For most people, the most evident difference between gold and bitcoin is that gold is physical whereas bitcoin is digital. Yet, the differences between both run much deeper. Gold is a precious metal which is utilised as a medium for exchange. It’s also used in manufacturing, technology and jewellery and even for keepsakes. Gold is tangible and is regarded as a long-term investment alternative. Bitcoin, on the other hand, is a crowd-sourced, coded currency which didn’t exist until 2009.
What is Bitcoin?
It’s the world’s very first decentralised digital currency. The new system for virtual money was proposed by a software developer named Satoshi Nakamoto in 2008. It was made available for public use in 2009. This system enables members of the bitcoin community to be able to mine new bitcoins using open-source software and solving extremely complex mathematical equations. The complete supply that may ever be mined is limited to 21 billion. Bitcoins are represented by the record of transactions between different addresses. These addresses consist of sequences of numbers and letters generated randomly. Users can purchase bitcoins by using a different sequence in the form of a personal key which is kept secret. The miners verify all transactions.
Risks and benefits of bitcoin currency
- Bitcoin offers its users with an elite trading experience. Unlike the British Pound or the American Dollar, bitcoin is frequently referred to as cryptocurrency. It isn’t regulated by any central bank. This means, in theory, the virtual currency is democratized, decentralized and can be accepted anywhere in the world. This also means that bitcoins are unregulated. This opens the door to corruption.
- Bitcoins don’t carry any information which can be used for personal identification, such as a physical address or names. It’s potential for anonymous transactions made it attractive on the black market.
- Bitcoin is crowdsourced. This means that its value is completely dependent on the participation of the community. In its initial years, it benefited from a particularly enthusiastic base of investors and developers.
Investing in Bitcoin vs. Tangible Gold
Considering both bitcoin and gold’s value, the first aspect to be considered is the stability. While several believe bitcoin presents the capability for a better currency, conventional investors rely on gold’s track record and historic value. Bitcoins are pretty much still in their youth and still have many years to go before investors see a reliable profile. Gold is a physical currency which is accepted all over the world and has been for hundreds of years. But, gold is limited and there’s only so much that can be located, mined and refined. These factors make it an extraordinary commodity and therefore give it its value. Gold has been the practical choice signifying money due to its rarity, durability and simplicity of divisibility.
Both the innovation and success of bitcoin as a virtual payment system must be admired. There are still many issues which need to be addressed in terms of sustainability and security before customers are encouraged to accept or use it. It’s also believed that bitcoin may eventually become a viable investment option but it will never surpass the versatility and stability provided consistently by gold.