Why Bitcoin Beats Gold by 2030

This article is divided into the following sections:

1. Money is technology, and technology improves over time
2. Bitcoin's superior monetary properties
3. "Gold has intrinsic value - bitcoin does not!"
4. Gold requires trust in banks and governments
5. Why bitcoin beats gold by 2030
   
   

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Money is technology, and technology improves over time

I think it's an important consideration to start this article off with the understanding that money itself is simply a form of technology. "Money" is not one thing but rather, what human beings collectively choose a certain thing to be. Merriam Webster defines the word "technology" as:

"The practical application of knowledge especially in a particular area"

"Money" is technology which serves the purpose of storing and exchanging value in order for us to solve the limitations of barter.

Technology evolves and improves over time. This is the inevitable course of what it means to be human. This is a beautiful, unique aspect of who we are. We build. We improve. Some examples…

Bitcoin eventually replacing gold as a form of money may very well seem like an outlandish claim to some. Yet, how could human advancement apply to every other aspect in life but not apply to money itself? It's ridiculous to think that it shouldn't. Is it as simple of a matter as gold remaining the primary form of money that humans prefer...forever?

It's historically been the best form of money that human beings have preferred to use. Of course, there have been many other forms of money used in the past, such as seashells, tobacco, cattle, etc., but gold has had the most desirable properties out of any other form of money throughout history. 

So let’s compare old technology with the new. A thought experiment:

Bitcoin vs. Gold

Again, "money" is a form of technology which serves the purpose of storing and exchanging value in order for us to solve the limitations of barter. Human beings have always had the observable tendency to choose the best forms of money instead of the worst, for obvious economic incentives to do so.

So, let’s say you want to send gold to someone in a different country...

• How will they verify that it’s actually gold?
• How long will it take to verify?
• How long will it take to send the gold?
• What are the risks involved with the transfer?
• How many armed guards will you need?
• How much will it cost to send?
• Once arrived, how much will it cost to store?

Now consider the following:

A form of money that has the monetary properties of gold but can be sent instantly anywhere on earth with no intermediaries, at basically no cost, verified by tens of thousands of people all over the world 24/7, with no risk of confiscation or loss.

Please ask yourself the following questions and answer as objectively as possible: How is something like this *not* valuable?

Do you see how this is clearly a massive improvement over gold? This is what bitcoin brings to the advancement of what we call “money".

Bitcoin’s superior monetary properties

Some comparisons on the monetary properties of bitcoin to gold:

Scarcity

Gold is very scarce, which is exactly why it was such a great form of money throughout history. The annual supply of gold only increases by approximately 1-2% per year. However, bitcoin is even *more* scarce, and *verifiably* scarce, with only 21 million coins that can ever exist. We will never know how much gold can be mined out of the earth.

The last bitcoin is programmed to be mined in approximately the year 2140. Until then, bitcoin's inflation rate (otherwise known as the "block reward") is programmed to get cut in half every four years. At the time of this article being written, bitcoin's current inflation rate is 1.75% and it will soon decrease to about 0.87%, and then about 0.43% four years later, etc., until the last amount of bitcoin is mined in 2140.

Never before in history has humanity had an absolutely finite form of money in which the total supply is widely known and not able to be produced past a certain number.

Divisibility

Gold’s smallest divisible unit is typically 1 gram, while bitcoin can be denominated to as small as 0.00000001.

Storage

Gold storage requires heavy security, a large amount of space, and (typically) trust in a third party. All you have to do to store bitcoin is write down twelve words (your “seed phrase”) on a piece of paper. Oh, and even better? You could simply memorize those twelve words and take them with you anywhere on earth.

Portability

Do you want to send money overseas to a different jurisdiction? With gold, this process would be extremely costly and time-consuming. With bitcoin, this can happen in 10 minutes and would cost close to nothing. You cannot have worldwide trade happen using gold, but you can with bitcoin.

Verifiability

Gold can be counterfeited – one example of this is in 2020, when 83 tons of gold were counterfeited in order to secure $2 billion worth of loans in China. This is simply not possible with bitcoin, thanks to cryptography. Every user running the bitcoin core software can audit the supply themselves and verify that no counterfeiting has taken place.

Ease of liquidity

Selling gold is time-consuming since it needs to be physically verified for authenticity and shipped to the buyer. With bitcoin, you could sell $100 million in one single day, given that bitcoin trades 24/7.

"Gold has intrinsic value - bitcoin does not!"

There could be an entire article written about this very topic, and in fact, there already has been. If you'd like to have this common concern addressed, you can read the article, "Bitcoin has no intrinsic value: Debunked".

In a nutshell, at first glance some people may not grasp how bitcoin could be valuable without being physical. This is typically a more common concern with those in older generations, given that people in younger generations grew up with computers and can therefore more easily recognize how something digital can also have value.

That being said, please consider the following:
Is email valuable?
Is anything on the internet valuable?
Is 2+2 = 4 valuable?

These are of course not physical, yet they are indeed valuable. Human beings have widely accepted for thousands of years that the non-physical world can certainly possess value. Information in general is undoubtedly valuable. Likewise, money is also information - information which conveys value. 

Lastly, you may have also heard the misconception that gold has been a valuable form of money because it also has a baseline demand for industrial use. However, the demand for gold's industrial use does *not* grant its monetary values... if that were the case, then why weren't aluminum or iron historically used as the best forms of money like gold was? Those metals have plenty of industrial uses! The answer? Simply because aluminum and iron are easier to produce, and therefore less scarce than gold, making them less desirable to use as money.

