Bitcoin is the first and most popular cryptocurrency, it is the invention of digital scarcity i.e. digital property. It’s a new form of money and an independent global monetary network. It was invented by a person or persons under the pseudonym Satoshi Nakamoto, and is an enormous breakthrough in computer science and cryptographic systems.
In simple terms bitcoin is digital money.
But then again so are dollars, euros, and yen. We have PayPal, Venmo, Cash App, Kohls cash, Credit Card reward points…heck you can even send money over Facebook messenger!
So while digital money is technically correct! It doesn’t really tell us anything…
What about digital gold? I’m sure you’ve heard that term tossed around, and honestly I do like it a lot better.
If I was explaining bitcoin to a 5 year old I would say that bitcoin is just gold that’s on the internet. In the same way that email is just internet mail, bitcoins are gold coins on the internet.
I like this comparison because calling bitcoin digital gold tells you it’s one of a kind, rare, and desirable. However bitcoin is more than just digital gold, its an evolution of gold. Where gold is great at moving value across time, its not great at moving value across space or scales.
Bitcoin is better than gold because it was specifically designed to fix all of its shortfalls. Including verifiability, portability, and divisibility.
The Gold Story
Gold was independently chosen by human civilizations for over five thousand years, civilizations that didn’t even have contact with one another. This is because gold just so happens to fulfill certain monetary properties which made it better money than any other asset on earth.
Why then did this ancient money become obsolete?
As civilization became global, and information moved at the speed of light, the only way for gold to keep up was for abstractions be build on top of gold. I.e. gold certificates. Paper money and bank spreadsheets that kept track of gold became money, instead of the gold itself.
The temptation to corrupt this system was too great for humanity to handle, and eventually more paper certificates were distributed than the underlying gold they were backed by. Eventually this system broke down and only unbacked paper/digital money was left.
Why Bitcoin is Digital Gold
Bitcoin is digital gold because of its scarcity. It’s digital gold because its monetary policy is set in stone, and it’s too decentralized to be able to change. It is extremely secure and durable because of its extreme simplicity. Bitcoin is programmed to do one thing and one thing only, be a sound money settlement network.
It was the first digital asset, created an entire asset class, and was the invention of digital property itself. It’s the number one digital asset in terms of market cap and is worth almost as much as all other cryptocurrencies combined.
Bitcoin has been used to back other cryptocurrencies like stablecoins, is classified as a commodity by multiple sovereign regulatory agencies, and is held on the balance sheets of governments and corporations like gold or treasuries.
It was this track record, network effect, and long history of unchanging sound money properties which has made bitcoin the undisputed champion of sound money, and no other digital asset tries to compete with bitcoin on this narrative. It’s well understood in the digital asset ecosystem that bitcoin is the sound money project.
Once you understand that bitcoin is one of a kind and has no competition in the digital gold space, bitcoin’s value proposition cuts through the noise. Bitcoin is gold that can be programmed, sent anywhere on earth at the speed of light, and easily integrated into any digital application or program.
Gold failed as money because it isn’t portable, it is hard to verify, and it can’t be divided up to small value amounts. Limitations bitcoin was specifically designed to fix.
By fixing the shortcomings of gold, humanity has a new sound money which will compete against unbacked digital certificates. If gold was independently chosen by world civilizations for thousands of years due to its superior monetary properties, what does that mean for digital gold?
The crazy thing about bitcoin is though, this definition of “digital gold” is underwhelming. It is extremely simplified and doesn’t really explain why bitcoin is so revolutionary.
To steal another line from Andreas Antonopoulos:
Saying bitcoin is digital gold is like saying the internet is a fancy telephone