a reduction in the number of miners and If miners leave the network because it's no longer profitable, the difficulty of mining drops. This makes it cheaper for the remaining miners to stay profitable..

[Invariant Core]

Is Peter Schiff hiring armies of FUD spreaders and trolls on Bitcoin Talk lately?

I was going to ask op what's actually the aim of his post, judging from the looks of his account, he seems to want to pass Fud. His opinion is valid but it's way beyond a scenario that's likely to happen soon.. bitcoin is already acting as digital gold. Though people would not want to consider it yet due to it's volatility and continuous market cycle that's seems like a draw back on price. Regardless of that, even after the halving is complete and all 21 million bitcoin have been mined, that won't call for disruption on the network.. there might be a reduction in the number of miners and If miners leave the network because it's no longer profitable, the difficulty of mining drops. This makes it cheaper for the remaining miners to stay profitable..

From mempool explorers it is easy to see that recent blocks are only collecting about 0.01–0.05 BTC in transaction fees. Annualized, that is roughly 525.6–2,628 BTC per year, which represents just 0.0025%–0.0125% of the 21-million total supply. Such a tiny security budget is nowhere near sufficient to protect a network as large as Bitcoin’s.

At present, miners are still mainly incentivized by the built-in 3.125 BTC reward per block., but with about 95% of all BTC already mined and further halvings ahead, the shrinking security budget will make Bitcoin increasingly vulnerable to 51% attacks.

[Invariant Core]

The Digital Gold Paradox: If Bitcoin wants to become digital gold, people will tend to hoard it without trading it, reducing on-chain transaction fees. After multiple halvings, when transaction fees are used to replenish the original block rewards, miners will shut down their machines, lowering the on-chain hash power. When this hash power is insufficient to withstand a 51% attack, a double-spending event will occur on the Bitcoin network, causing errors in the Bitcoin ledger and ultimately preventing it from becoming digital gold.

In other words, the more Bitcoin aspires to be digital gold, the more vulnerable it becomes, ultimately contradicting the goal of becoming digital gold.

  Just like Gold, Bitcoin provides value over time, reasons why some individuals would want to hoard it, just like they do with gold, it can also offer financial autonomy to its holder, as a result,but comfortably competes with gold as a store of value.

Not forgetting it's downsides; Bitcoin is volatile, and it's still in the phase of evolving economically and legally.

Off course being considered the next digital gold makes it more visible, more politically sensitive, and even much more regulated, but that visibility also gives birth to; confirming Bitcoin's legitimacy, and anchors it's role in the global monetary debate.

What's vulnerable is the ecosystem around Bitcoin, not Bitcoin itself, Bitcoin's design eliminates those vulnerabilities; no Central issuer to regulate, no CEO to charge etc.

I used to think that there was nothing fundamentally wrong with Bitcoin, but some recent reflections have made me reconsider. A simple calculation shows that after the first halving the inflation rate was about 12.514%, after the second it fell to 4.171%, after the third to 1.788%, and after the most recent 2024 halving it is around 0.834%.

In other words, the annual budget used to incentivize miners and secure the blockchain is now less than 1% of Bitcoin’s circulating market value. Ten years from now, after the seventh halving in 2036, the inflation rate will drop to just 0.0985%, below one-tenth of a percent. This rapid collapse in security incentives is, in my view, an urgent crisis Bitcoin is already facing.

[Invariant Core]

I see your point of view; however, I think you are being too optimistic regarding the risks. The "digital gold" label does not mean that Bitcoin will just sit there doing nothing.  Just like gold is rarely used in everyday commerce,  yet is constantly being moved around from one custodian to another, settled in large blocks, etc.,  Bitcoin can follow the same pattern, with small payments happening on Layer 2 while the base layer is used for big, high-value settlements.

Furthermore,  network security is based upon the potential value of block rewards and fees and not necessarily the number of transactions, as the price of bitcoin increases, individuals will naturally be willing to pay greater fees to ensure their payment is final, thus providing continued incentive for miners, Miners do not disappear simply because rewards diminish,  they adjust as long as it remains profitable. Additionally, an attempt by someone to launch a 51% attack at such an enormous scale would be both extremely costly and economically self destructive. Therefore, changing its status to  "digital gold"  may result in different uses of Bitcoin; however,  it doesn't automatically make Bitcoin fragile or insecure.

Bitcoin’s current block subsidy is 3.125 BTC, while transaction fees per block are only around 0.01–0.05 BTC and can essentially be ignored. This means annual issuance is roughly 3.125 × 144 × 365 = 164,250 BTC, which at a price of $89,000 amounts to about $14.6 billion per year—effectively the miners’ annual revenue.

An attacker could launch a 51% attack with just a few billion dollars, which is not an especially large sum now that governments and major capital have entered the space.

[Invariant Core]

You are using the verbs as if there is no other possibility but the one you present.  It is a good thing that you have your own opinion but we are about a century away from the moment Transaction Fees 'replace' Block Rewards and no body knows even what next year has in store for us.

By the time this happens, scientists may find out a way to perfectly replicate Gold in laboratory settings rendering your entire arguments and stress over what happens in 100 years pointless.

Is Peter Schiff hiring armies of FUD spreaders and trolls on Bitcoin Talk lately?

