Bitcoin Is Superior To Gold

Bitcoin vs Gold

The bitcoin vs gold debate rages on with investment circles unable to deny exponential patterns of growth which characterize Satoshi Nakamoto’s bitcoin payment system. Gold has been used as a form of currency and trade for thousands of years and has a reliable track record for preservation of wealth. However, as the newcomer onto the scene, bitcoin may be the kind of financial and technological breakthrough to challenge gold as the monetary kingpin once-and-for-all.

Early on in its life cycle, prescient investors began questioning the legitimacy of bitcoin value and debating how such a commodity could command a market price. What differentiated bitcoin from a mere collectible and what made it similar to precious metal assets?

Among many circles, especially gold bugs and older-generation investors, bitcoin was not considered a valid investment up until very recently.

In order to properly analyse the value proposition of bitcoin vs gold, we must clarify which attributes of gold are valuable and prop them up against the promise of bitcoin. When we measure the implications of today’s economic environment, it is clear to see why bitcoin is being considered the ‘gold of the 21st century’, or as some pundits have advocated, a ‘digital gold’.

Bitcoin vs Gold

Gold has perceived value because it is scarce, quasi-indestructible, and serves an industrial purpose. Bitcoin inherits all of these attributes then enhances the characteristics of portability and divisibility. Both are exceedingly durable and cannot be counterfeit. The main advantage for bitcoin over gold as a commodity is that bitcoin is highly portable, while gold must be insured, stored, guarded, and verified that the integrity of the substance has remained intact and not mixed with other filler metals.

If you are moving precious metals across borders, you must declare it. However, no amount of border authorities or cash sniffing dogs can detect if you hold bitcoin, as ownership can be distilled down to memorizing a private key.

If you are attempting to buy something with gold, it usually needs to be exchanged for currency first. Bitcoin payments need only a smartphone to transact.

One of the main reasons to add gold to an investor’s portfolio today is as a hedge against economics disaster, that of collapse or hyperinflation. Outside the gold-bug crowd, and among the current generation, gold as a valid form of transaction is something of a stretch of the imagination. In such a disastrous event, would people be exchanging pieces of gold if internet connectivity were still available?

At the blurring rate of current technological advancement, does considering a shiny metal to be valuable seem like an increasing or decreasing trend?

Gold may have been reliable in the 20th century, but among a generation of digital natives who are connected psychologically to their mobile devices, bitcoin will increasingly be the method of choice for commerce. This is the information age, and in it, information represents the most valuable form of commodity. Bitcoin is financial information stored on a collective, distributed computing network. Gold comes nowhere near to competing with this network of trust.

In terms of commodity fungibility, having one unit exactly similar to all others is important. With bitcoin, this is guaranteed by cryptographic algorithms, yet every transaction carries the entirety of its history. With gold, this is not so simple. Metals can carry dilutions and value estimates can differ depending on the mint which issued the coin or bar. We also know that the benchmark used by investors and central bankers to determine the value of precious metals has been (and continues to be) heavily manipulated.

With bitcoin, network integrity can be cryptographically proven, representing an asset which has transcended physicality and operates within the cyber domain. It’s very possible to send millions of USD worth of bitcoin within seconds and only the sender and receiver are aware of the identities involved. Physical actors cannot exert control over the portability of this commodity, and therefore, ‘digital gold’ represents bitcoin accurately.

Gold is a store of value which relies on tradition to support its value base along with a few minor industrial purposes. When you take away this perceived tradition of value you are left with a few manufacturing uses and nothing more. Tradition has built an idea in the consumers’ mind that gold holds tremendous value.

It could be argued that the valuations behind precious metals are artificially high due to a market perception which has vastly underestimated the quantity of these metals. Despite what a merchant may tell you, we have no clear idea on the supply of gold. We have barely begun to explore the depths of the ocean let alone mine deeper than a scratch in the Earth’s crust. Who is to say how much gold and precious minerals near-Earth asteroids contain? It’s possible that gold’s perceived scarcity may prove to be illusory in 20-30 years when businesses or government are mining rocks in space.

The fact that bitcoin is instantly transferable across the globe with the ability to be divided ad infinitum, is why it holds a tremendous advantage over precious metals.

