An ounce of gold is an ounce of gold, tangible and visible. Being a store of value for over 2000 years, it stands apart as the only enduring money.
Credit, on the other hand, is a mere promise or expectation to deliver something of value sometime in the future in the form of a vogue currency.
A currency not backed by gold is either a ‘gun barrel to the head’ in which it is coercion or a matter of confidence until the latter inevitably becomes worthless. Ask any person how many promises they have broken today, let alone in their lifetime. Not to mention government promises.
Is Bitcoin—and crypto in general—digital gold or just more credit?
Unlike gold, bitcoin has no utility or intrinsic value. Hence, its only worth can be in terms of a currency. But, as a currency, unless you destroy the equivalent amount of fiat, it’s simply more money chasing the same level of goods and services. The net contribution of crypto is, therefore, inflation. All the while, it wastes enormous amounts of energy on their creation, causing energy costs to rise and resulting in even more inflation. As for the converse argument that it’s a store of energy. How? I see it as energy expended to create nothing tangible or intrinsic.
Then there is the decentralisation narrative—try transferring ownership of anything valuable without a legal contract or the state's consent. See how far you get with that.
Therefore, crypto can only function on a practical and social level with the cooperation of governments. The fact that over 30,000 cryptocurrencies are currently in circulation suggests that they’re not unique or particularly difficult to develop. Why would a government not create its own CBDC without enriching Bitcoin or other CC holders?
What is the asset behind Bitcoin?
More importantly, crypto does not solve the fundamental integrity issue of money because it is still FIAT—digital instead of paper. In other words, it’s man-made and open to manipulation and corruption. Take Bitcoin, for example, at a limited 21 million tokens - that number does not allow for a practical medium of exchange - as at any one moment in time, more than 21 million transactions are taking place worldwide. To make Bitcoin functional, it must be made incremental, which has been done with a subset called Satoshis. But why not have a subsection for Satoshis and then another and another? In short, it, too, can be diluted to nothing. There’s also the problem of power outages and hacking.
My conclusions:
Bitcoin is not money; it is a digital ledger with a token value. As a ledger, the real asset is what is in the safe, not the printed amount on the accounts.
At best, Bitcoin is a speculative game in which you can gamble big—and win or lose accordingly. Good luck!
“Gold is money, everything else is credit.”
— J. P. Morgan
“The arrogance and ignorance of the current generation to understand and appreciate gold’s role in the development of man-kind, simultaneously astounds and frightens me. Without it I believe the enlightenment and civilisation as we know it would not have ensured.”
— Conic Tonic
“Money is one of the primary measure of value in any society, perhaps the primary one, the principal repository of value. As such money is a central source of stability, continuity and coherence in any community. Hence, to tamper with the basic money supply is to tamper with the community’s sense of value. By making money worthless, inflation threatens to undermine and dissolve all sense of value in a society.”
— Paul A Cantor