Bitcoin has long been likened to gold, with cryptocurrency enthusiasts claiming it’s value can never disappear. Just like gold it is scarce and difficult to mine and just like gold its practical applications have been replaced by other metals, or in this case altcoins, that serve the same purpose but better.
The value of gold, just like the value of bitcoin rests on society placing value on it. If I were to mine gold or purchase it I would need to expend a lot of resources, and I would not want to part with my gold for anything less than these costs. If anyone wants to acquire gold, they’re going to have to meet the markets demand of a high price.
However, gold has two distinct advantages over Bitcoin. The first, it has other uses. Gold can be used in manufacturing but more importantly it can be used for ornamental purposes. Just as high-end brands like Apple or Prada command a premium for the simple fact their logo is on the merchandise, so to does a gold necklace and statue for the simple fact that it is gold. A shirt with the bitcoin logo holds no more value than my favorite plain white T. While you can walk around with Bitcoin on virtual wallet to impress your friends, you could also walk around with gold bar, though both are testament to your wealth they are equally silly.
The other distinct advantage for gold is a true philosopher stone does not exist. I can acquire fool’s gold or buy gold paint but neither of these are the same thing. For Bitcoin the philosopher stone exists. The open source code, which I could easily copy to launch Bitcoin2. It would be just as difficult to mine, expend just as much energy, and in the minds of the masses be identical. I have no doubt that initially it would have no value, but all it takes is a couple of people to decide to adopt it. The main support of Bitcoin at this moment is the fact that no one wants to sell it for less than the mining costs. Bitcoin2 could even gain popularity more slowly, and after 50 years once the mining costs are identical to the first Bitcoin what is to stop it from having the same value? If the value is less because society places less value on it, what is to stop if from diluting Bitcoins price even a little bit? A group of likeminded individuals could decide that by investing in Bitcoin2 they have more to gain as the prices should eventually converge. We all know that once a market in cryptocurrency starts going up a little bit there will be people jumping on the bandwagon.
Now you might be feeling that this argument can be applied to any cryptocurrency. If Bitcoin can be copied to the point where it loses all its value why should any crypto be any different? The answer infinite scalability, no energy costs, and no fees. For every extra Bitcoin that is created the fees to transfer it to another person rise. While this might not affect the rich, it will affect the other 90% of the world. If I want to send 0.0001 BTC to someone I would be turned off it cost me 0.00005 BTC to do. The coin does not scale to the average person. However, if there costs of sending 100 coins is the same as sending 0.00001 coins then true mass market adoption can happen. Only then will a cryptocurrencies value become stable and become a currency.
So Bitcoin is not like gold, but why is it like coal? Just like coal Bitcoin had a use, a good one. One provided the first real energy to the world, the other the first real decentralized currency. Both were trusted and changed history. Unfortunately, both only offer band aid solutions to the same problem. They are not good for the environment, they threaten to destroy the world, and the rich are the ones that have benefitted from them. You might be thinking I am not rich, they helped me. You are compared to most of the world who don’t have access to energy let alone a computer.
Coal was at risk at dying off in developing countries, but then high efficiency low emission coal plants were created which increased efficiency from 33% to 40% according to worldcoal.org. The single most efficient plant being in China at an efficiency level 47.82% (Patel, S.). This is good, but it is not great. It also fails to address the fact the energy requirements go into mining coal. While other sources of green energy such as solar, wind, and hydroelectric plants need to be built it is a one-time cost, coal must continually be produced.
The lighting network is no different, it is more efficient than Bitcoin, but it is not efficient enough. Massive mining farms that take up land unnecessarily and use up our finite resources to power them help no one. It is a band aid to a problem. Further the lightning network is said to have problems that go against its main selling point, security. The nodes have to be online at all times removing the option of cold storage for your wallet, the lighting network also increases the possibility of fraud and theft (See --> Bitcoin’s Lightning Network: Three Possible Problems in the reference section)
Can you guess which country both has the most mining farms and mines the most coal? If you guessed China, you were correct. The world does not need to destroy an ecosystem home to 1.4 billion people for a currency that should be phased out, and it will be.
Bitcoin made a lot of people very rich. It also made a lot of people very poor. Just as people were selling at $20,000 there were people buying at $20,000. It is these people holding on for dear life that give Bitcoin its current value.
Now while I believe in the blockchain I do not believe in Bitcoin. I believe in sustainable investments and it is for this reason I will be investing in coins like Digibytes, NANO, and Skycoin . Ones that will improve the wellbeing of the planet and the people living in it, that will ensure the next generation has somewhere to call home.
Notes:
Gold that is costly to mine has the same value as gold that you find lying on the ground. (What am I talking about?)
If you do know the difference between proof of work, proof of stake, and DAG coins be sure to do a little research.
References
Articles:
Sharma, R. (March 17 2018). Bitcoin's Lightning Network: Three possible problems. Retrieved from: https://www.investopedia.com/tech/bitcoin-lightning-network-problems/
Patel, S. (04/01/2017). Who Has the World's Most Efficient Coal Power Plant Fleet. Retrieved from: http://www.powermag.com/who-has-the-worlds-most-efficient-coal-power-plant-fleet/
N.A., copyright 2018. High efficiency low emission coal. Retrieved from: https://www.worldcoal.org/reducing-co2-emissions/high-efficiency-low-emission-coal
Images:
Coal and Goal. Retrieved from: https://emerginggrowth.com/mx-gold-corp-otcqx-dtvmf-sheds-8-takes-breather-rally/gold-coal/
Harry Potter Philosophers Stone. Retrieved from: https://www.factinate.com/things/facts-harry-potter-sorcerors-stone/
✅ @ice.dragon, I gave you an upvote on your post! Please give me a follow and I will give you a follow in return and possible future votes!
Thank you in advance!
Haha I followed, but I would appreciate some criticism on what I wrote as this is an opinion piece. And while I can see both sides of the value/non-value in Bitcoin, I am on the fence. The gold line seemed to be to overrepresented without enough voices on the other side.
Edit: I am talking to a bot.
Coins mentioned in post: