The notion of Bitcoin as digital gold is as old as the decentralized crypto-currency itself. Even in original writings, Bitcoin creator(s) Satoshi Nakamoto wrote about how he intended to design a digital gold.
For instance, the mining of Bitcoin – which entails computer processes – was intended to mimic the mining of gold. That there will only ever be 21 million bitcoins in existence, as well, is a design intended to mimic gold.
Among the biggest inspirations for Bitcoin is Nick Szabo, the creator of the original bit gold. Nathaniel Popper wrote a book entitled Digital Gold about Bitcoin and its adherents. Trace Mayer, an early Bitcoiner, inspired many people within the gold and silver industry to investigate Bitcoin by explaining how it is gold’s digital corollary.
A major debate has recently erupted amongst Bitcoin programmers, and it appears they intend to change the core protocol that has powered Bitcoin heretofore. One main reason they wish to do this is because the Bitcoin network has not perfectly scaled amid huge growth in its first seven years. Thus, in order to ensure people can still use Bitcoin as a secure payment network, the block size limit must be altered. The block size limit of 1MB in transaction data per approximately ten minutes is not enough if Bitcoin is to be a payment system as many people wish it to be. Proposals currently suggest increasing the block size limit to 2MB and even 20MB. Things are seeming to head in the direction of a conservative block size increase of 2-4MB.
And herein lies the new lens with which to understand Bitcoin, as not a digital gold, but more of a distributed SWIFT payment system. SWIFT, Society for Worldwide Interbank Financial Telecommunication, is a network allowing financial institutions worldwide to send and receive information in secure, standardized and reliable environment. This is a more accurate comparison for Bitcoin post-block size increase than gold.
Perhaps, digital gold was never a good descriptor of Bitcoin. There have been many attempts at digital gold, and it could merely be that “digital gold” was more akin to a marketing ploy than anything. There are numerous examples of digital gold in the past: e-dinar, Pecunix, iGolder, gbullion, eCache, and others. These examples never had as much success as Bitcoin, but perhaps that’s precisely because Bitcoin was never digital gold in the first place.
Gold, for most millennials, is an outdated concept. It is a resource riddled with production injustices and environmental degradation. The concept of “digital gold” did not appeal to the lion’s share first. Those who did appreciate bitcoin’s gold-like features were more along the lines of the speculator.
Thus, Bitcoin, for most people, is not “digital gold” nor was it ever. Instead, it has been much more akin to the SWIFT system, a distributed one, in fact, which is very much in line with Dee Hock’s original vision for payment systems like VISA. So, for the purposes of this article, Bitcoin is more like a digital Visa card that is decentralized and allows individuals to do what debit and credit – that is, SWIFT – do.
What does this mean, then, for Bitcoin? Provided a block size limit is approved and Bitcoin is scaled via programming and network consensus, then it means Bitcoin will continue to grow in the ways it must so people can spend small transactions on Bitcoin quickly and efficiently. It also means transaction fees will increase over time as emphasis goes from the “digital gold” of yesterday to the “distributed SWIFT” of tomorrow.
As a payment system alone, Bitcoin will have to compete with credit and debit cards charging currently almost 3%, approximately, for transactions while offering incentives. Thusly, there are no guarantees these margins will incentivize miners forever, so what happens in the finance and banking industry – in regards to blockchain technology and otherwise – will dictate the future niche of Bitcoin.
Disclaimer: The views expressed in the article are solely that of the author and do not represent those of, nor should the be attributed to CCN.com.
Last modified: May 21, 2020 10:34 AM UTC