The Digital Gold Paradox

[mindrust]

Good thing is, bitcoin is not one entity. There are many different people who are interested in bitcoin and they don’t always act in the same direction. Some of them think btc is digital gold, some of them think btc is casino chips. Some people think they can outsmart the markets if they use trading strategies, some think btc is going to replace the dollar eventually. Some people pay their expenses using bitcoin and some merchants accept bitcoin directly. Some merchants on the other hand don’t even see bitcoin even though they accept btc for their products and services, they get usd instead. As you see bitcoin creates a very complex financial environment and there are many groups that benefit from btc in very different ways. So, your argument is invalid.

[biostart]

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 cannot become gold, gold is a stone Bitcoin is a computer program that performs the functions of money. .Gold has been money for thousands of years.Bitcoin is money that has existed for 17 years.Whether something is money or not is not determined by narratives or propaganda.Monetary properties include durability, divisibility, recognizability, and scarcity.  Monetary properties determine whether an asset or a good can successfully perform the functions of money, which are a medium of exchange, a unit of account, and a store of value.

So the question is not whether Bitcoin will become gold, but whether Bitcoin is better money than gold and whether it will absorb gold’s entire monetary premium.

When you send transactions on Bitcoin, you pay a transaction fee. People constantly send and receive money. Even today, if miner rewards were zero, miners would still earn several million satoshis just from fees.But as time goes by and more people use Bitcoin, its network becomes increasingly congested. The number of users grows, while block space is limited, so fees will rise.

If miner rewards were zero today, you could see from https://mempool.space/ that on-chain transaction fees are often only 0.01-0.05 BTC, which translates to 525.6-2628 BTC per year.

Using transaction fees—less than 1/10000 of the total 21 million Bitcoin supply—to ensure the security of the Bitcoin network is extremely fragile.

Moreover, a large number of Bitcoin transactions now occur off-chain, in CEX and ETF markets, and these transaction fees cannot be captured by the Bitcoin network.

[Invariant Core]

The explanation you gave is self-contradictory. Bitcoin is already digital gold. Its transactions will gradually increase due to price volatility. Due to the rapid price fluctuations and limited supply, the demand for Bitcoin is increasing. As demand increases and decreases, transaction fees fluctuate, which is part of the natural process. More energy is being burned to extract the last blocks, which increases the cost of mining. Most of the obstacles you are talking about will not happen in Bitcoin transactions due to the innovative nature of this asset.

You can check recent fee conditions on https://mempool.space/—many blocks are collecting only about 0.01 or 0.02 BTC in transaction fees. This situation has persisted for quite some time now.

If it were not for the 3.125 BTC block reward, miners would have gone on strike long ago.

[Invariant Core]

Good thing is, bitcoin is not one entity. There are many different people who are interested in bitcoin and they don’t always act in the same direction. Some of them think btc is digital gold, some of them think btc is casino chips. Some people think they can outsmart the markets if they use trading strategies, some think btc is going to replace the dollar eventually. Some people pay their expenses using bitcoin and some merchants accept bitcoin directly. Some merchants on the other hand don’t even see bitcoin even though they accept btc for their products and services, they get usd instead. As you see bitcoin creates a very complex financial environment and there are many groups that benefit from btc in very different ways. So, your argument is invalid.

People can view Bitcoin from various angles and use it in various ways. However, if these activities don't feed back into the Bitcoin main chain, transaction fees will always be insufficient.

Currently, on-chain gas fees are often less than 1 sat/vb, and transaction fees per block are often only 0.01 BTC. This demonstrates how depleted on-chain activity is, and this has been the case for a long time, even when Bitcoin hit a high of $126,000.

[super mysterious]

This is why the Bitcoin ecosystem and Bitcoin derivative tokens are designed to solve these kinds of problems. As a payment token, it has failed; digital gold and its derivatives are the ultimate solution.