Bitcoin and other crypto currencies have been featured heavily in the news as of late, with some even proclaiming them as a replacement of gold. Bit coin certainly has its advantages. It is digital, restricted in the quantity that can be produced, and isn’t subject to the politics and corruption which are too often associated with traditional government issued fiat currencies. A growing number of merchants are accepting it as form of payment, but can it really replace the yellow metal?

Origins of Bitcoin

Bitcoin wouldn’t have been possible without the existence of the internet itself. It is the very first digital currency to be introduced which is decentralized, meaning it isn’t produced by a central bank as is the case with the Dollar, Yuan, Euro and every other government issued currency. Members of the Bitcoin community use the processing power of their own computers, which is finite, to “mine” the coins via software that is open sourced and which performs advanced mathematical equations. Thus, Bitcoins are not produced out of thin air and instead have an intrinsic value due to the fact that their creation requires the work of computers around the globe.

The biggest advantage of Bitcoin is that unlike government issued paper currencies, it is restricted to no more than 21 billion units. This means, theoretically, that Bitcoin is invulnerable to the hyperinflation which has occurred in many countries such as Zimbabwe and Germany after World War 1. Governments around the world have shown that they largely can’t be trusted to manage paper currencies in a way that doesn’t incur debt on their populations, and as a result crypto currencies are superior.

Bitcoin’s Weaknesses In Comparison To Gold

Despite its benefits, Bitcoin has a number of glaring weaknesses, especially when compared to gold. For one, it is digital, meaning you can’t store it in your hand, carry it across borders, or secure it in a safe. In other words, Bitcoins are totally dependent on computers, the internet and electricity, and when natural or manmade disasters occur the very first thing to disappear is usually electricity and the internet.

This means Bitcoins and other crypto currencies are absolutely worthless in a power down situation. You can’t barter or trade with them because they are digital. Gold and silver, by comparison, are physical metals that have been used since the earliest civilizations. They are designed to survive calamities both physical and economic and are created in cosmic collisions which occur deep in space, making them truly rare. Unlike Bitcoins, gold and especially silver have industrial uses which is why they appear in computers and other machines and equipment.

Furthermore, the Bitcoin community has been subject to power struggles among traders and studies show that by the 2015 Chinese miners dominated over fifty percent of the market, which resulted in slower transactions for users outside of China. Do you really want to bet your family’s financial future on a crypto currency dominated by individuals in a single country? Or would you rather trust a physical metal you can hold in your hand that has been use for 5,000 years?