When people typically use the analogy of digital gold to describe bitcoin they mean that it is a digital asset that functions in the market in a way very similar to gold. By this they mean it is a store of value, not really a medium of exchange. This framing is not popular with the bitcoin is money crowd because when people use the digital gold framing they typically mean bitcoin isn't money. Its just a store of value. A hedge against inflation. It would never be used as money. It isn't good for buying stuff. Some that say this I'm pretty convinced are simply pushing this idea because of fear of the state. Others seem to really mean it.
The other day I was thinking about this and something occurred to me. I thought I understood gold before I understood bitcoin. I imagine like most people are similar. The truth is reading "The Bitcoin Standard" taught me much more about gold than bitcoin. In fact, I didn't really learn much about bitcoin from the book. I'm not saying its not a great book about bitcoin but rather my ignorance of gold was much greater than I realized. I imagine I'm not alone in that.
I remember thinking about gold after reading it... gold is pretty cool. Its properties are kinda wild. Gold has been used as money far longer than paper money. Its absolutely absurd to compare gold to bitcoin. Bitcoin is so new! But gold has qualities that make it unique among precious metals. These are not all unique properties but these are some of its qualities that make it a good money.
- You cannot create it, you have to find/mine it.
- You cannot destroy it.
- It is fungible.
- Its authenticity can be verified.
- Its supply has a very small increase over time(for now).
- It has been used for thousands of years as both a store of value and medium of exchange.
So why don't we use gold every day to buy goods. A common opinion is that it is because of greedy bankers and central planners but that's not the whole story. The truth is that gold died as a common money largely due to technology. Telecommunications and the speed of communication across great distances is what really supplanted gold as money. Gold was still used to back paper money(notes) but its use as the actual direct medium of exchange is largely dead. Bitcoin was not the first attempt to make digital money nor digital gold, but it has been the most successful by far.
So what am I saying? Bitcoin isn't digital gold but its a good analog. If you could make gold digital is would be great money. Bitcoin is a great store of value for the same reasons gold has been. Bitcoin however can be sent across great distances with ease and at the same time it can be stored for long periods of time at low cost. It is better than gold in both ways. As a store of value and medium of exchange. I can't send an oz of gold across the globe in seconds. I can't validate the authenticity of my gold with a simple computer.
My belief is that people that think bitcoin is only a viable store of value don't really understand bitcoin. Its true that currently under standard economic definitions bitcoin is not a generally accepted medium of exchange but that is only an issue of adoption and understanding. Bitcoin without lightning is still better than any fiat money. The dollar is only digital due to custodial services and trust in third parties. Our biggest problem with bitcoin as a medium of exchange is literally a lack of knowledge. This will be solved over time as people start to hold it to preserve their long term wealth. As fiat money dies and as regimes crack down on humans we will see a rise in desire for a new money. Sadly, I think most people will need to get wrecked before they get it.
My recommendation is to stop fighting over the "digital gold" label but instead agree and focus on the digital aspect. If gold was digital it would not have been supplanted by paper notes.
What do you think?