Bitcoin vs. Gold - Was ist besser?

When it comes to bitcoin and its function, even crypto enthusiasts are divided. As a rule, these can be roughly divided into three camps: those who see Bitcoin as a store of value, as a medium of exchange, or as both. For some, Bitcoin is a store of value that has even better properties than gold. For others, the comparison between bitcoin and gold is too far-fetched.

We therefore want to take a closer look at the often made comparison between Bitcoin and gold. How much truth is behind the statement that Bitcoin is the digital gold?

In this article, we are going to provide you with a lot of valuable and helpful information on Bitcoin vs. Gold within the following discussion, which will help you to be light years ahead of the average people out there in terms of knowledge technology.

So let's jump into the bitcoin vs. gold discussion and start by addressing the fundamental question of why we actually consider gold to be valuable. We want to try again and again to show possible parallels between Bitcoin and gold in order to then discuss them critically. Have fun!


Bitcoin vs. Gold Chapter 1: Why gold is so valuable

With the technological progress of the people, the efficiency in the production of goods also increased, which raised trade and thus the economy to a new level. With the increasing production of goods, the use of various raw materials, including metals in particular, rose sharply.

As a result, many metals were produced and in demand in large quantities. The high demand for metals made them a suitable medium of exchange that was widely accepted as payment for other goods. In addition, the manufacturing process of the metals involved a great deal of effort, so there was no risk of the market being flooded with too much supply and causing the metals to depreciate rapidly.

There was particularly high demand for rarer metals such as gold and silver. The practical indestructibility of gold made it possible for people to store value and wealth over generations and thereby develop a far-reaching planning horizon into the future. Both gold and bitcoin cannot be destroyed, but at most lost.

How Gold Became Money

Due to its exchangeability and physical property of retaining its value over generations, gold already fulfilled 2 of 3 important properties that money must have according to the general understanding: General acceptance as a medium of exchange and the ability to store value.

The foreseeable and natural consequence of the rise of metals was the use of gold, silver and copper coins in everyday commerce. The positive effects of universal means of exchange on the market economy should not be underestimated. The use of these coins made it possible to create a larger market, which greatly increased the opportunities for specialization and international trade.

Just like bitcoin, gold as a medium of exchange was transnational and not limited to trade within a state.

Gold's Drawback as a Monetary Good

However, the use of coins also had two major disadvantages. On the one hand, the use of different monetary means caused economic problems due to the fluctuation of their value among each other, which hindered their function as an efficient unit of account. On the other hand, governments and counterfeiters were able to reduce the proportion of valuable metals in the coins in order to put more coins on the market.

The latter is a current and serious dilemma, because such an approach not only depreciates the value of the monetary funds involved, but also transfers part of their purchasing power to the issuers of such coins. Since nothing in the world is free, no additional wealth is created, only a transfer at the expense of the recipients to the issuers of the coins.

With Bitcoin, counterfeiting gold would be like a so-called double-spending attack, in which BTC are transferred that do not exist at all. However, such an attack is only possible as part of a 51% attack and is extremely unlikely due to the high security of the network.

There Cantillon Effect

The circumstance of the value transfer described above is also known as the Cantillon Effect and describes that the beneficiaries of an expansion of the money supply are those who have the opportunity to spend the additional money supply before the market can react to the increased money supply by increasing prices. The profit from money creation is also known as seigniorage and is now used by the monopoly of the central banks to finance them as an institution.

With the 19th century and the development of the modern banking system, the use of paper money, whose value was guaranteed by its redeemability in gold, became increasingly popular. Instead of trading gold directly, its representative substitute, paper money, has replaced it in everyday commerce, eventually leading us to the gold standard.

The gold standard and the problem of centralization

The gold standard allowed international trade to flourish and reach new heights as the major economic powers agreed on a unified gold-based monetary system. However, the gold standard also had an essential disadvantage and that was an increasing centralization of gold reserves in bank vaults.

Since the amount of gold is limited, but people's hunger for more is limitless, this circumstance led to the inevitable. Banks and governments began to issue more paper money than their gold stash could support, to fund their rising expenses or to amass more wealth.

The rapidly increasing money supply compared to the only gradual increase in the gold supply resulted in a decline in the value of paper money and a transfer of wealth from the masses to the hands of a few. While banks and governments invested their wealth in gold and other assets, many commoners saved their fortunes in increasingly debased paper money.

The end of gold as money?

Eventually, gold's role as a monetary vehicle officially disappeared and was replaced by a new standard based on government money. The problem with government money is that its purchasing power relies specifically on the ability of money creators not to increase the money supply to the point where it depreciates.

Contrary to the opinion of many, gold still plays an important role as a monetary good. Central banks continue to hold gold in reserve to underpin the value of their money. In fact, central banks hold even more gold today than they did during the Gold Standard period.

The value of gold, just like bitcoin, lies in its scarcity and predictable rate of inflation. Only a certain amount of new gold enters the market each year, just like Bitcoin.

This brings us to our next topic: the stock-to-flow method, which provides an explanation of why gold and bitcoin are considered more valuable than other commodities.

Bitcoin vs. Gold Chapter 2: Scarcity as a value driver

The relative difficulty of producing new units of a good determines how susceptible that good is to inflationary behavior.

The relationship between the amount of gold in existence and the amount that is additionally put into circulation each year is expressed by the stock-to-flow (SF) ratio.

SF = Stock / Flow

The inventory (stock) corresponds to the size of the available stocks or reserves. The flow reflects the annual additional production of the good. The higher this value is for a good, the more likely it is that this good will hold its value or increase against inflationary currencies such as the US dollar or the euro.