Bitcoin, and other developments in cryptocurrency, will challenge precious metals as history’s de-facto store of wealth.


Who Is Satoshi Nakamoto?

Satoshi Nakamoto set in motion the unraveling of the nation state and the end of central banking … two closely related institutions that have directed history since history has been recorded. The creator of bitcoin is one of the greatest disruptors in modern history, and this is reason enough not to want an identity attached to the source code.

So who is Satoshi Nakamoto?

Information on the creator of bitcoin remains obscure. It has since evolved without their direct input, put forth for anyone willing to experiment with the technology. Satoshi’s last call was to deemphasize their unknown identity. As it still remains today, the true identity of Satoshi Nakamoto is unknown and the alias is considered a pseudonym. Whoever the creator was, they wanted to remain invisible, and thus far they have achieved such.

When Satoshi had the basic foundation of the bitcoin client built, they transitioned the responsibilities to a group of early enthusiasts and withdrew back into the shadowy depths of anonymity. Nothing tangible has been heard since.

Satoshi Claims

Satoshi claimed to reside in Japan, although searches and inquiries into their true identity turn up few results. In their early days working on the project, Satoshi was known for a business-like demeanor and very seldom revealed details about themselves, instead focusing feverishly on the bitcoin project. If the work of the bitcoin client was produced by one person, and began in 2007 as Satoshi claimed, then it must have required serious commitment for several months before releasing it.

At one point, when early adopters aimed at increasing its popularity, after users began lobbying for WikiLeaks to accepting bitcoin donations, Nakamoto intervened. Giving decisive orders to the team, Satoshi wrote, “No, don’t bring it on. The project needs to grow gradually so the software can be strengthened along the way. I make this appeal to WikiLeaks not to try to use bitcoin. Bitcoin is a small beta community in its infancy. You would not stand to get more than pocket change, and the heat you would bring would likely destroy us at this stage.”

Then, as mysteriously as they had appeared, Satoshi Nakamoto vanished.

Easter Eggs

Satoshi listed their date of birth as April 5th, 1975, and at first glance this appears to be insignificant. However, upon further analysis we find that On April 5th, 1933 U.S. President Franklin D. Roosevelt signed two executive orders: 6101 of Civilian Conservation Corps, and 6102 which forbade the hoarding of gold coin, gold bullion, and gold certificates by U.S. citizens. We then find that in the year 1975 gold ownership was relegalized for citizens of the US.

The birth dates coupled with the insertion of a link buried within the genesis block to a London Times article entitled ‘Chancellor on Brink of Second Bailout for Banks’, make it clear Satoshi Nakamoto was politically motivated and displayed such through easter eggs hidden within their work.

What’s In A Name?

Some researchers proposed that the name ‘Satoshi Nakamoto’ was derived from a combination of tech companies consisting of Samsung, Toshiba, Nakayama, and Motorola. The notion that the name was a pseudonym is clearly true and it is doubtful they reside in Japan given the numerous forum posts with a distinctly English dialect.

Linguistic Analysis

British formatting in their written work implies Nakamoto is of British origin. However, they also use American spelling which may indicate they were intentionally trying, somewhat successfully, to mask their writing style – or that Satoshi is more than one person.

Many in the bitcoin space also believe Satoshi to be of American nationality, asserting that the time frames for code submission coincided neatly with someone living in an EST time zone.

Technical Analysis

As for the code itself, it has been dubbed multi-disciplinary and of extremely high expertise in the area of cryptography and C++ programming language, causing many to believe Satoshi Nakamoto is a small group of computer programmers rather than a single individual. Nakamoto claimed to have begun work on the bitcoin project in 2007 and published the whitepaper in the following year.

In 2008 Satoshi first released their work through a cryptography mailing list, where one of the first partners in development was cryptography expert Hal Finney. Based on analysis from other programmers who worked on the source code, it does not appear to be written by someone who is well versed in professional programming but rather has a strong academic or theoretical knowledge of cryptography.

He was the oracle to which we would go for questions about the system, but he rarely followed standard engineering practices, like writing unit or stress tests or any of the standard qualitative analysis that we’d perform on software. Several things had to be disabled almost immediately upon public release of Bitcoin because they were obviously exploitable.

