Gold vs. Bitcoin - Which is Better?

BitcoinEducational

Gold vs. Bitcoin - Which is Better?

Comparing two of the world's most scarce assets.


TL;DR

  • Money can be compared in a variety of ways, but the simplest way is to look at monies qualitative aspects – better money will better fulfill the qualifications for money
  • Bitcoin is superior money than gold because it meets most of the qualifications better
  • With Lolli, you can earn bitcoin for free just by shopping online

Gold’s Rich History

Gold has a fabled, rich history – it was used by the oldest civilizations, from Ancient Greeks and Romans down to the Cowboys of the Wild West. Time and again, gold would replace other currencies, and time and again hostile parties would seize gold.

Whether governments, bandits, or marauding invaders, a group could see their wealth and trading power vanish overnight. For the ancients, losing wealth wasn’t that big of a deal – if the marauders got their hands on your gold you were probably already dead.

The US & Gold

In 1913, President Woodrow Wilson’s administration created the Federal Reserve to maximize employment and stabilize prices. By the 1930s, depression had struck and gold redeem-ability became critically limited. And in 1944 national convertibility became illegal.

Fast forward to 1971, and President Richard Nixon put the final nail in the golden (and hence the saver’s) coffin by ending the few remaining ties the US dollar had to gold completely. The USD became a floating currency and would be used as a reserve for the other fiat (fiat meaning by decree) currencies of the world.

What made presidents, rulers, and marauders cable of seizing gold and debasing wealth? Gold’s cumbersome size and weight.

Qualifications for Money

  • Scarcity
  • Divisibility
  • Portability
  • Fungibility
  • Ownership

Scarcity

Scarcity functions to let things, like gold and bitcoin, maintain their value. Actions like inflation or Quantitative Easing effectively reduce the individual value of monies by increasing the total supply – less is more basically.

Gold is super scarce  – that’s why it has been used to hold wealth and traded for several millennia. However, bitcoin is even more scarce. Less than 21 million bitcoins will ever be mined whereas gold will continue to be produced around its historic rate of 3% of the existing supply.

Mining gold is hard but it’s not as difficult as mining bitcoin. Once the last bitcoin is mined sometime around 2140, no bitcoin will ever be mined again, making it the hardest asset in the world; no rise in demand can ever alter the issuance schedule, nor increase the total supply.

Portability & Ownership

These terms are put together because they are highly related. To own something you (in the vast majority of cases) must have the right and the ability to transport it.

Gold was seized and wealth was stolen easily because gold is cumbersome to move, awkward, and costly to hold – it weighs a lot. Due to these limitations, people began giving control of their gold to banks. These banks in turn consolidated more and more gold under one roof, making it easy for a centralized power, i.e., a government influenced by a central bank, to seize gold and suspend redeem-ability of banknotes for gold.

Bitcoin doesn’t have this problem because holding and moving it is easy. You can store it on your phone, laptop, customized device, or even a slip of paper and you can transfer it around the world securely and fast, with no reliance on centralized third parties.



Unlike gold, which again has a tendency to be centrally held, bitcoin has empowered more and more individuals to have sovereign control over their wealth.

Better security, transferability, and scarcity make Bitcoin a better store of value. And it may just become the better money – it's updatable and improvable after all (unlike gold).

And even if you don’t think bitcoin is superior, it’s obvious why Lolli gives back bitcoin and not gold rebates – it’s impossible to send ounces of gold through the computer.


Thanks for reading! Follow us on Twitter @trylolli and find out more about bitcoin in What Are Sats?

💜,
The Lolli Team


*The difference between bitcoin and gold’s divisibility and fungibility is trivial, so those terms were not used to compare the two.

*There is a lively and broad historical debate over how money initially emerged as a technology, in other words, how it came to have value. This debate is pretty much irrelevant if both things being compared have value as a given. Bitcoin and gold are both already very valuable and that the debate is too broad for a blog post, so the debate over the emerging value of money technology was ignored in this post.

Walt Smith

Walt Smith

Walt is a Research and Editorial intern at Lolli, a browser extension that lets you shop from 1,000+ brands online. He currently studies economics at Grove City College.

Newport Beach, CA