So let's look at some SF numbers.

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Gold has the highest SF value at 62. This value says that it takes 62 years of production to maintain the current gold stock. Silver comes in second with an SF value of 22. This high SF value makes them monetary goods, but at the same time of different quality.

Bitcoin currently has an SF value of 25. This puts Bitcoin in the same category of valuable goods as silver and gold, based on the SF value.

The Bitcoin Halving as a value driver

Now, one could say that according to the SF ratio, gold is more valuable than gold. In fact, it also has a higher value, but this is where a special feature comes into play that also deserves attention in this consideration, namely Bitcoin Halving.

The Bitcoin Halving halves the inflation rate every 4 years. This means that unlike gold, bitcoin will have an ever-increasing SF value.

Of course, this will also apply to gold in the future, as soon as natural gold reserves begin to run out. However, this is currently not the case. With Bitcoin, on the other hand, we already know very well that the Bitcoin flow will be reduced by half every 4 years. Because that's exactly what it says in the code.

Bitcoin vs Gold Chapter 3: Similarities and Differences

Now that we've got a superficial look at how gold got its value, we can look for the same success factors in Bitcoin. We have already got to know an indicator for such a possible cause through the stock-to-flow ratio.

Furthermore, we have already been able to draw some parallels to Bitcoin in the chapter on the history of the origin of gold as a monetary good. Now we want to look specifically for other similarities between Bitcoin and gold. In this search, we will also automatically come across the differences between the two assets. This enables us to critically discuss whether the comparison between Bitcoin and gold is justified. Last but not least, let's get to the core question of the article: Bitcoin vs. Gold - Which is better?

The differences and similarities between gold and Bitcoin are marked, but not limited, by the following lists.

Similarities between Bitcoin and Gold

  • Bitcoin and gold are both long-lived. While gold is subject to very slow physical decay, bitcoin has no physical form at all.
  • Both gold and bitcoin are finite, giving both assets a relative rarity. While gold's occurrences are of course limited, its protocol limits the number of bitcoins ever in existence to 21 million BTC.
  • With both bitcoin and gold, large fractions of the total are in the hands of a few. With gold, it's primarily central banks and banks, while with bitcoin, it's a handful of individuals and crypto exchanges.

Advantages of bitcoin over gold

  • Unlike gold, we already know that bitcoin's inflation rate will halve every 4 years. This process repeats itself until the maximum number of BTC ever in existence is reached. This makes Bitcoin's value development more calculable for everyone than gold.
  • Due to its physical properties, gold is not as easily transferrable as bitcoin. Transferring a larger amount of gold is inefficient due to its weight and physical size. Users can transfer bitcoin from one owner to another almost instantly.
  • Bitcoin can be divided with high precision. Although gold is divisible, it cannot be broken down as easily as bitcoin, making paying for low-value goods difficult and inefficient.
  • Bitcoin is becoming increasingly popular as a medium of exchange due to its growing acceptance as a means of payment by merchants. Gold, on the other hand, is no longer used or even accepted as a means of payment in most parts of the world.

Advantages of gold over bitcoin

  • Gold has a high intrinsic value due to its usefulness as a commodity in everything from space travel to jewelry to medical devices. On the other hand, opinions differ to this day as to whether Bitcoin has any intrinsic value at all. However, it can also be argued that Bitcoin has intrinsic value due to the effort involved in producing it, its scarcity and its function as a self-sufficient and anonymous currency.
  • While Bitcoin is still very young and novel, gold has proven itself as a monetary commodity for thousands of years and has outlasted many other forms of money.
  • In order to be able to trade Bitcoin at all, the parties involved in trading are dependent on technical aids. At least small amounts of gold, on the other hand, can be transferred from hand to hand without any problems and without any additional tools.

Bitcoin vs Gold Chapter 4: Is Bitcoin Like Gold?

Well, at this point we are aware of the advantages, disadvantages and similarities between Bitcoin and gold. But what exactly does that tell us? Is Bitcoin rightly called the digital gold? Is Bitcoin Like Gold?

Without a doubt, we can see from the few exemplary differences between Bitcoin and gold that they are of course not the same good. Also not about the same thing. There are notable differences between the two assets. However, the similarities between Bitcoin and gold show that they are similar.

That at least justifies the title of Bitcoin as digital gold.

Like gold, Bitcoin has many noteworthy properties that a store of value needs. It is scarce because no one can arbitrarily increase its supply while its supply is limited. It is also self-sufficient and cross-border.

Bitcoin vs Gold: Which is Better?

Finally, let's revisit the Bitcoin vs. Gold debate that is often heard, in which different camps try to explain why Bitcoin or gold is better.

It is easy to explain why consensus can often not be found in these discussions. It simply leaves a crucial preliminary question unanswered. To find an adequate answer to the question of whether bitcoin or gold is better, the first question would have to be: Better for what?

Unlike gold, bitcoin is definitely more transportable and easier to share. However, unlike gold, Bitcoin is still very young. While gold has proven itself as a store of value for thousands of years, Bitcoin is still at the very beginning of its journey, the end of which no one knows yet.

Bitcoin is still in its infancy

A direct comparison between Bitcoin and gold only makes sense once Bitcoin has managed to prove itself as a store of value for decades to come.

But its young age also offers greater potential as an investment. The market capitalization of gold is approximately $8 trillion. This makes it around 50 times larger than that of Bitcoin. Should Bitcoin be able to assert itself as digital gold in the future, this gives an outlook on how great the potential of this unique creation could be.

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