Some tout Bitcoin as an online alternative to gold – a currency that is insusceptible to manipulation. However, there are others that believe it is the trendiest investment craze.
Comparing gold to bitcoins might seem like next to absurd. One is a physical, ancient metal. The other one is a hot cryptocurrency. Irrespective of those noticeable differences, these two stores of value have plenty in common.
What Is Bitcoin?
Bitcoin is the most revered digital currency. It is created and maintained electronically. Bitcoin units are forged by “mining” them on a distributed digital network.
When it comes to bitcoins, and in stark comparison to gold or euros, everything occurs in the digital world and the cryptocurrency is not tied to any palpable store of value.
Besides being completely digital, the other really distinctive specific of Bitcoin is the very fact that it is entirely decentralized. While extra euros may be printed by the European Central Bank, the Bitcoin cryptocurrency can only be extracted by a global network of computers which all function to manufacture more bitcoins.
This means that no government or financial entity is behind the cryptocurrency, making it a very tempting store of value throughout periods of inflation, political instability, or insecurity.
Who Is in Charge of Bitcoin?
Satoshi Nakamoto set the rules behind Bitcoin in 2009. Nonetheless, anyone can produce it.
Doesn’t that Render the Currency Valueless?
The inceptors of Bitcoin realized that for anything to be worthy, it has to bear some scarcity. That’s how they made Bitcoin mining more and more difficult with time. Not only an aspiring investor needs a powerful computer to continue mining, but the whole process is gradually getting harder.
Here’s where the analogy with gold kicks in. The metal’s worthiness has been increasing exponentially only due to its scantiness lately – mining of gold is both difficult and costly. That’s why the production of bitcoins is also called “mining”, highlighting the comparison.
Is Bitcoin the New Gold?
Since forever, gold has been deemed one of the most famous safety plays on the worldwide market. However, in 2017, gold has been outpaced by Bitcoin, which gained more than 200% year-to-date.
Bitcoin worshippers claim that the digital currency is the ultimate safety play. That is owing to its clearly-defined and tightly controlled maximum supply – 21 million bitcoins. Irrespective of that, it’s difficult to regard bitcoins as a “safe” investment at the moment.
While supply might be sternly capped, the ever-growing demand for the digital currency is incredibly difficult part of the value equation to predict or even calculate.