Often bitcoin, as a monetary unit, is called " digital gold".
The reason for this definition is mainly linked to two characteristics shared by bitcoin and gold: it is a scarce commodity and it is difficult to produce.
It has nothing to do with the cost of a single bitcoin or the value attributed to the Bitcoin Protocol! If tomorrow the single bitcoin should cost 100 euros instead of 10,000, the two properties shown above would continue to be valid.
Gold is currently a better Store of Value (SoV), simply because it has had more time to consolidate its market position.
At a theoretical level Bitcoin should also over time constitute a reserve of value and therefore allow the user to maintain his purchasing power or even increase it.
However, Bitcoin has features that make it better than gold as a medium of exchange.
Let's see them together.
FUNGIBILITY: we have previously said that this term indicates an asset that can be exchanged for another of equal attributed value. For example, we can exchange one 10k gold coin with another that has the same chemical/physical characteristics. In the digital environment it is difficult to guarantee fungibility in a context in which a third party can intervene and cancel transactions or seize money. My money could be dirty and therefore not as good as yours. Bitcoin tries to solve this problem by introducing the concept of irreversibility of transactions and excluding the third part.
The level of fungibility of the unmarked gold is higher than that of Bitcoin if we consider the bitcoin exchanges on the base layer (via blockchain), while it is comparable if we consider the exchanges on Lightning Network.
DURABILITY: gold like bitcoin is not perishable, an excellent feature if you want to use these goods as money.
PORTABILITY: gold portability is good if we consider small businesses (eg buying a car), it is very bad considering big businesses. Bitcoin portability is excellent and does not rely on the medium used (just an app on the phone).
DIVISIBILITY: both assets are divisible but Bitcoin is more suited to micropayments (on Lightning Network). Bitcoin is divisible up to 8 decimal places for blockchain transactions, while it is up to sub-satoshi figures for those on Lightning Network. This ease in splitting is possible because the bitcoin asset is completely digital.
SECURITY: Bitcoin security is given by its decentralization and the computing power used by miners to support the network (hashrate). The greater this calculation power and the number of miners, the lower the chance that transactions will be rewritten or made reversible. Currently (August 2019) the cost for an attack on the Bitcoin network is estimated by Messari (messari.io) at around $ 160,000,000 a day, with an attacker who is able to directly collect and manage more than 50% of the system's computing power. The network is therefore considered relatively safe, given the impossibility for an attacker to coordinate a similar attack and the system's tendency to increase total hashrate, currently close to 100 million TH/s.
Individual security is instead given by the ability of users to secure their private keys (see "Has anyone ever stolen bitcoins from the system?"). On the other hand, the security of gold is given by factors such as:
- exposure to counterfeiting
- management of funds by individuals
- management of funds by a third party
- susceptibility to seizures by the State or other legal entity
Counterfeiting is a problem that also affects institutions that store and manage funds; if it is true that a counterfeit of minerals can be easily discovered, it is also true that it is possible that the marks stamped on the gold bars may be counterfeit. Recently it was discovered that counterfeit gold bars were stored in the vaults of JP Morgan Chase & Co for a value of 50 million euros. The fakes are sophisticated, so other thousands of fake gold bars may not have been identified yet[31].
The fakes are real gold. The marks on the bars are counterfeit. This counterfeit is a relatively new way of breaking global measures taken to block "conflict minerals", that is, coming from conflict zones and sold primarily to perpetuate wars, and to prevent money laundering. Consequently, we move on to the fourth factor listed above, namely the susceptibility to seizures by the State, minor in Bitcoin thanks to the pseudo-anonymity of the system itself.
The management of gold funds, especially for high sums of money, takes place on behalf of reliable third parties: typically banks subject to regulations. As for Bitcoin, this can be done in total autonomy, even for large amounts.
For minor amounts, gold can be relatively simple to store but more subject to the risk of theft or extortion than Bitcoin: it is undoubtedly easier to keep a sheet containing a private key, or even memorize it, than to store and secure 1 Kg of gold.
The management of the funds by a third party involves a centralization of the resources that exposes to the dangers expressed in the chapter Why was Bitcoin created?, in particular if the management system of the institution is centralized and the gold is "tokenized", ie represented by a digital token issued by the institution.
EASY TO TRANSACT: transactions in gold for high amounts are expensive and complex. They require intensive coordination and very high commissions, unless the assets are tokenized.
Bitcoin transactions are almost immediate (hours for Bitcoin on blockchain, days/weeks/months for physical gold) and can be realized directly between the two parties that want to exchange value.
SCARCITY: both assets are scarce but the amount of units of value in the Bitcoin system is totally predictable ( predictable supply ), while it is not for gold. The discovery of a large gold deposit could lead to a shock to the global market with a consequent reduction in the role of gold as a Store of Value, to the point of reducing its use solely for secondary purposes (eg computer industry, technology, furniture). These are not remote hypotheses: with the reinforcement of the space industry it will be possible to search for precious metal deposits on relatively close celestial bodies and take it. Bitcoin was created with the express purpose of acting as a monetary unit and could potentially replace gold as a global Store of Value.