Gold and Bitcoin have been used synonymous as paradises and safe coins. What is a safe shelter? It is a place to park wealth or money when there is a high degree of uncertainty in the environment. It has to be something that everyone can believe, even if the current institutions, governments or players in the business game are not available. Wealth should be kept safe in times of problems. What are the risks for someone’s wealth? There is robbery for theft if it is a physical asset. There is damage by fire, flooding or other elements. There is a legal problem by not being able to determine if the asset is really yours or not. There is a risk of access in which you can own the asset, but you may not be able to get your hands. You can own the asset, but you may not be able to use it due to some restriction. Who else does he have to trust to be able to use his wealth, spending it, investing it or turning it into different units of measurement (coins)?
In cases such as cash or coins, you may have the asset and can use it freely, but it has no value due to a systemic problem. There may be too many units of the currency so that the use of them would not buy much (hyperinflation). There is also devaluation, where a coin is arbitrarily devalued due to any economic or institutional problem. Most of these problems come from too much debt and there are not enough assets to pay for them. A devaluation of the currency is like a partial or slow bankruptcy for a government or issuer. In a foreclosure scenario, creditors (or users of the currency) would obtain a fraction of what was originally worth the asset (or currency).
A key aspect for Bitcoin and gold is that, when creating any of them, there is no responsibility involved. National currencies are issued with attached interests, which means that there is a responsibility to the issuer of the currency. The coins due to being centralized can also be “eliminated” or have their altered value, devalued or exchanged by other currencies. With Bitcoin, it would have to be consensus among the players for this to happen. Gold is the money of nature, and since it was found, there is no one in charge of how it works. Gold also has the history of being used as money for thousands of years in practically all cultures and society. Bitcoin does not have this reputation. The Internet grid, technology and power are needed for Bitcoin to work, while gold is alone. The value of gold is based on what is being exchanged. The value of Bitcoin is similar to the purchase of an action or a good: it is determined by what the buyer and the seller agree that it is worth it.
Are there regulatory, institutional or systemic risks with Bitcoin? The answer is yes. What happens if a group of central banks or governments took over Bitcoin’s issuance? Would not this take this to the control problems that could stop Bitcoin’s transactions or prevent them? What happens if the justification was to stop terrorism or illegal activities? There are also technological problems such as Internet controlling, electric power involved in mining Bitcoins, or other topics in infrastructure (electrical grid, nuclear network, Internet servers, telecommunications companies, etc.) can also execute The range Of restricting who buys Bitcoins, how many can exchange each day or may be issuing billions of FIAT currency units and buying and selling Bitcoins with them, which would cause seizures at the prices of the unit, which led to distrust and lack of use? Gold does not have these deficiencies. Once it is extracted, it can not be destroyed. It does not depend on technology, infrastructure or any institution to be valid. Since it is small and portable, it can be taken anywhere and still be useful without any other necessary mechanism. The prevailing institutions can be changed many times and gold will remain valuable.
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