It is true that other metals have been and are still used for coins, but this wasn't because they posessed superior monetary qualities. In most cases, it was either due to 1) gold's limited divisibility, which made it impractical for the smallest transactions, or 2) due to intentional debasement of the currency by governments imposing legal tender laws to force the population to use inferior metals as money, instead of gold.

Scarcity is one of the most defining properties of what makes a certain thing either good or bad money.

Gold requires trust in banks and governments

As mentioned earlier, gold is not a very portable, nor storable form of money. Therefore, what we've seen throughout the history of gold's use is that it inevitably ends up being stored at a bank, which would then issue paper notes that were redeemable for the gold that its customers deposited. From a logistical standpoint, this makes sense given that paper notes are much easier to store, carry around and send as opposed to a heavy metal.

Unfortunately, this has always led to what is called fractional reserve banking, which is when the bank lends out more money than it actually has in the vault. From a strictly profit-maximizing point of view, the incentives are strong to take advantage of this system. Unless all of the bank's customers simultaneously rush in to withdraw their funds (known as a "run on the bank"), then how else would everybody know that the bank would be lending out more paper notes than it actually had proportionate to the amount of gold stored in the vault?

Additionally, aside from fractional reserve banking, gold is much more vulnerable to outright confiscation. One of the most prominent examples of this is Executive Order 6102, signed by US President Franklin D. Roosevelt in 1933. As you can see from the image below, this law effectively made it illegal for Americans to own gold and forced them to hand it over to the banks. The real underlying issue here is that gold was already largely held by banks in the first place because, as mentioned earlier, gold is difficult to transport and store in large amounts. So naturally, the banks were able to seize the ownership of the gold and claim it as property of the state.

Bitcoin fixes this issue because, as mentioned in the previous section of this article, it is quite easy for people to take ownership over their own coins, as well as send the coins anywhere on earth. Storing your savings by keeping twelve words private is substantially easier than storing your savings in gold. This is why being physical is actually a limitation to being money, rather than a benefit!

Speaking of gold's physicality being a limitation to money rather than a benefit, another massive problem is the case for refugees escaping totalitarian regimes. Sure, maybe a family fleeing an authoritarian dictatorship could find a way to hide some gold (a strong emphasis on the word "maybe"), but the reality is that they would likely lose all of their wealth trying to escape. Bitcoin fixes this problem by giving people who are seeking a better, more free life the ability to seamlessly take all of their wealth with them...and there's absolutely nothing a despotic government can do about it. 

Why bitcoin beats gold by 2030

First of all, bitcoin has been a far better investment than gold since its inception. Between 2010 and 2020, bitcoin’s price increased from less than a cent to over $29,000, representing a growth of almost 290,000,000%. During the same period, the price of gold increased from around $1,200 per ounce to $1,800 per ounce, representing a growth of only about 50%.

Some might respond to this by saying, “Sure, bitcoin has been a great investment over the last decade, but I’m too late now.”

However, this is akin to saying, “There's no point in using the internet today because I’m too late. I should've invested in the late 90s. I missed the boat.”

See how ridiculous this sounds?

Groundbreaking innovations are long-lasting utilities, not short-term fads. There is no such thing as being "too late" to bitcoin because of the permanent solutions that it gives the world. Plus, as you'll read soon in this article, bitcoin adoption is still extremely early with a huge total addressable market that has not yet been covered.

The most *logical* (not hopeful) assumption is that more people will value bitcoin’s monetary properties over gold’s as time goes on.

Now, let's focus on the generation set to inherit large amounts of wealth by 2030: the millennial generation. 

A study conducted by the Tokenist, which surveyed nearly 5,000 participants in 17 countries, found that 45% of millennials preferentially invest in bitcoin over stocks, real estate, and gold. 59% of millennials feel that most people will be using bitcoin within the next decade. Less than 25% of millennials think that bitcoin is a bubble, while 50% of baby boomers do. The survey also posed a question for both millennials and baby boomers to answer, which was:

"How much do you agree or disagree with the following statement: I don't see the value in bitcoin because it is an intangible good (i.e., I can't touch it)"?

55% of millennials disagreed with this statement, while only 15% of baby boomers disagreed with this statement. This is indicative that the millennial generation is much more inclined to value bitcoin despite its non-physical nature.

The graph below shows this study's results on the millennial generation's preference of bitcoin compared to the baby boomer generation's. Here's a pretty compelling factor to note: only 3% of the baby boomer generation would prefer $1,000 of bitcoin over gold, while 32% of the millennial generation would prefer $1,000 of bitcoin over gold. Therefore, according to this survey the millennial generation prefers bitcoin over gold over TEN TIMES more than the baby boomer generation does!

Of course, statistics cannot be completely accurate all the time; however, these figures are certainly indicative of trends. A different study from deVere Group reported an even higher number of millennials preferring bitcoin over gold. deVere's report stated that over 2/3rd of millennials prefer bitcoin to gold!

Now an important consideration with everything stated above is that those in older generations are, of course, not getting any younger. Such is the cycle of life. With that said, a study by Coldwell Banker estimates the millennial generation is set to inherit $68 trillion by 2030, while Bank of America estimates that it will be $84 trillion by 2030. Given that the number of millennials gaining interest in bitcoin is only growing, plus the fact that this generation is set to inherit such a large amount of wealth, the most *logical* (not hopeful) scenario is that bitcoin's adoption will drastically increase as the wealth transfer between baby boomers to millennials takes place. There is a generational shift of money currently taking place.

I'll end on the same statement that this article began with:

Money is a form of technology. Technology improves over time.
Bitcoin is the next generation of money.

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