Is Bitcoin really the Digital Gold?
Gold is the name synonymous with prestige, stability and luxury as it has been the true measure of value for centuries now. Gold has formed the backbone of our current financial system when it was first used in 1500 BC and obviously with its long history, there have been many that have associated themselves to be the new form of Gold. Bitcoin was the cryptocurrency that was hailed as the “Digital Gold” because of how its inception has managed to create a new decentralized world. So, what makes gold so valuable? And can we consider Bitcoin or other cryptocurrencies to be the “Digital Gold”?
The Value of Gold
Gold is one of the natural resources that comes from the Earth and it has risen to become one of the most sought off commodities in the world. Despite the presence of other commodities such as wheat or Oil, Gold has been the one chosen for method of transactions to replace barter even though Wheat and Oil are existential for our living.
Gold just like any precious metals are forged inside stars through a process called nuclear fusion. This means that a few years after the Big Bang, the stars were blazing away to create nuclear fires. These nuclear fires then force the lighter elements such as hydrogen, helium, Carbon to form heavier elements some few million years ago.
Gold finally reached us some 200 million years after the formation of the planet when meteorites packed with gold and other metals bombarded its surface. During the formation of Earth, molten iron sank to its center to make the core. This took with it the vast majority of the planet’s precious metals — such as gold and platinum.
This is the first reason as to why Gold is so valuable as not only it is difficult to mine due to its position lying deep on earth but also it could never be recreated again unless other meteorites reach the Earth. This is also the reason why Gold is so memorable to people as its rarity and finite supply makes it a symbol of prestige in the world.
You might also wonder that other precious metals are also finite in supply, why is gold the most demanded of them all? What makes gold interesting is also the characteristics of the element, Gold is the metal that does not tarnish or corrode over time even though it alloys with other metals really well and it also can also be easily cast or formed into different shapes. It also has a yellow metallic color that is rarely present in other metals and does not get used up like Oil, which means that the Gold used in the Roman Empire is still here with us in the present day.
All these qualities combined make Gold the perfect candidate to be chosen as the representation of money as everybody was willing to exchange their goods with it. Gold first started being used as a method of exchange in Egypt around early 1500 BC which was called Shekel, an alloy of Gold and Silver. This use of Gold became a mainstay through the ancient Babylonians and the Roman Empire, before making its way to the USA in the 18th century. From the 18th to 20th century, the use of Gold as money was more globalized although the value of gold was affected by the recoinage and clipping from time to time.
In the 20th century, we also see the function of Gold changing from being a method of exchange to a store of value with the introduction of the Gold Standard. The idea was that the paper/ fiat money circulating around would be pegged to Gold at a fixed rate, although this was later depegged on 1971 by President Richard Nixon.
So what makes Gold Valuable? Its multifunction and malleable nature is what separates Gold from other precious metals. It is not only an efficient method of exchange but has also performed great as a store of value for centuries. Whatever you make it into, it will still have a physical value for years to come, but with the rise of the digital era, can any cryptocurrency rise to become “Digital Gold”?
Can Cryptocurrency be considered “Digital Gold”?
When we mention the word “Digital Gold”, there is one cryptocurrency that is considered for that title and that is the one that started it all — Bitcoin. Bitcoin maybe 14 years old but its invention has prompted the world to build a new decentralized ecosystem around it and just like Gold helped the world to transition from Barter, Bitcoin and other Cryptocurrency should help transition us to a digital era of our financial system.
From the surface Bitcoin or other cryptocurrencies and Gold possess the same characteristics in a way that both of their supply are finite and can never be recreated again to increase the supply on a later date. They are both also efficient medium of exchange as every cryptocurrency has a value assigned to it and they can be transferred from one perpetual owner to another.
Of course, what Bitcoin does better is the revolutionary technology of Blockchain in which we can build an ecosystem around it so the possibilities are virtually endless. It also can be transferred quickly from one user to another which is a necessity in the digital era and it also is much safer than carrying a Gold Bar every time you want to make a transaction. Bitcoin and other cryptocurrencies will also see their importance increase over time with our financial system heading into the digital era of course that will have to wait until a clear regulation is created.
Of course, Bitcoin rising from virtually nothing to an all-time high of $68,000 is a gain that might beat any other financial instruments but it also is where the problem lies. Blockchain might be an amazing invention but you find thousands of crypto assets offering the same technology, it doesn’t sound so special after all. This is also before mentioning the word “Volatility” which recently brought Bitcoin and the whole cryptocurrency market to a crash.
Bitcoin and other cryptocurrency might be an efficient payment method but its volatility issues mean its status as a store of value will always be in question? This is obviously due to the uncertain future; it may have due to the upcoming regulation in place.
So, can Bitcoin be considered a “Digital Gold”? There will never be another asset on the same level of versatility as Gold but that doesn’t close the possibility for Cryptocurrency and Gold to Co — Exist. Let us know what you think in the comments, is there any idea of this “Digital Gold” debate that we left out?
We in Nagaya Technologies Pte. Ltd believed that there is enormous value in Gold as it provides a level of stability that spans centuries. This leads us to creating the world’s first hybrid cryptocurrency that combines the technology of blockchain and cryptocurrency with a gold backup that helps to strengthen its intrinsic value overtime. To know more about our coin Nagaya, you can read our whitepaper at nagaya.io.
Or talk to us at t.me/nagayaofficial
