You Can’t Buy a Coffee with Gold; or 5 Ways Bitcoin is Different to Gold
- You can’t buy a coffee with gold
Anywhere. I know because I’ve tried. Before the advent of Bitcoin, I was interested in purchasing bullion gold in small quantities, and happened to have a twentieth-ounce (0.05 oz – about a small fingernail’s worth when flattened out with a hammer) nugget of 24-carat gold left over from negotiations with a jeweller. Running out of local currency and in a location far from any banking facilities, I tried in desperation to use it to buy some food. No dice. A vendor preferred to give me the food for free, presumably as he figured it would be more hassle essaying the gold and exchanging it for currency than it was worth.
- You can’t split gold coins into smaller denominations
The above anecdote described my plight with a twentieth-ounce piece of gold. At the time, it was worth about £25. Had I wanted to exchange value to the worth of say £5 only, it would have necessitated getting out a hammer and chisel, something which clearly comes with logistical difficulties.
- Gold supply varies
Bitcoin supply depends on the rate of block creation, which due to the mathematics involved, remains approximately constant over time. This means that the supply of bitcoins is predictable. Gold on the other hand, sees a constantly changing rate of supply. The geographical diversity of gold producers entails that most geopolitical events impact the rate of production in some way, as do technological innovation and territorial exploration. Most importantly of all, however, producers are able to influence their rate of production according to what they deem to be most profitable for them, leading to a variable rate of gold supply.
- Sending gold across borders is tricky
When leaving the UK, if you are transporting more than €10,000 worth of cash, you must declare it or you run the risk of incurring a large penalty. It can be argued that gold is not cash, but it’s not a conversation I’d like to have with a border guard. Declaring it shouldn’t be a problem, but it will lead to some intense questioning from border agents, and may result in temporary confiscation until any information you provide can be verified. Bitcoins, on the other hand, can be sent internationally in large quantities with the same ease as using them to buy a cup of coffee (see point 1).
- Gold can’t be hacked
Gold can’t be hacked, but it can be stolen. Finding somewhere safe to secure gold is directly comparable to finding somewhere safe to store Bitcoin, with the exception that gold will have to be physically transported to the point of storage, whereas Bitcoin can be sent digitally. Storage of gold and storage of bitcoin both require time, effort and careful planning, weighing up convenience vs cost vs security.