Bitcoin has often been compared to gold. It shares many of the same financial properties of gold. In fact, it does a better job at certain financial functions than gold.
Anyway, this article will cover four reasons why Bitcoin can replace gold.
Bitcoin is a More Practical Currency than Gold
The first reason Bitcoin can replace is gold is that Bitcoin is a much more practical currency than gold. For one, Bitcoin is currently used as a currency for transactions. It’s extremely simple to pay for goods or services in bitcoin – all that is required is an internet connection.
Gold, on the other hand, requires physical proximity with the other party to use it as a currency. It’s also bulky and cumbersome to use as a currency whereas bitcoin can be divided into tiny fractions with a few keystrokes.
Further proving this point is that gold is rarely, if ever, used to pay for goods or services. Gold is used as an investment rather than a currency, which is a huge negative for the long term usefulness of gold if that investment opportunity is perceived as disappearing.
The Future Supply of Bitcoin is Predetermined
The next reason that Bitcoin can replace gold is that the future supply of bitcoin is predetermined.
That’s right, the future supply of bitcoin is hardcoded into the programming of bitcoin. The maximum total supply of bitcoin is 21 million. And the amount that bitcoin miners receive for “mining” a block of bitcoin halves every four years, so scarcity is already built into bitcoin.
Gold works a little differently. No one really knows the maximum supply of gold in the world. Geologists have their estimates, but no one truly knows the amount. Complicating matters even more is that if a massive gold mine is discovered, then the price of gold will crater.
Bitcoin does not have that problem because the amount of bitcoin miners receive is already predetermined and programmed to slow down over time.
Overall, Bitcoin has much better controls to manage future supply than gold, which makes Bitcoin a suitable replacement for gold.
Bitcoin is More Accessible than Gold
Another great reason that Bitcoin can replace gold is that Bitcoin is more accessible than gold. Anyone with a little extra money and internet access can purchase a bitcoin miner and begin mining bitcoin. Not to mention that bitcoin is divisible to such small amounts that investments of under a dollar are available.
Yet again, gold does not have either of those features. No one can mine gold on their own – gold mining companies spend tens of millions of dollars on developing the infrastructure to extract gold from the ground.
Furthermore, gold is not infinitely divisible on any sort of practical level. Someone interested in gold cannot purchase $5 worth of physical gold. The amount is simply too small for that to be practical.
Due to those reasons, we view Bitcoin as a much more accessible financial instrument than gold.
Bitcoin is Easier to Store than Gold
Another reason that Bitcoin could replace gold is that storing bitcoin is so much easier than storing gold.
Do you have access to the internet and a computer or mobile phone?
If you do, then you have everything you need to store bitcoin. All it takes is creating a wallet and private key. We don’t recommend storing the private key on an electronic device, but it’s possible and plenty of people do it.
Gold is a little more difficult to store than bitcoin because it takes up physical space. This might not be a problem if you only have a few coins, but it becomes more problematic if you want to start a few thousand dollars worth of gold.
Overall, however, the difference between storing gold and bitcoin is not that large. But there is something to be said about the security inherent to storing bitcoin in your own wallet – no wallet has ever been hacked!
Frequently Asked Questions (FAQ) About Bitcoin Replacing Gold
Here are some frequently asked questions about Bitcoin eventually replacing gold.
Will Bitcoin Actually Replace Gold?
Only time will tell if Bitcoin will eventually replace gold. The market cap of Bitcoin is an impressive $340 billion USD, which still pales in comparison to the estimated trillion dollar market cap of gold.
That said, the reasons listed above do indicate that Bitcoin has the potential to one day eclipse gold as the unofficial store of value. More importantly, Bitcoin can easily be used as a currency, which is something that likely will not happen with gold at any point in the future.
What will happen to gold if Bitcoin replaces it?
Gold will likely still stay around in some form or another. However, the situation will likely end up with investors preferring Bitcoin to gold as an investment for the reasons stated above.
For instance, there might be a day where you see BTC on the financial ticker on financial news outlets and countries discuss their bitcoin reserves rather than their gold and foreign currency reserves.
When will Bitcoin replace gold?
Again, only time will tell when Bitcoin will replace gold. It is still a far way off in our opinion – 10-20 years at a minimum.
However, it will not be an overnight transformation from gold to Bitcoin. Certain countries, banks, and Wall Street will begin to normalize Bitcoin in the financial industry until it eventually becomes the standard.
How will we know when Bitcoin has replaced gold?
This is actually a great point – there is no official way to know when Bitcoin has replaced gold. A good metric, however, is market capitalization. An even better metric is public perception.
Do people discuss purchasing bitcoin as a stable, safe investment? Do Bitcoin investment funds exist? Do central banks hold bitcoin?
If the answer to those questions is yes, then it’s safe to say that Bitcoin has replaced gold. You can read more comparisons of Bitcoin Vs Gold.
Well, that covers it for some of the reasons that Bitcoin can replace gold. Bitcoin is a more useful currency, more accessible, more secure, and has a more predictable supply than gold.
In other words, it checks all the boxes that gold checks.
The only thing standing in the way of Bitcoin replacing gold is public perception surrounding Bitcoin. And that public perception has been shifting towards Bitcoin over the past few years.