You might have previously heard, even from me, that Bitcoin is kind of like “digital gold”. Now, going past the metaphor, could Bitcoin replace gold in the future?
As a fun fact, Bitcoin traded at the the price of gold for the first time in March 2017, which lead to a bunch of comparisons between the two.
In order to know whether Bitcoin could replace gold in the future, let’s see a few facts about each.
Gold has a market cap of $7-8 trillion (for the record, that’s about 100x the current market cap of Bitcoin). Humans discovered it thousands of years ago. It was the first metal that was widely known by our species. It is quite impressive, thinking that everyone was living back then in rural, semi-isolated communities.
People have always appreciated gold because of its rarity and because its use in manufacturing processes of all sorts of valuables (such as jewellery). Nowadays, it is barely used as a transaction medium, despite of its past, when most valuable coins were made of gold (the oldest ones dating back to 500 BC).
Bitcoin has a market cap of around $70 billion at the time of writing (March 2019). Satoshi Nakamoto invented it 11 years ago and it was the first popular digital currency. This time, though, the human species lacked isolation. Thankfully, it got to know about Bitcoin with the help of the media and the Internet.
Bitcoin was controversial since its creation, as some people consider it a tool for scammers, while others consider it one of the coolest innovations of the 21st century. Unlike gold, you can’t manufacture anything with it, because it is 100% digital, but you can use it to make anonymous transactions. Additionally, it keeps records of all transactions done on the network. It is also the creator of the most powerful network of computers in the world.
Let’s put the two head to head and see what conclusions we can get.
There are some similarities between Bitcoin and gold: the limited supply and the ability to use them in order to make transactions or investments, for example.
Unlike gold, Bitcoin is not a physical thing. It is entirely digital. From this point of view, in order to almost completely replace the precious metal, the society has to shift entirely to digital. Kind of like what we see in SciFi movies. Of course, Bitcoin is far more volatile and profitable (on the longer term) than gold. That is another thing that is different.
In conclusion, I believe the future will not see Bitcoin replacing gold. Gold is used as a material in many objects, while Bitcoin is just a digital asset. Most likely, Bitcoin will outpace gold on being a transaction medium with high volume, but the precious metal will never completely disappear, because of its unique properties and general perception.
Anyhow, if you have anything to add, make sure to leave a comment below. If you wish to have a chat with me, you can use this link.