Bitcoin vs. gold: what a decade of data reveals

Bitcoin vs. gold: a decade arguing over what money is

By the time the metal had been working as a store of value for centuries, the token was barely five years old. Can you keep your savings in something you don't understand yourself? The trigger for the debate was a bankruptcy: in February 2014, the bitcoin exchange Mt. Gox filed for bankruptcy with 18.6 million in debt and an alleged theft equivalent to 6% of all bitcoins in circulation. Anyone who bought at $80 and sold near $350 laughed; anyone with funds inside, far less so.

I don't understand Bitcoin: the three reasons for distrust

The starting point is simple and anyone can recognize it. Three reasons not to touch Bitcoin: you don't understand it, there's no guarantee it will still exist a decade from now without being able to be counterfeited, and there's no need to add another form of real money to the system. The reply comes with the protocol: it is a simple, unforgeable accounting entry, and 99% of people use monetary services without knowing about money issuance or credit expansion.

There is a recurring comparison used to settle the argument. Nobody knows how the TCP/IP protocol works, and yet we live inside WhatsApp, Gmail or any website. Bitcoin would be the same: a technology that matures. To anyone who asks why bet on bits with no tangible value, the answer uses the same yardstick: you can't describe the subatomic mechanics of gold either, only that it is scarce and that many people want it.

Intrinsic value: the bone nobody will drop

Here the debate splits in two. The gold defenders' position holds that gold has intrinsic value and that the 3,524 cryptocurrencies are all fiat, dependent on the internet and therefore at the mercy of whoever controls the network. The counterattack turns to monetary history: seashells, cocoa beans, salt or amber were also used as money and have not preserved that value, replaced by forms with more convenient qualities.

The technical defense of Bitcoin rests on four specific antiestéticatures: decentralization, a pre-established monetary policy, the impossibility of printing units and censorship resistance. Its issuance is capped at 21 million units, a ceiling no fiat currency can match. And against "intrinsic value", the classic dig: the main application of gold that gives it value is its monetary use, not its industrial utility.

The Mt. Gox collapse and the risk that isn't in the protocol

The 2014 crash left an uncomfortable lesson for both sides. The exchange went bankrupt with 18.6 million in debt after an alleged theft equivalent to 6% of all bitcoins. The correct reading is not that the protocol fails, but that Mt. Gox is not Bitcoin, just as a cracked-open safe does not invalidate the gold it holds.

The comparison with traditional banking is also introduced with dry wit: with money in a bank you pay taxes, but there is a deposit guarantee fund; with a balance trapped on a foreign platform, if it goes bankrupt, the user just has to lump it. That distinction between a bank ledger entry and an exchange ledger entry is the one that has generated the most discussion.

Can Bitcoin be banned? China's Great Firewall and satellites

The argument that a government can cut off the network crashes into an elementary fact: an average bitcoin transaction takes up a ridiculously small amount of information, on the order of about 200 bytes, impossible to block because it would fit even in longwave radio, a century-old technology. Bitcoin works behind China's Great Firewall, which proves it withstands severe restrictions.

There remains the problem of receiving the information without depending on a third party, which requires downloading the blockchain. The technical answer is Blockstream satellites, which for a low price allow you to operate without depending on any terrestrial communications network.

The digital dollar and the shadow of regulation

The most repeated threat is political: the announcement of a digital dollar wallet. The counter-reply is that this wallet already exists and is called a bank account: controlled by the government, seizable, censorable and with infinite issuance. Against it, a Bitcoin wallet would be unseizable, uncensorable and with finite, known issuance.

A forum user cites a JP Morgan calculation: bitcoin could triple its value and challenge gold. The skeptical response comes from another direction: on Bitcoin's promoters, a forum user recalls that the Winklevosses are interested parties and that what they say is worth little. And the underlying argument returns, one that belongs to no one in particular: if people ignore an age-old haven like gold, they understand a token made of bits even less.

The thesis gaining ground: they are not enemies

Little by little, a less tribal reading is prevailing. Bitcoin makes it easier for people to use gold as money, something today effectively prohibited by law. There is nothing preventing you from having both. Whoever rejects the token out of tradition is just as wrong as whoever laughs at the gold bar out of modernity. The real risk remains having neither.

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In 2013 it sold for 350. A forum user predicted then that, once things calmed down, it would rise toward 900. Gold remains in the safe, with no need to download updates or trust your neighbor.