Home > bitcoin, currency, economics > Bitcoin: Better than Gold

Bitcoin: Better than Gold

Many proponents of bitcoin come to the technology with the belief that the ultimate currency is gold, or some other commodity with intrinsic value.  This is usually because they correctly realize that the centralized control of the supply of money is too dangerous a power to bestow on anyone.

However, currencies which are based upon an item of intrinsic value have an inherent problem. This problem stems from the same feature that gives it the benefits that they seek. Items or rather commodities, with an intrinsic value cannot be transmitted over distances easily. Whether gold, or silver, or gemstones, or cigarettes or wheat, these must be first converted into a form suitable for transmission over distances if one wants to efficiently do so.

In a digitally connected global economy the long term sustainability of such currencies is reduced to almost zero.  This is simply because there must be central repositories or control of the sending and receiving of said resources, or the representation of their value, when users wish to transmit this value over distances very quickly. The current global banking system primarily arose out of the need to be able to send measures of value over distances which made the physical shipping of these commodities very costly and therefore impractical.

Therefore no matter which physical currency of intrinsic value that people choose, they must ultimately submit to the fact that in order to facilitate global trade based on such a currency, that currency must first be deposited at a bank and converted to a digital account so that they may use that measure of value in transactions which occur over the internet. It is at this point that they then entrust the control of that currency to a bank.

This is merely repeating the same mistake that history has shown over and over again doesn’t work. This centralization of wealth in the banking system will result in a failure of that exact system. It is a consequence of the centralization of wealth and its power. It corrupts the people in control of the system and eventually the entire system itself.

I believe this can be taken further. If Stefan Molyneux can argue that the more free a society is the bigger and more corrupt the government ruling such a society becomes then it could be argued, using the same logic, the more commodity based or intrinsically valued a currency is, the more powerful and corrupt the banking system will eventually become.

It is bitcoin which solves both of the problems. Not only does it decentralize currency production, but it also solves the problem of digitally transmitting the measure of value of that commodity, as bitcoin itself is a sound currency.

It will eventually follow that the ultimate form of a globally decentralized monetary system requires the efficient convertibility of this digital currency into locally valuable commodities, which may include precious metals. This is merely the proper function of any digitally transmitted measure of value. At this point in time there is no technology which can do this without first centralizing control of the currency other than bitcoin.

Micheal Suede wrote an article that more clearly demonstrates the problems that a gold standard or any commodity backed currency faces. I reiterated many of the points he makes here and hopefully added some new ideas as well.

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