You might have seen bitcoin being described as a digital gold in some instances and as a digital currency in others. You might have also wondered which one is it now?
In this guide, you will find out whether bitcoin is digital gold, a digital currency, or both.
Satoshi Nakamoto created Bitcoin as a global peer-to-peer digital cash payment system.
The goal was to give people a currency that would enable them to transact directly with each other without going through intermediaries like banks. However, something different happened. People started buying bitcoin as an investment and as a store of value.
As the bitcoin price rose and bitcoin millionaires started to crop up, more and more people rushed to buy the digital currency with the hopes of accumulating wealth in the long term or cashing out for a hefty profit. As a result, bitcoin became more of a store of value, akin to gold, than an actual currency. Hence, the term “digital gold” was born.
Bitcoin has established itself as digital gold because it has proved itself as an investment asset and as a store of value. Like gold, bitcoin acts as a store of value because you can use it as a hedge against the fallout of a financial crisis. Moreover, you can use it as an alternative to save your money when your country devalues its sovereign currency or the currency weakens for economic reasons.
Bitcoin has many of gold’s characteristics plus several benefits that – as many bitcoiners argue – make it superior to gold. They include:
While both bitcoin and gold have similar attributes, bitcoin is considered a superior store of value by bitcoin advocates.
Unlike bitcoin, physical gold is not easy to transport or transfer from one person to another. You have to arrange for secure transportation, which costs money and time. What’s more, the supply of bitcoin is mathematically asserted to be finite, whereas the true supply of gold can only be estimated.
The dream of bitcoin’s role as a digital currency is not lost. Bitcoin is used by many to pay for goods and services, making it a digital currency. Nonetheless, its use as a currency is not widespread.
Some of the factors inhibiting this are price volatility and speed. These issues are, however, should be temporary. For example, the price of bitcoin will become more stable as the market expands.
Furthermore, the Lightning Network (LN) is providing a solution to speed up bitcoin transactions. The Lightning Network, a second layer built on the Bitcoin blockchain, aims to scale the speed of bitcoin transactions to millions per second. Currently, the Bitcoin network processes about seven transactions per second.
Once Bitcoin can handle more transactions per second, thanks to second-layer solutions like Lightning Network, and its volatility reduces, bitcoin could become a universal digital currency for everyone.