Many people think of bitcoin as digital gold. And that is true, but bitcoin is also much more. This misunderstanding is part of why bitcoin is still so undervalued.
For example, bitcoin is both a bearer currency and a payment network. It’s like the USD + PayPal, if they were inseparable from each other. Admittedly a very imperfect analogy.
But I want to pose a thought experiment:
What if gold were exactly like bitcoin? What if a gold bar or a gold coin could do everything that bitcoin can currently do?
If gold were exactly like bitcoin…
You could send gold to anyone in the world, anywhere in the world, in 10 minutes, for less than $10 (as long as they had an internet connection)
You could send the tiniest fraction of gold or a suitcase full, and it would be just as fast, cheap, and easy to send
With a simple computer program and internet connection, you could instantly verify whether the gold you have is real or fake, at no extra cost
Anyone in the world could instantly verify how much gold existed in the world, and exactly how much gold was held by each owner (each wallet)
Anyone in the world could also see every time new gold was minted, old gold was destroyed, or gold was sent.
You could carry any amount of gold that you want, to anywhere in the world, just by memorizing or writing down 12 unique words. No need to worry about gold’s heavy weight, or risk of confiscation, or losing it in your checked luggage.
Right now, there are people around the world working to improve this “gold”, and everyone who holds some can enjoy the improvements. So if someone devised a way to make sending gold cheaper or faster, every gold holder would enjoy this upgrade.
People are also working to build products and services on top of “gold”, that make use of its many unique features. For example, someone could build a tool that allowed you to temporarily lend small fractions of your gold (the lightning network), and in return you would earn more gold for providing this service. And anyone who holds gold could use this tool
You would know exactly how much new gold is mined around the world, every minute, hour, and year, and by exactly which miners. Further, every 4 years, the rate of newly mined gold would drop by half, in perpetuity
Finally and perhaps most importantly, you are certain that there will only ever be a maximum of 21 million “gold” units in the world, and that is also public and independently verifiable
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If gold were bitcoin… but gold is not. It can do none of those things. And that is why, slowly and inexorably, bitcoin will win in price and mindshare and adoption.
Bitcoin is gold with wings. Or conversely, gold is like a dumb bitcoin.
There are many more differences that I have left out. But I hope it’s an interesting thought experiment.
Note: of course, there are some benefits to physical gold that bitcoin doesn’t have. For example, gold has materiality. Gold has some niche industrial uses.