Bitcoin is now seen by many people as a digital, enhanced version of gold; find out if the cryptocurrency comparison makes sense
Can bitcoin really become “digital gold”? Yes. First of all, you can't fake or create gold in the laboratory: miners need to extract the ore from deposits. As an extremely durable and scarce metal, over the centuries gold has become a kind of global store of value and, as it was with the metal, for sharing similar characteristics in terms of scarcity and durability, the crypto active has been considered by many investors an alternative to gold in a digital environment.
In addition to being a durable metal, it was this scarcity that made gold what it is today, and like the noble metal, bitcoin also needs to be mined and is extremely scarce.
Why is Bitcoin Scarce?
Bitcoin is the first asset to replicate the concept of scarcity in an all-digital environment. As with precious metals, bitcoin has a limit to be “mined” of 21 million units. More than that, the protocol code establishes a maximum limit of bitcoins that can be extracted from the system per day, that is, the crypto active offer is set in stone, or better, in code.
The more bitcoins that are extracted, the more difficult it is to extract new units. This is because the daily emission of the crypto active drops by half every four years on average, due to an event called halving. This drop-in half simulates the scarcity of a scarce natural resource on Earth. It is estimated that all bitcoins will be mined by the year 2141. After that, no more bitcoin can be generated. The crypto active is also compared to gold as a store of value and is seen as a strategic means of protecting assets against the rise in prices in the economy. This is because their prices are driven by risk and return factors that are different from traditional markets and because of their scheduled scarcity.
More than that, bitcoin proves to be a superior asset in several respects. Safeguarding gold is not that simple and it is still expensive. With bitcoin, the asset can be stored in an application on your cell phone or in a physical wallet, which is extremely similar to a pen drive.
Another point is that, with bitcoin, it is still possible to transact values anywhere in the world, since everything is done in a digital environment. On the other hand, gold has reduced mobility due to its physical limitations. That is, in addition to bitcoin being superior in terms of scarcity, it is also easily verifiable, transferred, and transported.
It is worth noting that the important thing is not whether bitcoin will replace gold as a store of value. The reality is that both alternatives may exist and gain space over time, but we believe that the rate of growth in bitcoin adoption should be faster, given that gold has been an established asset for millennia.
Bitcoin features time value preservation elements as good as, if not better than, gold. Now, it remains for us to follow the evolution of the asset to ensure that, like gold, it will prove to be a store of value over time.
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