– Jeff Garzik, early bitcoin developer

Adam Penenberg of FastCompany came to the conclusion that Satoshi Nakamoto may in fact be a trifecta of programmers, arguing through linguistic analysis that phrases from the whitepaper match in very unique sense to a patent application for updating and distributing hashing functions, which was filed around a remarkably similar time frame as the domain name was registered. The domain was listed as being registered in Finland, and one of the patent authors had traveled there months before the domain was registered.

Regardless, all three programmers deny the claim to the Nakamoto throne.

In any case, when was registered on August 18 2008, the registrant actually used a Japanese anonymous registration service, and hosted it using a Japanese ISP. The registration for the site was only transferred to Finland in May 2011, which weakens the Finland theory.

I exchanged some emails with whoever Satoshi supposedly is. I always got the impression it almost wasn’t a real person. I’d get replies maybe every two weeks, as if someone would check it once in a while. Bitcoin seems awfully well designed for one person to crank out.

– Laszlo Hanyecz, early bitcoin developer

Blockchain Analysis

Based on a blockchain analysis technique created by Sergio Lerner, an authority on bitcoin and cryptography, a dominant entity believed to be Satoshi Nakamoto had been mining the network from block 1 up until their disappearance, with identical performance. Lerner claims this miner is “the only entity that has shown complete trust in bitcoin, since it has not spent any coins,” estimating that Satoshi holds around 1 million BTC.

Many in the early community wondered why Satoshi had forsaken them in a project they poured their energy into for so long. Perhaps it was the fact bitcoin was starting to gain traction, evolving without their direct counsel, and the decision to hand the reins of power over was necessary.

However, the question still lingers, have we seen the last of Satoshi Nakamoto?

Bitcoin Forecasting

Advantages & Disadvantages of Using Bitcoin

The benefits of using a bitcoin for payments far outweigh the risks posed. Bitcoin represents a dramatic improvement upon our current arrangement of financial payment systems which use government sponsored currency by relying on an internet protocol for the transmission of value where no humans or third parties are required.

Advantages of Bitcoin

  1. Trustless Payments
  2. Bitcoin does not require a central party to facilitate transactions or confirm account balances. This is the power of peer-to-peer payments. When a payment is made, the transaction is verified by an economy of interconnected computers very much in the same way networks of servers make up the world wide web of today. The transaction is initially broadcast, then verified by the network in a secure manner. Eliminating the need for third party trust was one of the objectives of bitcoin in the first place, and it accomplished this unlike any financial instrument before. Typically, people trust banks to store their money, they trust central banks to retain the value of their money, and they trust governments to manage debt problems in a responsible manner. Bitcoin divorces the reliance on these institutions by putting trust in cryptographic technology rather than third parties.

  3. Open Payment System
  4. The bitcoin payment system is the first non-exclusionary payment system every devised. It does not require paying monthly fees or deny access to people who are not in a position to be serviced by a traditional banking institution. Your account is never in jeopardy of being locked because there is no central institution with the capability to block transactions. With bitcoin technology, advocacy groups are able to accept and spend their money as they like, without requiring approval from government payment processing services.

  5. Personal Information Privacy
  6. Under the current system, unless you are using cash, you are identified when you make a purchase. With bitcoin, this is no longer necessary, but it comes as a double edged sword. In one sense, bitcoin can be obtained and used in an anonymous manner. It does not require the personal information that traditional financial institutions would, such as government identification and contact information among a host of other data. Because the bitcoin payment system does not require these inputs, it need not put a citizen’s personal information at risk. However, just as easily as it can be used for stealth can bitcoin be used transparently, giving the entire world first-hand viewing ability into your financial standing. Being a distributed ledger, the blockchain will be making your wallet viewable but will be tied to your identification the instant you associate your real world identity to your transactions. Every person has an inalienable right to privacy, and that includes financial privacy. Bitcoin may provide that financial privacy while eliminating the potential for identification fraud and theft of personal information. Many people will argue that providing the ability to transact anonymously opens the floodgates for money laundering, illicit purchases, and all kinds of criminal activity. This may be true to a certain degree, but bitcoin technology does not aggravate this issue any more than paper cash does today. Indeed, using cash is still the most popular way to conduct money laundering and other illegal activities. There are risks associated with an anonymous form of transaction that financial enforcement agencies are well aware of. Even more so are they aware that paper cash is still the best medium for laundering money.

