Loading ...After all, in one major respect it is no different to BTC, USD, LEK or yapstones. It is because people believe in it. It is no less a fiat currency than the others. It isn’t backed by anything. It just is.
I guess it all started 5,000+ years ago when european, north african and asian peoples realised that gold was different. There wasn’t much of it, and it didn’t rust or corrode. And it was beautiful. And heavy, which made it unfakeable. Easily worked. Easily tradeable, it could be used for barter for perishable goods, or animals; and thus it became a store of value. When paper currencies were developed by the Chinese, they were always redeemable for gold, and fully backed by it. The piece of paper was simply more convenient, lighter, easier to hide.
Later on in western cultures the paper currencies would be abused, by more paper being printed than there was gold to back it. And thus another advantage of gold became apparent. If you had gold – you had gold. If you had a paper promise for gold you didn’t have gold, you had a paper promise. Ummmm; a paper promise. A piece of paper, issued by the government, promising to give you some gold. What could go wrong.
My response to cryptocurrency conversations when they first started emerging from the primordial blockchain was “tulips”. This has not changed. What, exactly, do you have when you own a bitcoin? As far as I can see, you own the right to a particular sequence of zeros and ones which are stored multiple times in a disseminated network of computers. And in your personal crypto wallet, a hard drive or part of a hard drive which usually requires a password etc. etc. and so is secure. Or on a crypto exchange which makes it easier to buy and sell. So you own – what? What is a one or a zero? A distortion in a magnetic field? So you own the rights to a series of magnetic fluctuations? Whatever it is, it relies on a lot of sophisticated stuff to access and transfer (spend or acquire) them, which can be intercepted by hackers now, let alone when quantum computers arrive. Tulips seem a lot simpler.
Bitcoin is currently valued at $100,000 by the market. Maybe roughly the same as a skilled worker – certainly in Oz a skilled tradesman can earn that in a year. At the height of the tulip bubble a tulip sold for ten times the wage of a skilled artisan. On that metric BTC could reach $1m before the bubble pops. So plenty of time for everyone to jump on the bandwagon! YEEEEHARRRR!! Ride them coat tails.
Or, if you really want to clean up, issue your own. Surely the success of Dogecoin, which was issued as a joke, must be the ultimate sign that it’s all without foundation. It currently has a market cap of $46bn and a current supply of 147bn and no limit on how many can be issued. And it is, officially, a joke, poking fun at BTC. I think it’s performing its function perfectly.
So for me the metal has value over and above paper and crypto currencies simply because it a physical item that cannot be destroyed, even if it is lost in a South Welsh Newport landfill site (you’ve gotta doubt that a hard drive would still be functional after all these years). It cannot be hacked when you try to spend it or convert it to fiat. It just is. Tulips it is not.