See us talk about the advantages of Gold over Bitcoin here
Bitcoin: Why the hate? Why the love?
So you already have gold and other assets in your portfolio, but have been holding off on considering the investment value of Bitcoin.
If you’ve already been following what the major finance outlets have been reporting about Bitcoin, you’ve probably heard common misconceptions get more airtime than the actual technological advantages it possesses.
Bitcoin is often treated in the press much like many of the Goldbugs are treated whenever they are on air or in the papers.
There have also been plenty Bitcoin critics that are traditionally fond of gold and libertarian values and the debate of Gold vs. Bitcoin has been held a number of times.
Is this poor coverage all due to ignorance?
Well some yes and some no.
The perspective is important to note when talking about
- Bitcoin the asset,
- Bitcoin the currency,
- and Bitcoin the technology.
To question Bitcoin, it is necessary to define which part you’re referring to.
A new concept
The technology of Bitcoin, the invention it is, is the kernel of its value.
Much of what’s in the press isn’t even about the killer features of Bitcoin, if they are even understood by those presenting it.
The currency of Bitcoin is well understood by many financiers.
Hence, almost all major financiers criticise its volatility, unfriendly interface and comparatively small acceptance rate.
The asset that is Bitcoin is also downplayed by its volatility and by the fact that it is such a new and sophisticated financial instrument.
Many holders of gold have dealt with criticisms of the gold market and its dismissal as a serious asset.
The “inherent value” that is seen amongst Goldbugs is mostly driven by the fact that gold was the first ever globally-accepted currency, and still exists as such.
When talking about Bitcoin, you’re simply not going to have the same history.
However, it is the first globally-accepted digital currency that is unlikely to be stopped.
Bitcoin is not the first digital currency, but it is the first digital currency with a distributed consensus-based ledger.
What is that?
It’s called the block chain, and it’s the true innovation inside Bitcoin.
It can’t be gamed, tricked, hacked, or shut down by any single entity while enabling all the participants in this market to play by the same transparent rules.
Being this innovation, Bitcoin has many advantages over gold, which gives it its own “inherent value” that is quickly becoming adopted across the world.
Advantages of Bitcoin vs. Gold:
- Divisibility – One bitcoin contains 100,000,000 “Satoshis”, the smallest unit of Bitcoin. If needed, this could be quickly divided further. No matter how much the world economy grows, you can still buy your morning coffee without counting atoms.
- Higher utility of transfer – Sending bitcoins takes seconds and costs about 20 cents per transaction, regardless of the amount or the distance between sender and receiver.
- Harder to fake – It is very easy to verify whether the bitcoin you receive is real and to secure the ownership over it. No more worries about tungsten-filled gold bars, no more expensive assaying to verify. With Bitcoin it just works.
- Limited supply – It is absolutely clear how many bitcoins will be mined, and the rate at which they will be produced. After 2140, all available bitcoins will be either in circulation or destroyed. From today’s perspective, the supply of Gold appears limited, it is not certain how much gold will become available over the coming decades via undersea and asteroid mining.
- Fast innovation – As mentioned above, Bitcoin in and of itself is a huge technical innovation with countless possible applications. Building on top of this innovation, many programmers are working to improve it further and market test applications and improvements. We have only seen the beginning of the age of crypto-currencies!
Knowledge is Power
Arming yourself with the knowledge of what Bitcoin is capable of allows you to recognize the inherent value in Bitcoin.
The aforementioned advantages together with the ever-growing number of people trading bitcoins reinforce the mass media attention it has been getting.
Despite its comparatively tiny market capitalization, Bitcoin has created substantial amount of business growth.
This 5 Billion USD market is just beginning to grow, because it has as much potential as the Internet itself did in the early 90s.
Especially considering the potential impact on current financial instruments governed by banks, credit institutions and exchanges.
Bitcoin has the potential to digitize these financial tools and combine them into something more powerful than the current financial state of the art.
Have we covered the main points? Or can you think of more?
Let us know by commenting.