This is not some distant scenario a hundred years in the future—it is an imminent issue. Bitcoin’s current annual inflation rate is only around 0.8%, already lower than gold’s yearly supply growth.

In the next decade, at the seventh halving in 2036, that rate will fall to roughly one-tenth of one percent. When miners no longer receive a sufficient share of incentives, Bitcoin will become highly vulnerable to 51% attacks.

[Invariant Core]

Aren't we overthinking? Even if a lot of people start hoarding Bitcoins instead of buying and selling or using them, the blockchain won't cease to exist because there will still be transactions happening. We can't expect every single person involved in cryptocurrencies to be only buying and holding bitcoins, so many people trade bitcoins and other cryptocurrencies because there can't be so many purchases every day from only holders because we can see trading volumes in only the BTC/USDT pair in Binance going above a couple of billion dollars, which means that there are so many traders. Don't they make transactions, you think?

About miners stopping their operations, the last block with Bitcoin rewards will be mined in the year 2140, and we are still in 2026, don't you think we are thinking about something that is way too far from now? We should think about things that happening right now, or things that can happen in the near future, and I think what we are discussing here is not going to happen in the first place, and even if it does, we have a lot of time for that yet, and there will surely be some solutions and changes, things don't stay the same way forever.

The crisis will not wait until 2140 to appear—it is already becoming evident as early as 2026. About 95% of all bitcoins have already been mined, and the inflation rate has fallen to roughly 0.8%. Even though Bitcoin’s market capitalization is around $1.7 trillion, the security budget used to incentivize miners is less than 1%, or only about $14 billion per year.

After the seventh halving ten years from now, the inflation rate will drop to roughly one-tenth of one percent. Even if Bitcoin’s price reached $1 million and its market cap climbed to $20 trillion, the network’s security budget would be only about $20 billion per year. For a 51% attacker, this would be an irresistible opportunity—huge upside for a relatively small cost.

[Luzin]

There is no proof that bitcoin was designed to be a store of value, did you read that bitcoin is a store of value in the white paper.
Bitcoin was designed for privacy transactions it was investors that made bitcoin a store of value.
Gold is a store of value because it does not compliment or improve the fiat transaction.

Yes, that has already been explained by Sathosi. The reason is simple and easy for everyone to grasp and ultimately consider as a store of value assets because Bitcoin has a higher price in a given year and exceeds the lowest price. So I think this is indeed the mindset that has shifted. The crypto industry has shifted and deviated more from the original purpose of Bitcoin. Regarding gold, yes, the definite advantage of gold is the recognition of the world.

[Invariant Core]

There is no proof that bitcoin was designed to be a store of value, did you read that bitcoin is a store of value in the white paper.
Bitcoin was designed for privacy transactions it was investors that made bitcoin a store of value.
Gold is a store of value because it does not compliment or improve the fiat transaction.

Yes, that has already been explained by Sathosi. The reason is simple and easy for everyone to grasp and ultimately consider as a store of value assets because Bitcoin has a higher price in a given year and exceeds the lowest price. So I think this is indeed the mindset that has shifted. The crypto industry has shifted and deviated more from the original purpose of Bitcoin. Regarding gold, yes, the definite advantage of gold is the recognition of the world.

We should return to Satoshi’s original vision and treat Bitcoin as electronic cash to be used, rather than digital gold to be hoarded. If everyone treats it as digital gold, then in the end it will become nothing at all.

Bitcoin must first become a circulating coin of the digital age before it can become digital gold—not the other way around.

[CroverNo01]

The Digital Gold Paradox: If Bitcoin wants to become digital gold, people will tend to hoard it without trading it, reducing on-chain transaction fees. After multiple halvings, when transaction fees are insufficient to cover the original block reward, miners will shut down their machines, lowering the on-chain hash power. When this hash power is insufficient to withstand a 51% attack, a double-spending event will occur on the Bitcoin network, causing errors in the Bitcoin ledger and ultimately preventing it from becoming digital gold.

In other words, the more Bitcoin aspires to be digital gold, the more vulnerable it becomes, ultimately contradicting the goal of becoming digital gold.

Bitcoin is already doing well in its lane and one thing is sure that, every form of usage of bitcoin has contributed significantly in its growth so far from mining, to trading to holding and what so ever anyone chooses to do with their coin has all contributed to the massive growth of the coin.

I don't even know why I trust bitcoin so much but I think it has in the past shown and proven itself beyond reasonable doubt that it has come to stay.

[Invariant Core]

Bitcoin is designed to be a store of value, so we can't neglect this in order to please those who want to see it as a medium of exchange.

There is no proof that bitcoin was designed to be a store of value, did you read that bitcoin is a store of value in the white paper.
Bitcoin was designed for privacy transactions it was investors that made bitcoin a store of value.
Gold is a store of value because it does not compliment or improve the fiat transaction.

Yes—the very title of the whitepaper makes it clear that Bitcoin was meant to be a peer-to-peer electronic cash system. Yet today too many people are abandoning that narrative: they use USDT as electronic cash while treating Bitcoin as digital gold. This path will not work.

Bitcoin must return to the original design laid out in the whitepaper and actually circulate in everyday life as a medium of exchange; otherwise, an empty on-chain network will fail to generate enough fees to incentivize miners, hash power will decline, Bitcoin will no longer be secure, and the illusion of “digital gold” will eventually shatter.