Many gold bug values overlap with Bitcoin, but they reject BTC without understanding its digital ledger superiority.
This is an opinion piece by Luke Groom, civil engineer, JD-MBA student, and part-time strategy partner at Marathon Digital Holdings.
Over the past two years, Jordan Peterson plunged down the rabbit hole of sound money, and for me it was a pleasure to watch from a distance. So many of the values he espouses align with values encouraged by Bitcoin, such as personal responsibility and the pursuit of truth, so it was only a matter of time before he became interested in Bitcoin. .
He spoke with Saefidean Ammous And Robert Breedlove in recent years and, even as a non-Bitcoiner per se, captivated the audience at the Bitcoin conference in Miami in 2022. A more recent conversation with Roy Sebag was also enjoyable to listen to, although it illustrated for me the need to discuss the differences between gold and bitcoin, not only their properties as monetary units, but also the properties of their ledgers.
Certainly, golden critters such as Sebag and Peter Schiff share many beliefs with Bitcoiners. I respect them and their work. There is a lot of overlap in the problems and solutions that Gold Bugs and Bitcoiners deal with. But the arguments for bitcoin as the superior unit of account have been discussed at length.
The fact that gold has other tangible uses is irrelevant to world money
Sebag and Schiff argue that gold is valuable, in part because it has other uses such as cellphone parts and dentistry, while bitcoin has no other uses. It’s true; however, I’m not sure how relevant this is.
Why do we need our money to have other characteristics besides just being money? Where is it written? If the monetary premium for gold disappeared and was used only for its other tangible purposes, the price of gold would completely collapse. Moreover, if gold were to become the global unit of account as gold bugs want, gold would be used even less for non-monetary purposes due to cost limitations. Its monetary bounty would increase, thus weakening their own argument for having other valid uses.
A monetary unit only needs to have good monetary properties and interact well with its ledger. As the generally accepted properties of silver dictatean ideal monetary unit would be portable, durable, accepted, rare, fungible, divisible, and resistant to counterfeiting.
As a unit, bitcoin is equal to or better than gold in all of these characteristics except acceptability. (The market capitalization of gold is still around 20 times that of Bitcoin, which means it’s even more widely accepted.) Talking about units, however, is only a fraction of the conversation. You also have to look at the ledger.
Bitcoin Ledger is Superior
Our modern society requires the use of records to conduct financial transactions. Moving physical dollars or physical gold around the world is simply too expensive, dangerous and logistically difficult. Instead, we rely on the records of credit card companies, banks, and central banks to facilitate the “movement” of money. Our entire system, except for the relatively few physical dollars, is an entirely ledger-based money system.
Because ledgers have become necessary in modern commerce, and because no one is advocating a return to the society in which all commerce is conducted exclusively by in-person exchanges of money, when analyzing monetary systems, we must not only look at the units on our ledgers but also at the ledgers themselves. Bitcoin’s properties as a ledger make it a far superior monetary system to anything out there.
If we were to think of the properties that make up an ideal ledger, they would be: reliable, unassailable, verifiable, global, accessible, trustworthy, and able to provide quick final settlement. While the strong monetary properties of gold versus bitcoin were relatively close when considering the units behind the ledger, when comparing the ledgers themselves, bitcoin is far superior.
From a monetary unit perspective, Bitcoiners and gold bugs agree that a gold-based system could encourage monetary responsibility and limit inflation. However, goldbugs did not provide any widespread suggestions for improving the US dollar ledger system. This current system is flawed in that it is unverifiable for individuals, inaccessible for individuals to interact with directly, and slow to process final settlement. How would a gold-based ledger be better?
Moreover, the gold bugs provided no meaningful suggestions on how to avoid debasement issues, which have been a constant for centuries.
We have already experimented with a gold-based ledger for the past 800 years. THE Medici family popularized ledger-based gold-backed banking in Italy and throughout Europe as early as the 12th and 13th centuries. The Europeans, in fact, used ledgers to “transfer” their gold over great distances. People and governments have continued to use the gold-backed overlapping ledger system for centuries and each of these countries seen a corruption of the general ledger, the bankruptcy of their currency or the debasement of gold. So what mechanisms do gold bugs suggest to prevent corruption and debasement of a gold-based ledger in the future? I haven’t heard any.
Bitcoin is beautiful in that it provides an elegant solution to both unit and ledger. The unit has all the characteristics of a sound currency and the ledger is reliable, unassailable, verifiable, global, accessible, allows quick final settlement and is trustworthy. One person can personally interact with the ledger and provide verified final settlement across the globe in minutes on a ledger that does not require a trusted middleman.
I have great respect for golden bugs and even own a modest amount of gold myself. With that in mind, I ask Peterson, Sebag, Schiff, and the other gold bugs, when comparing monetary systems, to analyze both the unit and the ledger, and then come to their own conclusions.
This is a guest post by Luke Groom. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.