  7. Simplicity & Security
  8. The cryptographic technology behind bitcoin is the most advanced of its kind, making the system impractical to hacking attempts. Rather, the hacking attempts to steal funds have been successful due to poor storage practices and faults with exchanges. Security experts around the world have been attempting to attack the bitcoin network directly since its inception. None have been able to find a chink in its armor. When used correctly, the bitcoin blockchain is an elegant and airtight solution to sending money cheaply and efficiently.

  9. Internet Functionality
  10. The innovation of a payment layer for the internet is one of the primary reasons people are so excited about bitcoin. Some of the payment system features include worldwide accessibility, zero or low processing fees, open-source, fraud control, multi-signature accounts

Disadvantages of Bitcoin

  1. Technical Sophistication
  2. In order to properly store and use bitcoin it requires a certain degree of technical understanding that most of society current finds challenging. The more you understand about vulnerabilities to storing bitcoin, the safer you will be. Storing your bitcoin is one of the biggest challenges and being protected from hackers takes a considerable degree of computer competency.

  3. Limited Acceptance
  4. Bitcoin is continuing to gain traction with merchants. The number of businesses accepting it is growing daily. The Federal Reserve Board of Washington reports that the number of daily users is likely to have grown exponentially in the past few years, and that the user base has doubled every 8 months for the last 3 years. Businesses that do transactions online are taking a close look at integrating bitcoin, while brick and mortar retailers are still just getting onboard with this new type of payment. Because you may find it difficult to pay your rent or buy food at the grocery store with bitcoin (for now), this limited acceptance can be a disadvantage.

  5. Uncertain Future
  6. No one can say with certainty what will come of bitcoin. As it remains today, bitcoin is very speculative as it is still an experimental type of technology. However, the upside is so one-sided that the average consumer would be wise to research and understand this new type of technology, given that money factors into our lives essentially everyday.

In the long-run bitcoin technology will transform the distribution and access to information in a manner similar to internet and smartphone technology. Considering the only action a user need perform to start using bitcoin is downloading an app using the aforementioned technologies, and you may begin to see why we are on the cusp of a powerful disruption in business, economics, and daily life.


What Is Money?

The need for money comes from the idea that we live on a planet with finite resources. Human desire is not limited, yet resources vary by scarcity and availability. Therefore, it is necessary to have a medium to exchange those resources which are not perfectly abundant. This medium must be generally accepted to be useful as money.

A unit of exchange is necessary to allocate scarce resources among a population with theoretically limitless desire. Money itself is neither good nor evil, but rather a necessary tool in a properly functioning economy.

Money is a unit which can be used as a:

  1. Medium of Exchange
  2. Store of Value
  3. Unit of Account

Aristotle, the Greek philosopher, defined the characteristics of a valid currency comprising of four core aspects:

  1. Durability
  2. Money must remain in the same state it was originally created in. It cannot change or be destroyed by the forces which use it.

  3. Portability
  4. Money must be able to be moved easily.

  5. Divisibility
  6. Money must be able to be divided into smaller units.

  7. Fungibility
  8. All units of money in circulation must be identical.

Trust that the money supply will be accepted makes up the most important factor when it comes to its survival. When this trust erodes, the tender is in danger of being debased. There are many reasons why money loses its trust among its user base. Money could then be described as a collective agreement.

When there are enough people who settle on what holds their trust, that which they agree upon becomes secondary. History has provided us of countless examples of this being true. Whether it be cigarettes among a prison society, animals among farmers, precious metals among kings, and now computer code, money remains a collective agreement established by its user base.

Money is a proxy for labour. Think of money as a bearer instrument with which you can redeem services from society. It is essentially stored labour product, and therefore, can be seen as stored energy.

The entire money supply, and the financial system it operates within, is a vast network of information on who owns and owes what to whom.