Times are changing and changing fast!The Internet Age has brought about a new competitor, also unseen and felt by the common man. It has been described as "A technological Tour de Force" by none other than Microsoft computer billionaire Bill Gates. Many call it "The Internet of Money." I call it "The Future of Money," because there will come a time when people will rise above the mere paper currencies of the world. Not bound foolishly by mere arbitrary territorial boundaries, and when people worldwide will PREFER to deal with the world's first global currency. And that is Bitcoin.
Let's look at the two a little closer, shall we?
Gold has many advantages over Bitcoin (BTC) in its current nascent state. Gold couldn't be more established as a brand. Billions of people worldwide see it as the pinnacle of all commodities and metals. Can't find a person who doesn't want some of it in their possession. Gold has plenty of supporting industries and corporate infrastructures built over time, of which young Bitcoin has few. And its current value, in ounces, is double that of BTC as well.
But the downsides are significant as well. If you had a gold bar, what could you do with it? Could you buy food with it? Could you easily and safely break it into smaller units for trade? How safe would you be, walking around with a gold bar? Could you travel by plane in the U.S. with a gold bar? Really? The Gestapo, I mean the TSA, would love to see you try that!
Could you do business overseas with it? Send some in seconds to a business partner in Kuala Lampor? And what are the chances of you actually buying physical gold at this point, and not being funneled into an ETF. Or some have third party trying to sell you an INTEREST in gold, but not provide you with physical gold? Plus, the gold markets have long been known to be manipulated by major banking interests worldwide, fixing prices well below their real value. So you also have to deal with the level of institutional corruption in that market as well. You don't know what you're buying, in practice, and its actual value will not be set by supply and demand. The gold market is not 24 karat pure, if you have any knowledge of it dealings, and let's leave it at that.
BTC is no model of perfection, currently. Probably 90% of the world has never heard of it, and fewer than that know what it is and how it works. So it's technology that makes it so special hurts it in adoption, at least at this point. KISS (Keep It Simple Stupid) doesn't apply here.
Fortune 500 companies like Dish Network, Bloomberg LP, and PayPal have given stamps of approval and seem to understand the revolutionary advances Bitcoin makes. Using Bitcoin on a daily basis is still a chore, at best, at this time. Bitcoin is a lot like the Internet was in 1994. No search engines worth a damn. No Facebook or super-fast modems. No super sites to tie it all together. The infrastructure is in its toddler stages, and this cripples mainstream adoption. And you can't hold it in your hand. Since man has been trading currencies, in all of its forms, for thousands of years PHYSICALLY, using a purely digital unit to transact business may be beyond comprehension. Bitcoin is a little too advanced for most people to grasp, at this point.
$150,000,000 in BTC has been sent for virtually no cost, within seconds. No financial disclosures, no 20 questions with any bank, regulatory or private interests. A person has total freedom to transact business without a counter party. And without the risk of fraud or identity theft. One in 1200 credit card/debit card transactions is fraudulent. 0.0% of Bitcoin transaction are fake. You cannot counterfeit a Bitcoin. There are no fake Bitcoins.
Bitcoin has grown from nothing but an idea to over $400 in value in less than six years. This level of growth is unprecedented and is more or less designed into it. Supply is finite, at 21 Million BTC, so all you need is demand, and price/value skyrockets accordingly. Who knows how much gold there is worldwide? At this rate, one BTC will pass Gold's ounce price next year, and never look back!
Dollars? $100 Billion were made out of thin air last month! Can you say inflation? Bitcoin can't. Wouldn't know how that works. It's the perfect hedge against something totally man-made, inflation. You get inflation because you deal with central bankers who make paper money whenever they feel like it. What a system! So the price of gas doubles in 5 years, and that's a good thing? Is that the way a well-designed economic system is supposed to work? Really?
Bitcoin is not designed to replace the dollar anytime soon, but it may end up replacing Gold as the commodity of the future. Its value has been said to be headed for anywhere from $10k (according to Merrill Lynch/Bank of America) to $1 Million (Business Insider) in the future, if it does gain traction in the global e-Commerce market as a preferred mode of payment. Gold hasn't shown any such potential for such growth in all of its thousands of years, because it is definitely not as finite in supply as BTC is. There are far more than 21 Million ounces of gold on this planet, and Gold is still being mined to this day. Gold supply may never run out.
Gold advantages over Bitcoin: Superior corporate infrastructure, perceived value & cache, consumer acceptance and understanding, stable price history, trusted worldwide, great for non-techies.
Bitcoin advantages over Gold: Secure to transfer anywhere, can be used for goods and service, no need for ID/Bank accounts/information disclosure to use. Finite supply increases value by design, perfect mode of transfer for the Age of Technology, still affordable today.
Neither is perfect. And Gold will not soon be replaced as the preferred commodity as a store of value. But Bitcoin is coming, and the century is still young. Five years from now, this can look very different. Bitcoin isn't going anywhere. It can't be uninvented, so let's agree to have this discussion again in 5 years. I think the landscape will be quite different, and prosperous, for both.
Which is the better investment? How much value do you put in Gold in your future? Should it be more than just a way to invest to provide enduring value? Share above and comment below.
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Last modified (UTC): November 14, 2014 10:30 AM