For the first time in history, gold has taken a backseat to Bitcoin during a financial crisis. Currently, Greece is in economic turmoil; banks have closed, ATMs are inoperable, and credit cards have been shut off. Greek Finance Minister Yanis Varoufakis stepped down on July 6, as his country voted “nay” to demands from an international lenders referendum.
Many in Greece are trying to find ways to preserve their remaining wealth. In the past, precious metals were the top recommended assets to hold during economic failure. However, this may not be the case anymore.
The Cases for Gold and Bitcoin
Gold has been a safeguard of value for thousands of years. It is scarce and accepted almost everywhere as a medium of exchange. However, a short term look at gold over the past decade reveals more volatility than in previous years. Most of this new volatility is due to gold discoveries, increasing the supply between 1%-3% per year.
Gold has its advantages and disadvantages. You can purchase a gold coin at a shop with cash and have little to no interference from authorities. However, gold is heavy; the more you have, the more weight you must carry or hide. Gold is also not easily divisible. A person needs a very hard tool to break a coin or bar into smaller pieces. This task is not convenient and can be a difficult maneuver.
Furthermore, in a sovereign debt crisis, the idea of confiscation is real. In 1933, Franklin D. Roosevelt issued an executive order that outlawed private gold storage. The order confiscated the precious metal from citizens across the country — with little compensation — in an attempt to devalue the dollar.
Over the past couple of years, Bitcoin has become another safeguard against economic failure. The current crisis in Greece has displayed Bitcoin’s benefits, taking a lead over its precious metal counterparts. There are very good reasons to why Bitcoin has become the asset to hold in times of a debt crisis — offering superior advantages to gold, silver, and even paper money.
Bitcoin is a peer-to-peer, open-source, decentralized network. This means no one can freeze the blockchain like a bank account. Your funds cannot be shut off or denied to you. You have 100% control over your money. There is no denial of service. Bitcoin transactions can happen 24 hours a day, 7 days a week. You may say to yourself, “well, banks already do this,” but ask a Greek how banks are handling the situation over there.
There are only 21 million Bitcoins that will ever exist. The number never increases. Furthermore, as Bitcoin miners get closer to exhausting the supply, it gets more difficult to mine the digital currency, making it dynamically scalable. This makes every last Satoshi more valuable as Bitcoins are mined into existence. Gold is not scalable in this fashion. In fact, it’s said that on the moon, or under the earth’s oceans, there is more gold than what’s been found by miners over thousands of years. As technology advances, it isn’t a stretch to imagine us getting to this gold, which will undoubtedly devalue the metal. Bitcoin, on the other hand, will always maintain its 21 million cap.
It is much harder to confiscate Bitcoin than gold. Bitcoins themselves have no weight or physical mass, allowing them to be stored in a space as small as a thumbtack or inside a tattoo. The digital currency can be easily hidden from those who wish to take it. Bitcoin is divisible by 100,000 units called Satoshi or mBTC. And there no need to carry a hammer and chisel to break bitcoin in half.
Both gold and Bitcoin have their advantages. However, only one shows a clear runway in these modern times. Bitcoin is not to be taken lightly anymore, as it’s showing strength in Greece’s economic troubles. Sovereign fiat currencies in general are sure to fail, as they are printed from thin air at a whim. The facts of this failure is quite apparent in countries like Greece and Venezuela.
Bitcoin has many merits it can offer the Greeks. It can help counter capital control infractions. With the company BitReserve, Bitcoins can be pegged with gold, and many fiat currencies. There are other exchanges that offer similar ways to tether the digital commodity to a foreign money or commodity. So even though at times the cryptocurrency can be volatile, your wealth is protected.
Bitcoin can be hidden and kept safe from threatening governments. You can store the digital currency for free, and store it very safely with various wallets. People can store Bitcoins in their head, and travel with their keys very lightly. Bitcoins are not heavy or flashy objects, yet meet all five qualities of sound money: they are durable, divisible, portable, scarcity, and have value in the mind of the actor.
In this time of financial crisis, countries surrounding Greece might want to take note. They may be able to thwart off economic meltdown before it’s too late. In these modern times, hoarding coins and bags of gold may not be the answer to preserving wealth. There is a new technology that can help the masses on a global level. Its called Bitcoin.
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This author’s views do not necessarily reflect those of Bitcoin.com