Some say Bitcoin is “Gold 2.0”. There are many attributes that make Bitcoin like a gold, but only better.
Jerome Powell, Federal Reserve Chairman
Federal Reserve chairman Jerome Powell said that Bitcoin is, “just like gold, only it’s virtual, it’s digital…It’s really a competitor for gold, that’s really how I think about it.”
Inflation resistance and holding value over time are what gold and bitcoin have in common.
Inflation is caused by reckless government monetary policies that increase the new supply of money which drive up the prices of everything. The issuance of new US Dollars has averaged about 9.9% a year since 1971. (source)
Gold vs. Bitcoin Monetary Policy
So, let’s compare the monetary policies of gold and bitcoin since the rate of issuance of new money is what causes inflation…
Gold’s monetary policy is made by the market.
When the price of gold goes up, more people are motivated to mine it from the Earth. When the price goes down, less people mine it. This has kept gold’s purchasing power stable for more than 2,000 years with an annual increase of new supply of about 2.4% a year. (source)
However, if Elon Musk is able to bring an asteroid to Earth which contains trillions of ounces of gold, gold’s value is destroyed because the market recognizes that gold’s principle quality of scarcity is gone. In general, we have no idea how many ounces of gold will exist in 5 or 50 years.
Certain vs. Uncertain Issuance Rates
Contrast gold’s unknown, market based monetary policy with Bitcoin which has a fixed, predictable monetary policy. We know with absolute certainty how many bitcoin will exist in 5 and 50 years, and in fact, we will know exactly how many bitcoin will exist in 100 years!
The Bitcoin protocol creates digital scarcity by reliably capping the total number of Bitcoin to 21 million and gradually reducing the new supply of Bitcoin over time. As of December 2024, about 19.8 million bitcoin have been created.
This monetary policy is written into the open source code that runs bitcoin and can be validated by anyone.
Further, this source code is not controlled by any central authority, government, company, or foundation which can manipulate or corrupt it. No one can change the monetary policy of Bitcoin which creates true, lasting digital scarcity. It addition to proven scarcity, Bitcoin’s monetary policy provides certainty and confidence as opposed to the uncertainty of gold.
Plus, Bitcoin’s monetary policy is designed to not only retain value over time, but to increase it through a gradually decreasing new issuance schedule where the new supply is cut in half every four years.
Bitcoin’s Superior Monetary Policy
As of 2024, Bitcoin’s annual new supply rate is already 3x better than Gold’s at 0.86%. And, after the next halfing in 2028, it will get halved to 0.43%! Eventually, no more Bitcoin will be “mined” and the new supply rate will terminate at 0.00%. source: https://charts.bitbo.io/inflation/
Bitcoin’s fixed issuance schedule, its unconfiscatable nature (when stored properly), combined with gold’s best properties as a hedge against reckless government money printing has made the Bitcoin’s adoption curve look like the Internet’s of the 1990’s.
Bitcoin: A Better Gold?
- More portable: Bitcoin can easily and affordably be sent anywhere on the globe with an internet connection in 30 minutes.
- More easily divided: there are 100 million easily divided units in each Bitcoin, called Satoshis, or “sats”.
- More easily verified: open source software allows anyone with a computer to verify the authenticity of any Bitcoin transaction, saving the assay costs of gold.